The Future Of Capitalism: A Swinkels Economy, Or Heineken Economy?
I'm not a big beer drinker, but as an entrepreneur I do follow the financial news, especially when it comes to reporting on companies like Heineken.
Heineken reported its Q3 figures last week: in July, August and September, sales of its beers fell by 1.9 percent. The net profit for the first nine months was a ‘mere’ 396 million euros, while in 2019, a profit of 1.7 billion euros was generated over the same period. This is why Heineken wants to cut back on 20 percent of its staff costs.
The other reason I follow Heineken is because I am an avid supporter of so-called Rhineland capitalism.
The difference between American shareholder and Rhineland capitalism
So, what is the difference between American shareholder capitalism and the European Rhineland model? Shareholder capitalism is primarily concerned with the interests of shareholders, while the focus of the Rhineland model is firmly on the interests of all stakeholders: employees, customers, suppliers and shareholders.
The difference between the two models become more apparent in times of crises, with the coronavirus crisis serving as a litmus test. It is a bit like the tale of the emperor’s new clothes. The American model tries to tell us that it also cares about others, but in times of crisis it proves to be naked, just like the emperor was, as everybody could clearly see.
Classic SMEs - the medium and small enterprises, often anchored within their local communities - try to show as much solidarity as possible with their own employees and their location. The listed companies on the other hand, feel the hot breath of shareholders in their necks, who – wherever they may be in the world - decide where their money will yield the highest return.
Comparing the approach of two Dutch brewers
It’s always a bit of an abstract tale, but we can make it tangible by comparing two Dutch brewers: on the one hand the Heineken corporation, listed at the Amsterdam stock-exchange and headed by Mrs de Carvalho-Heineken, who is the controlling stakeholder, and lives in London. On the other hand we have Bavaria, a local brewer, located in the southern province of Brabant, and run by the Swinkels family since seven generations. CEO Peer Swinkels grew up in a catholic environment, meeting after church on Sundays, with the whole family at his grandparents house.
Heineken generated sales of 28.5 billion euros in 2019, and below the line had an operating profit of approximately 3.5 billion euros. By comparison, Swinkels generated 892 million sales in the same year, with an operating profit of 94 million. Both brewers therefore make about 10% profit on their turnover, despite Heineken being 30 times bigger.
The wealth both families have been able to amass through beer brewing is public knowledge: Mrs. de Carvalho-Heineken, as can be read in the business magazine Quote, is currently worth in excess of 14.2 billion euros. This is no mean feat, because at the time of her father Freddy's death, the share package she inherited - as the only daughter - was worth 3.7 billion euros. On that same Quote list, the Swinkels family was listed for 650 million euros in 2019. Interesting detail: The Swinkels family has also almost tripled its assets since 2002: that year, its net worth was still 250 million euros.
Swinkels have the advantage of not being listed on the stock exchange, and still remaining in charge of their company, enabling them to play the long game. On the family-owned company's website, CEO Peer Swinkels says: "We are in the midst of a major crisis that directly affects our industry. Our priority is to get out of this crisis healthy and stronger, together with our employees, customers and business partners."
I hope that the Rhineland DNA of the Swinkels family and the financial buffer of the past are strong enough for Bavaria and other beer brands to avoid redundancies, such as Heineken has announced.
I sincerely hope they will prevail; not only as an entrepreneur, but also as a citizen. Because in this respect, the coronavirus crisis is not only a litmus test, but also an opportunity.
So, dear citizen, what will it be for last orders: would you prefer a Swinkels economy, or a Heineken economy? You can have your say, mainly in the supermarket for now, as a consumer.
(This article previously appeared in a slightly different form in the Dutch newspaper Trouw.)