Unethical practices to drive beer profits
In 2019, Heineken – the second largest beer producer in the world – sold its Chinese operations to state-owned China Resources, giving it a licence to brew its beer. In return, Heineken got a sizable stake in China’s largest brewer, CR Beer. The two companies are working closely together in China.
CR Beer is the most dominant beer producer in China, according to Statista.
In 2021, Snow beer, brewed by China Resources Breweries, accounted for approximately 22.3% of the beer market in China. Tsingtao was the second largest beer brand with around 10.6% of the market share.
The Chinese company sources hop for its beers from Xinjiang, where the Muslim minority Uighurs are subject to systematic repression − including on the farms where the hops come from.
Human rights violations are part of Heineken products and profits
In Xinjiang, human rights violations are committed on a large scale, even to the extent that several bodies – including the Dutch Parliament – now argue genocide.
When Heineken entered into a partnership with CR Beer, these human rights violations had already been a well-known fact. But Heineken ignored human rights concerns in their greed for ever more profits.
China’s beer industry has witnessed growth since the early 1980’s, supported by the sheer size of the population and lack of public health oriented limits for beer producers. At the beginning of the 21st century, China overtook the United States to become the world’s largest beer producer as well as the largest beer consumption market. In 2020, more than 340 million hectoliters of beer were produced in China, nearly 120 million hectoliters more than the United States ranked at second place. In 2021, China generated more than $120 billion in revenue from its beer industry, according to Statista. China’s beer market has recorded strong growth in terms of revenue since 2013 and Heineken is thirsting for a piece of that revenue.
Follow the Money (FTM) investigated the human rights problems linked to Heineken’s beer production in Xinjiang. But the beer giant claims ‘none of the raw hops and barley used in the Heineken pilsners brewed by CR Beer comes from China; these ingredients are 100% imported’. But FTM revealed that Chinese media report that CR Beer does indeed source hop from Xinjiang.
Heineken claims that as a minority shareholder, they were not responsible for the conduct of CR Beer. However, experts argue that as these two companies’ operations are highly interconnected, Heineken does bear responsibility. Moreover, CR Beer’s practices are at odds with its own human rights policies.
The source of the new revelations
FTM investigated Chinese publications and public reports, and presented those to Xinjiang experts. They confirmed that those publications contain strong evidence of forced labour. FTM also presented the partnership of Heineken and CR Beer to experts on corporate responsibility.
Heineken’s deal with the CCP
As the Statista data reveals, the strategic cooperation with CR Beer is critical for Heineken. To accelerate profit making in China, Heineken needed:
- A much strong distribution network in the country, and
- The capacity to compete with Anheuser-Busch InBev (AB InBev) that controlled 16% of the Chinese beer market in 2017. Heineken only had a 0.5% share of the market at the time.
Chief executive Jean-François van Boxmeer schemed to make a deal with the Chinese Communist Party (CCP) to change Heineken’s position in China by forming a cooperation with China’s largest beer producer which faithfully aligns itself with the CCP.
The CCP’s leadership is embedded in CR Beer. Important business decisions are discussed with the internal Party Committee.
Heineken NV acquired a 40% stake in CRH (Beer) Ltd, statutorily based in the British Virgin Islands, according to FTM. The remaining 60% is owned by China Resources Enterprises (CRE), a wholly-owned subsidiary of the state-owned China Resources Group.
CRH (Beer) Ltd holds almost 52% of the shares in China Resources Beer (Holdings) Co Ltd, listed on the Hong Kong stock exchange. Because Heineken holds only 40% in the joint venture, the Amsterdam-based company’s ultimate indirect stake in CR Beer is 20.67%.
This leaves Heineken with a remaining 20.67% stake in a number of its former subsidiaries, which include three breweries. In addition, it now has a stake in CR Beer’s breweries. Heineken also granted CR Beer a licence to brew Heineken beer. Furthermore, Heineken and CR Beer signed an agreement that stipulates what CR Beer may do with Heineken’s other premium beers, according to FTM.
CRE, in turn, bought shares in Heineken NV for €464 million. That gave the Chinese a 0.9% stake in the Amsterdam-based multinational beer giant.
In total, the deal cost Heineken almost €2 billion. This spending is what the beer giant now needs to recoup through windfall profits.
Since Heineken entered into partnership with the Chinese beer giant and the CCP, CR Beer managed to grow. In 2022, sales were up 5.2% compared to 2021, according to FTM reporting.
After Heineken and Heineken 0.0, CR Beer also started brewing Amstel and Heineken Silver.
Heineken reported a higher-than-expected profit for 2022. This was mainly related to the strong recovery of the business in Asia. According to Heineken, its economic interest – based on its equity stake in CR Beer – was almost €4.4 billion at the end of 2022. Heineken expects that the market will keep growing in the coming years. While some traditional beer markets, such as the European ones, are already quite saturated, there are plenty of growth opportunities in Asia, particularly in China – especially with the support of a partner like CR Beer.
Human and natural resources from Xinjiang region for Heineken products
FTM has investigated the links between CR Beer and the Chinese government, especially those in Xinjiang province. According to numerous academics, investigative journalists, human rights organisations and most recently, the United Nations Human Rights Council, serious human rights violations are being committed there. On February 25, 2021, the majority of the Dutch House of Representatives concluded that Uyghur genocide was occurring in China.
Already in 2019, the book “Heineken in Africa” by investigative journalist Olivier van Beemen revealed how Heineken is exploiting people, communities and countries in Africa. The book detailed a shocking list of unethical practices employed by the world’s second largest beer producer, including complicity in the genocide in Rwanda and support for authoritarian regimes.
In its annual reports, CR Beer states that it buys hop from foreign and domestic parties from China’s ‘northwest’. The company does not specify whether that involves Gansu or Xinjiang, the two Chinese provinces where most of the hop is grown. But from what Chinese sources report, it appears that CR Beer sources its hop from state-owned farms and go-betweens in Xinjiang, according to FTM.
Heineken violates its own human rights commitments
Follow the Money found seven areas in Xinjiang that directly or indirectly supply the Chinese brewer. For example, a party official of a hop company in the agricultural Yanqi Reclamation Area says on a local government website that his company has a long-term contract with Chinese brewers, including CR Beer. In the same news report, a CR Beer purchasing manager outlined how the purchased hop goes to their 96 breweries throughout the country.
Sales of hop from Xinjiang sometimes go through a go-between. For example, Junhu Farm supplies CR Beer with hop through the Japanese-Chinese joint venture Sanbaole. Junhu has been growing hop for 15 years on farms owned by the Xinjiang Production and Construction Corps (XPCC), a conglomerate comprising a paramilitary organisation, local governments and (state-owned) companies.
The same XPCC operates camps in Xinjiang where an estimated one million Uyghurs and members of other muslim minorities have been detained. In July 2020, the US government put the XPCC and some of their top executives on a sanctions list for their involvement in human rights violations.
The XPCC and local authorities in Xinjiang are also involved in forced labour on hop farms.
In its Human Rights Policy, Heineken commits to the guidelines of the OECD for multinational enterprises. The company therefore also has a duty of care. It must identify the risks of human rights violations, including forced labour, to prevent such violations and remedy them where necessary. Companies are responsible for examining the impact of their activities on human rights. The same applies to those of their business relationships, explain experts that FTM interviewed.
Compliance with guidelines such as those of the OECD is voluntary. But many companies do not comply.
Heineken itself says it is closely involved in CR Beer. Heineken plays an advisory role in China, according to CR Beer, and a Heineken board member is on the board of the Chinese beer companies.
That implies a big degree of involvement and thus influence on the business operations locally. Ultimately, that is the deciding factor as to whether Heineken is legally culpable.”Channa Samkalden, human rights lawyer, Prakken d’Oliveira
Ms Samkalden explains to FTM that Heineken’s “Human Rights Policy” and the beer giant’s expressed commitment to adhere to OECD guidelines emphasized their human rights responsibility even more.
Carlsberg Exposed: Beer Giant Participates in Oppression of Uyghurs
In March 2023, Movendi International reported that Danish beer giant Carlsberg had been exposed for participating in the oppression of the Muslim minority in China.
These cases indicate that alcohol companies overall ignore the human suffering their operations are causing.
Carlsberg owns a brand that dominates 85% of the beer market in Xinjiang. In Xinjiang authorities force the Uyghurs, a Muslim minority group in China, to consume alcohol. Muslims have been systematically imprisoned if they refused to consume alcohol, according to an investigation by Danish Danwatch and TV2. Experts criticize Carlsberg for participating in the Chinese oppression of Uyghurs.