Oil Crisis, Hedging, Devaluation, Working in Lockdown

My first working day after our break was March 9th and I remember sitting in the management team and getting alerts that the stock exchange was collapsing and that our shares were going down by more than 20%. When I checked why, it turned out that Corona was impacting the European economy and that investors were selling off. I should have done the same, but at that moment I did not realise what was coming. So in the evening I went to the gym to workout and while watching Bloomberg I was informed about the disagreement between Russia and Saudi Arabia and I knew we were in big trouble in Nigeria.

Nigeria is depending on oil revenue for the dollars it generates. The Naira is now kept already for 2 years at a stable rate versus the Dollar by using the dollars coming from oil and the linked to that higher oil prices of the last two years helped. However at Sesame Street Level if you are depending on Dollars and there is an inflation difference between US and Nigeria of more than 10% per year, logic says that there should be a devaluation of 10% per year of the Naira, which has not taken place in the last 2 years.

So when the oil prices collapses we knew we would get a devaluation and probably at least 10-20%. This means that everything that we buy abroad like malt or everything that is purchased in dollars like cans, PET, sugar etc will get more expensive. We are in a very competitive market so passing through price increases is tough. As of the next day we started to secure / forward buying materials. We were very successful with it and then we rolled into the next week where we discovered that Covid-19 was on his way to Africa and that this would probably impact our delivery of goods and products. So we focussed on getting materials on the water and buying up stocks at suppliers. After this we moved into the week in which it became clear that Nigeria would go in Lockdown and that our sales would probably collapse, because of the closure of all bars and restaurants. Beer (alcohol) was also not considered an essential product, therefore we needed to adjust part of our strategy of building stocks, since we could end up with huge stocks that would expire and then throwing it away is expensive. We are now 3 1/2 weeks in lockdown. We have set up meeting structures with meetings of 15-20-30 minutes, sharp to the point to keep focus. But doing this full days with this intensity is challenging. I have the feeling that I have done a MBA in this period. I have learned so much. I believe I am good in my job but for what we went through over these last few weeks there is no manual, there is no standard operating procedure. If I see what my teams have achieved, what the Management Team has done as well as the support of Heineken with hands on guidance and support I feel very proud to be part of my company.

When the Covid-19 crisis kicked in, Heineken came very early with a statement that makes clear where we stand for, 'there would be no job reductions' and 'support our customers and suppliers to get through this together' caused by this global disaster. In all we do we are always putting the right focus on the people side of our business. And this disaster has a big impact on our business. At this moment we have breweries/countries that are not producing like Mexico and South Africa since beer is part of the lockdown and not considered an essential product. However in Africa there are still countries that claim that Covid-19 is not a threat. For example Burundi is fully open and functioning and there are no restrictions at all.

It is probably driven by poverty and lack of healthcare facilities, but put on your European glasses and think about the mayhem and chaos that would bestow on Europe if we would not have had lockdowns and a high level of healthcare.

We are lucky to be working for such a global company, we all have 'green' blood. Sometimes I make Viv crazy when we go shopping and I start putting the labels of our product straight in the beer section. But this is Heineken, we are a big family.

By now the oil prices has collapsed from 60$ per barrel to 25$ per barrel. The Naira has devaluated in a first step from 360 to 385 vs the dollar.

The number of Covid-19 cases in Nigeria is approx 300 of which 50 recovered and 7 people died. We do not know what will be coming in the next months from health perspective but also from business perspective. You always need to stay positive and following the international and specifically the Dutch news you slowly start to get signals that hopefully for parts of Europe we have reached the peak and how we are going to get out of this and move forward into the future. There has been a lot of behaviour by people and governments in Europe and in the whole world,that is questionable. Focussed on themselves, not sharing, sharing late, blaming others, behaving like invincible. There are many worldleaders that are selling themselves over the back of populations. On the other side there are many people standing up and are helping on all different levels others by doing groceries, supporting businesses, healthcare, teacher, people working in elderly homes. They are leading by example. I hope that this pandemic will create the better in people and that we start to get more sharing, more inclusive and be more human again.#staysafe