There’s no shortage of applicants for the beer company’s procurement department, which is championing innovation and collaboration
“I dread when a vacancy comes up because I have so many disappointed people,” admits Heineken UK’s head of procurement Graeme McLuggage. At any time, he could have 20 internal staff wanting to join his department of 17.
But that’s what happens when enthusiasm is a key ingredient of a transformation. “I wanted to invest in the people and bring in those who would be excited about doing different categories,” he says.
McLuggage is one of more than 70 country procurement heads for the global company that produces brands such as Tiger and Fosters, as well as its namesake. He reports into HQ in Holland, where the global team makes bulk purchases such as key ingredients, and arranges other contracts. “Global buyers will buy glass, even though some of the glass suppliers and plants are in the UK,” he explains. Local contracts tend to be smaller, like for local IT, pensions and professional services.
Heineken UK spent roughly €1.1bn in 2017, of which over 40% was on the supply chain, and over 20% on directs. “The UK is unique because we buy our own apples for cider,” McLuggage says. Most of Heineken uses culinary concentrate from Germany and Austria. Beer sales are still higher in the UK, but its cider brands like Strongbow have seen a revival.
The company recently added 1,900 pubs through its acquisition of Punch Taverns. “We trebled the estate, and the UK will become a pub company first.” That means bringing on board new suppliers and increasing services such as estates management.
McLuggage took over procurement in 2015. “People were siloed and contract managers were specific to raw materials, product or non-product related,” he recalls. Cross-category buying and contract management brought a fresh pair of eyes into categories and broadening knowledge. “It wasn’t about the category, it was about the skill,” he says. Partnering is key, so he brought in people who work well with stakeholders “so procurement becomes the automatic place to go for any supplier need”.
Staff enjoy the variety. “One contract manager does international tankering – creating lanes for bringing beer in from the continent – but also looks after below-the-line advertising agencies in commerce. One minute he is schmoozing in London, and the next looking at the back end of a tanker.”
The enthusiasm is reflected in buyers’ employee engagement scores, which have increased in the last two years, since the changes.
NEW CAN CUTS COSTS
Unlike most of Heineken’s cans, which are sourced in Germany, the UK’s new 440ml, ‘tactile’ Heineken can is made in the UK, following collaboration between procurement and the supplier. “By making it in the UK, you have no transportation costs,” McLuggage says. “That brings out a big chunk of cost that can be reinvested elsewhere. It is made near to the brewery.”
Dialogue encourages innovation, he adds. Supplier days are an opportunity to introduce them to other teams in Heineken, where they can share ideas and talk about technologies – such as thermal ink that changes colour when it is cold, or label embossing. “It helps share ideas about making cans eye-catching,” says McLuggage. “We allow the teams freedom to talk to suppliers.”