Flat sales in Europe and US force out Heineken boss early

The chief executive of Heineken, the world's third-largest brewer, is stepping down early as part of a major management overhaul at the struggling company.

The chief executive of Heineken, the world's third-largest brewer, is stepping down early as part of a major management overhaul at the struggling company.

Thony Ruys, who has run Heineken since the death in 2002 of Freddie Heineken - a legend of the brewing dynasty - will step down in October.

News of his departure comes only two months after Heineken warned its profits would drop for the second consecutive year. Jean Francois van Boxmeer, the operations director, will take over as chief executive, while another member of the executive board will step down in a streamlining of the brewer's management structure. Its executive board will be reduced to three members from five.

Mr Ruys, 57, is bowing out after failing to stop Heineken struggling amid a slowdown of beer sales in Western markets. Some 40 per cent of Heineken's profits come from Western Europe and 21 per cent from the US.

In February, the company warned that profits might fall this year, after a drop in earnings last year. Profits were flat in 2003. Nikolaas Faes, of Exane BNP Paribas, said: "You don't let your chief executive go if everything is going well. There are obviously problems at the company which need action."

While other international brewers, such as Inbev and SABMiller, have been driving business in emerging beer markets such as India, China and Russia, Heineken has not expanded extensively into these growth markets, concentrating instead on the US and Western Europe.

"The fundamentals of the business are not strong," Mr Faes said. "We are facing another year of lower earnings from the group because it is so geared towards mature beer markets. It has made only a small inroad into emerging markets. While everyone else was getting into China and Russia, Heineken sat back, saying it did not want to overpay for businesses.

"Now it has missed out, because beer assets have risen in value and if it were to start buying its way into emerging markets now, it would be overpaying. I don't see how a new chief executive is going to get round this predicament."

Heineken's biggest acquisition to date is the 2003 purchase of Austria's BBAG, which made it the biggest company in the Central European beer market. Some industry commentators believe Heineken overpaid for this and has failed to derive enough cost savings from the deal. One brewing industry source said: "Mr Ruys inherited a difficult situation, particularly in the US where the dollar has slid. Since taking over he just hasn't pushed the business enough."

Mr Van Boxmeer is a comparatively youthful 43 and as operations director is thought likely to be tougher on costs than Mr Ruys. He said yesterday: "The chance to lead such an iconic business is the opportunity of a lifetime."

Mr Ruys said Heineken had been transformed over the past decade but it was now the right time for the next generation of management to take over. "The time is clearly right to create a new management structure that will drive and support the next phase of our growth," he said.