Heineken NV / Heineken Holding NV BARCLAYS GLOBAL CONSUMER STAPLES CONFERENCE, 6 SEPTEMBER 2016 HEINEKEN: Delivering on Strategy Jean-François van Boxmeer Chairman of the Executive Board / CEO
Heineken NV / Heineken Holding NV
BARCLAYS GLOBAL CONSUMER STAPLES CONFERENCE, 6 SEPTEMBER 2016
HEINEKEN:Delivering on Strategy
Jean-François van Boxmeer Chairman of the Executive Board / CEO
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This presentation contains forward-looking statements with regard to the financial position and results of HEINEKEN’s activities. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.
Many of these risks and uncertainties relate to factors that are beyond HEINEKEN’s ability to control or estimate precisely, such as future market and economic conditions, the behaviour of other market participants, changes in consumer preferences, the ability to successfully integrate acquired businesses and achieve anticipated synergies, costs of raw materials, interest rate and foreign exchange fluctuations, change in tax rates, changes in law, changes in pension costs, the actions of government regulators and weather conditions. These and other risk factors are detailed in HEINEKEN’s publicly filed annual reports.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. HEINEKEN does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of these materials.
Market share estimates contained in this presentation are based on outside sources such as specialised research institutes in combination with management estimates.
Disclaimer
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AgendaHEINEKEN: Delivering on strategy
Strategic transformation at HEINEKENSix business priorities
Strategy delivering results
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Strategic transformation at HEINEKEN 2000-2015
Transformed geographic footprint Diversified business - not dependent on one sole geography
Increased exposure to higher growth markets:
61% of profits delivered by developing markets in 2015 vs 20% in 2010
Evolved strategy for developed markets First stage – cost base restructuring, increasing productivity
Second stage – reinvesting in the top line through innovation
Portfolio approach
Focus on premium portfolio as a competitive advantage, anchored around core Heineken brand
People and culture
More diversified, more international
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AgendaHEINEKEN: Delivering on strategy
Strategic transformation at HEINEKEN
Six business priorities Strategy delivering results
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Six business priorities
Win in premium led by Heineken® brand
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Shape the cider category
5
Lead by cool marketing and innovation
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Brewing a Better World
1
Drive End2End productivity
2
Be commercially assertive
3
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Source: Canadean 2015 and company dataIPA – Indian pale ale
Heineken® the only truly
Global brand in the world
Heineken®
In +170 markets
14% of HEINEKEN volume
20-year CAGR c. 5%
Desperados – tequila flavoured beer
Strongbow – the global leader in cider
Affligem – Belgian abbey beer
Sol – the independent Mexican
Amstel – a premium lager beer with a strong heritage
Tecate – Mexican brand with broad consumer appeal
Other International brands
Tiger – Born in Singapore, the iconic Asian beer brand
Krušovice – a lager beer with strong Czech heritage
Red Stripe – strong Caribbean brand with distinctive
attributes
Lagunitas IPA – exciting IPA brand with international
potential
Win in premium led by Heineken®
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Heineken® Formula 1Video
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Shape the cider category
* % of consumers drinking alcohol, that do not drink lager Source: Canadean, company data
Category expected to growth 2x level of beer 2015-2020 with 4% CAGR
Opportunity to leverage skill set as global market leader in cider, and strong position in the UK, the largest cider market
Available in 71 countries
In 2015 cider crossed 1mhl outside the UK
Portfolio positioned in attractive premium segment and product innovation friendly
Production in the UK, Belgium, Singapore, Nigeria, Slovakia and Bulgaria
Re-engineered production cost structure: cider production integrated into existing brewery network and beer route to market
Full cider brand portfolio
51%*26%*
Capturing new Consumersthrough cider
Drive the cider category andmaximise the cider opportunity
Award winning focus on quality
MOST AWARDED CIDER
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Lead by cool marketing
Source: HEINEKEN annual reports
Consumer-inspired, customer-oriented and brand-led
Brand buildinginvestments
11.7% 11.3%
12.4%12.8%
12.2%12.6% 12.7%
13.4%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2008 2009 2010 2011 2012 2013 2014 2015
Marketing & Selling (M&S) Spend (€ billion)
M&S spend M&S as % of consolidated revenue
Award-winning global campaigns
Sporting events, music & film festivals
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Innovation contributed €1.1bn of revenue in 1H16
1 The innovation rate is calculated as revenues generated from innovation introduced in the past 40 quarters for a new category, 20 quarters for a new brand and 12 quarters for all other innovations, excluding packaging renovations divided by total revenue
Innovation Rate of 10.5%
Innovation rate1
Innovation revenue Satisfying the needfor craft & variety
Seizing the low/no alcohol opportunity
Innovating in draught
Leading innovation in cider
4.1%5.3% 5.9%
7.4%8.6%
10.5%
11HY 12HY 13HY 14HY 15HY 16HY
€0.3bn
€1.1bn
11HY 16HY
25% CAGR
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Campaigns strengthened byleading capabilities in social and digital media
Facebook fans as at 31 August 2016
#1 on facebook
21.6MHeineken®
13.7MBudweiser
2.5MCarlsberg
12.3MCorona
7.9MStella Artois
(NUMBER OF FANS)
Digital transformation Engaging storytelling content and connecting global campaigns
Digital media investment more than
doubled between 2012 and 2015
Significant increase in investment
with key partners (Facebook, Google,
Twitter etc.)
Expect to double media spend on
digital by 2020
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Be commercially assertive: EOETo win in the point of sale on a daily basis
1. Leadership
2. Alignment
3. 100% data
4. Focus & Simplicity
5. Sell Out
6. Step by Step
7. Empowerment
8. Accountability
23,000-strong Sales Force
aligned under one program
Rolled out globally across all markets
Covering Traditional, On, Modern
and Wholesale trade channels
Empowering the Sales
Representatives to focus on
Excellent Outlet Execution
Providing one global way of working
Increasing performance through KPI
measurement and reporting
Based on 8 Execution Principles
Sales Force Technology
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Drive End2End productivity
Source: HEINEKEN annual report 2015
Leveraging global scale to deliver increased efficiencies
New financial shared service centres: Mexico, China, Singapore and Brazil
Global procurement delivering efficiencies: 63 countries supported
2,700 procurement led cost reduction projects
Delivering transactional finance activities: Covering 24 OpCos, 25 languages, 26 nationalities
26% reduction in cost per invoice during 2015
Global supply chain – driving efficiencies and improving productivity in our breweries. FY 2015 examples:
Water usage reduced in 66% of our breweries
Energy consumption reduced in 59% of our breweries
Increased productivity in 69% of our breweries
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Brewing a Better World
Protecting Water Resources2020 Target
Specific water
consumption
Reduce to 3.5 hl/hl for group
average and to 3.3 hl/hl for breweries in water scarce areas
Water
balancing
Effective water stewardship
programmes with UNIDO
Waste water
treatment
Solutions for all plants
Sourcing Sustainably
2020 Target
Local sourcing
in Africa
60% of raw
materials locally sourced
Sustainable
agriculture
50% of main raw materials
supplied from sustainable sources
Supplier Code
Procedure
Ongoing compliance to Supplier
Code Procedure
Advocate Responsible Consumption2020 Target
Industry
commitments
Deliver global industry
commitments
Heineken® 10% of Heineken® media spend
dedicated to responsible consumption
Partnerships Maintain and publicly report on
local partnerships addressing alcohol abuse
Health & Safety
2020 Target
Life saving rules – action plans fully implemented
Inclusive Growth
2020 Target
Investing in our communities through direct
contributions, shared value projects and foundation initiatives
Reducing CO2
Emissions2020 Target
In production Reduce by 40% (eq. 6.4 kg CO2/hl)
In fridges Reduce by 50%
In distribution Reduce by 20% in Europe and the
Americas
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AgendaHEINEKEN: Delivering on strategy
Strategic transformation at HEINEKEN
Six business priorities
Strategy delivering results
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Delivering margin expansion
Source: Company data
Commitment to medium term margin guidance
In 2015 margin expansion negatively
impacted by 23bps from the disposal of
EMPAQUE
Year on year margin expansion
improvement of around 40 bps
reiterated for 2016
14.3%14.7%
15.3%
16.2%16.5%
2011 2012 2013 2014 2015 2016
90bps
40bps60bps
23bpsc.40bps
Delivered in a balanced way through effective revenue management, continued focus on innovation, and investment in brands, combined with cost effectiveness
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HEINEKEN strategy to create value
1 Return on Sales - Operating profit (beia) divided by revenue; based on consolidated financials2 RONA - Return on Net Assets
Revenue & Market Share Growth
Focus on premium segment to drive top line growth and market share
Return on Sales
Commitment to medium term margin guidance
Focus on driving costs and efficiencies throughout the business
RONA
Focus on efficient deployment of capital eg. working capital
efficiencies, right capex, etc.
HEINEKEN Golden Triangle
Revenue & Market Share
Growth
Return onSales1 RONA2
Developing and Developed Markets may differ in weighting on these priorities as countries and markets evolve.
Decision making at HEINEKEN and operating company level incorporates all three elements.
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Summary
Recent years have shown further positive evolution at HEINEKEN
The company has six clear business priorities to focus on and drive future growth
HEINEKEN strategy is working and delivering positive results
Long term value creation is at the heart of our strategy and management of the company
Strong 1H16 results reported on 1 August 2016, with FY16 margin expansion expected to be in line with medium term guidance