Tag Archive | "Heineken"

Interim Revenue and Profit Growth at Heineken


Heineken has reported a 4.5% organic increase in revenue to Eur8.8 billion for the first half of 2012, driven by higher total consolidated volumes up 1.6% and revenue per hectolitre growth of 2.9%. Group beer volume rose 3.3% with increases in four out of the global brewer’s five regions. Reported net profit increased 30% to Eur783 million but included a post-tax book gain of Eur131 million for the sale of a minority stake in a brewery in the Dominican Republic. Net profit (beia) declined 4% on an organic basis.

Heineken’s ongoing Total Cost Management (TCM2) programme delivered pre-tax savings of Eur85 million in the first half of 2012. Despite this benefit, profitability in the first half of the year was impacted by difficult trading conditions across Europe as well as higher input costs and planned capability investments.

Jean-Francois van Boxmeer, chairman and chief executive of Heineken, comments: “Our focus on delivering top-line growth continues to be successful with revenue increases across all regions and market share gains in several of our key markets. The Heineken brand again performed strongly in the international premium segment with organic volume growth of 6%. “Our Africa & the Middle East, Asia Pacific and Americas regions all delivered an excellent top- and bottom-line performance.”

He continues: “Although faced with a challenging economic environment and unfavourable weather, revenue in Western Europe increased slightly in the first half of the year, whereas the Central & Eastern Europe region reported solid organic top-line growth.”

Heineken expects overall group revenues for the full year to benefit from continued positive momentum in higher growth economies across the Asia Pacific, Africa & the Middle East and the Americas regions. However, volume in Western Europe is expected to remain subdued in the second half of 2012 owing to the challenging economic conditions. Full year net profit (beia) is expected to be broadly in line with last year, on an organic basis.

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Heineken to Acquire Asia Pacific Breweries


Heineken has made a S$5.1 billion (US$4 billion) offer to buy the stake held by its joint venture partner, Fraser & Neave, in Asia Pacific Breweries, one of the fastest growing beer groups in Asia and owner of the Tiger brand. In accordance with the Singapore Code on Takeovers and Mergers, when the conditions of the offer are satisfied, Heineken will make a mandatory general offer for all the shares of APB not already owned by Heineken for a maximum consideration of S$2.4 billion.

Heineken’s offer is in line with the company’s strategy to expand its presence in emerging markets and follows transformational deals in recent years that have included the acquisition of the brewing operations of FEMSA in Mexico and Brazil, the partnership with United Breweries in India and acquisitions and capacity investments in Africa.

If agreed, the offer will strengthen Heineken’s platform for growth in some of the world’s most exciting and dynamic economies with fast-growing populations. The deal will give Heineken direct access to a number of important markets, including Cambodia, China, Indonesia, Malaysia, New Zealand, Papua New Guinea, Singapore, Thailand and Vietnam.

When completed, the offer will also strengthen Heineken’s portfolio, providing control of the strong international Tiger brand and strong regional and local brands such as Anchor, Bintang and Larue.

Jean-Francois van Boxmeer, chairman and chief executive of Heineken, comments: “We really value our partnership with F&N which goes back over 80 years, but due to changes in the F&N and APB shareholding, the fabric of the partnership has changed. As a result, it is time for us to look ahead to the next chapter of our Asian business, in whichSingaporewill continue to be our regional headquarters and both the Heineken and Tiger brand will spearhead our brand portfolio in Asia.”

He adds: “We believe that our offer for the APB shares is highly attractive and provides excellent value to F&N and APB shareholders. At the same time, taking control of APB will create long-term financial and strategic value for Heineken’s shareholders.”

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Heineken to Divest Minority Stake in Dominican Republic Brewery


Heineken is selling its 9.3% minority shareholding in Cervecería Nacional Dominicana in theDominican Republicfor $237 million to AmBev Brasil, part of Anheuser-Busch InBev. Closing of the transaction is expected to take place in the second quarter of 2012 and subsequently Heineken expects to realise a post-tax exceptional book gain of approximately Eur130 million.

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Anheuser-Busch InBev Becomes Caribbean Leader With $1.2 Billion Deal


Anheuser-Busch InBev has further strengthened its exposure to emerging markets by taking a majority stake in Cerveceria Nacional Dominicana (CND), one of the largest brewers in the Dominican Republic. Anheuser-Busch InBev’s subsidiary AmBev Brasil has formed a strategic alliance with E Leon Jimenes, which owns 83.5% of. CND, to create the leading beverage company in the Caribbean through the combination of their businesses in the region. The combined business will include beer, malt and soft drinks operations in the Dominican Republic, Antigua, Saint Vincent and Dominica, as well as exports to 16 other countries in the Caribbean, the US and Europe.

AmBev Brasil is making a cash payment of approximately $1.0 billion and contributing AmBev Dominicana. The combined entities would have had net revenues of approximately $570 million in 2011 and are expected to have an estimated combined EBITDA for the first 12 months of operations of approximately $190 million, which implies an EV/EBITDA multiple of approximately 13x.

Separately, AmBev Brasil will acquire an additional stake in CND of 9.3%, which is currently owned by Heineken, for $237 million. This deal will increase AmBev Brasil’s indirect interest in CND to approximately 51%.

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Anheuser Busch InBev and Heineken Chase $1.5 Billion Acquisition


Anheuser-Busch InBev and Heineken are reported to be competing to acquire Cerveceria Nacional Dominicana (CND), the largest brewer in the Dominican Republic. CND, which also sells its beer in the Caribbean islands and in the United States, is owned by Grupo Leon Jimenes. The likely price tag for CND is $1.5 billion and a deal could be concluded within weeks.

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Heineken Assigned Solid Investment Grade Credit Ratings


Heineken has been assigned solid investment grade credit ratings by the world’s two leading credit agencies – Moody’s Investor Service and Standard & Poor’s. Both long-term credit ratings, Baa1 and BBB+, respectively, have ‘stable’ outlooks and reflect the brewer’s excellent geographic spread of profits and cash flows, its leading positions in beer markets across the world and its well-balanced growth strategy.

The public credit ratings, the first in the company’s almost 150-year history, provide Heineken with continuous access to a wide range of funding sources and will facilitate and further enhance its already successful track record in the financial markets. These ratings will be assigned to Heineken’s European Medium Term Note (EMTN) Programme that will be published on the website of the Luxembourg Commission de Surveillance du Secteur Financier (CSSF), once the annual update has been completed.

“The award of these credit ratings underlines our commitment to transparency and diversification of our funding sources,” comments Rene Hooft Graafland, chief financial officer of Heineken. “The credit rating agencies have recognised the strength of Heineken and our other brands, our geographic diversity, our leading profitable market positions and strong cash flow generation. These have all been instrumental in securing these solid investment grade ratings today. In addition, our sound financial policies and conservative approach towards managing liquidity and funding continue to support a strong capital structure in the long-term.”

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Heineken Achieves Organic Growth Across All Regions


Driven by a group beer volume increase of 3.6% with growth in all regions, Heineken has reported a 6.1% increase in revenue to Eur17.12 billion for 2011. Revenue grew 3.6% organically, reflecting total consolidated volume growth of 2.1% and revenue per hectolitre growth of 1.5%.

Organic EBIT growth was 1.4% as higher revenues, cost savings and increased profit from joint ventures were partly offset by increased marketing expense, higher input costs. Net profit grew 9.2% organically to Eur1.58 billion, driven by higher EBIT, lower interest expense and a lower effective tax rate. However, reported net profit declined 1.2% to Eur717 million, following an exceptional capital gain in 2010. 

“At the start of 2011, we said that we would significantly increase investment in our brands and innovation to drive long-term value and volume growth. This strategy helped us to deliver organic volume and revenue growth across all five reporting regions for the year,” comments Jean-Francois van Boxmeer, chairman and chief executive of Heineken. “We also grew the bottom-line organically in 2011, with 9.2% net profit (beia) growth.”

Heineken’s Total Cost Management (TCM) programme delivered pre-tax savings of Eur178 million in 2011 and total savings of Eur614 million over the entire three year period. The Dutch brewer has now launched a new Eur500 million cost saving programme (TCM2) covering the 2012-14 period. Heineken also achieved cost synergies of Eur94 million in 2011, relating to the acquired beer operations of FEMSA, bringing cumulative savings to Eur136 million. The remainder of the targeted Eur150 million cost synergies from the FEMSA acquisition will be realised in 2012.

Jean-Francois van Boxmeer continues: “The Heineken brand continued to outperform the international premium segment and overall beer market, with particularly strong brand performances in Brazil, China, France, Nigeria and Vietnam. Heineken was also launched in Mexico and India, two attractive growth markets.”

In the year ahead, Heineken expects to benefit from continued positive growth momentum in higher growth economies and from revenue enhancing initiatives in developed markets. In addition, revenue development will continue to be supported by an ongoing shift towards higher growth economies in Africa, Latin America and Asia.

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Heineken to Take Over UK Marketing and Distribution For Desperados


Heineken is taking on the UK marketing, sales and distribution rights to Desperados premium tequila-flavoured beer. Heineken will assume exclusive responsibility for the Desperados brand in all UK on and off trade sales channels from February 1st 2012, where it will be sold in 330ml bottles only. Desperados is a Heineken-owned brand that is currently enjoying success in many European markets.

SHS Sales & Marketing was awarded the sales and distribution rights to the brand by Heineken in 2009 and, under its stewardship, Desperados has established itself as one of the fastest-growing premium packaged lagers (PPLs) in the UK. However, both parties now agree that the time is right to simplify the route to market and Heineken will integrate Desperados into its portfolio of premium and speciality brands.

The change coincides with SHS Sales & Marketing entering into a new agreement with Heineken International that sees the Gloucester-based company appointed to handle the sales and marketing for premium Czech lager brand Krusovice exclusively in the UK while installing SHS as a principal distributor of Sagres, the Portuguese premium import marketed in the UK by Heineken.

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Heineken and Coca-Cola Hellenic Increase Stake in Pivara Skopje


Heineken and Coca-Cola Hellenic have acquired 41.2% of the minority shares in their joint venture company, Pivara Skopje, in the Former Yugoslav Republic of Macedonia (FYROM) for €79.1 million (excluding acquisition costs). Coca-Cola Hellenic and Heineken now collectively own 96.5% of the shares in Pivara Skopje.

 

Pivara Skopje was established in 1924. In 1998 Coca-Cola Hellenic and Heineken together acquired the majority interest in the company. Today Pivara Skopje is the largest beer and soft drinks company in FYROM manufacturing, distributing and selling the brands of The Coca-Cola Company and Heineken.

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Heineken to Increase Stake in Haitian Brewer


Heineken intends to increase its shareholding in Brasserie Nationale d’Haiti (Brana), the country’s leading brewer, from 22.5% to 95%. The shares are currently owned by Brana’s management and private shareholders. Financial details are not disclosed.

 

Brana is the leading beverage company in Haiti, producing, marketing and distributing various beer and malt brands, most notablyPrestige, Malta H and Guinness (licensed), as well as various PepsiCo licensed soft drink brands. Heineken acquired its initial 22.5% stake in the company in the 1980’s. The transaction is subject to customary closing conditions and is expected to be completed and consolidated in January 2012.

 

“The Haitian beer market has shown solid year-on-year growth, but remains relatively underdeveloped,” comments John Nicolson, regional president Americas for Heineken. “A growing population together with increased political and economic stability creates good prospects for continued growth. Brana is uniquely positioned to benefit from this environment with its leading brands, local brewery and nationwide distribution network.”

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Heineken Forms Global Partnership With Facebook


Heineken and Facebook have announced a global partnership, which will see the two companies collaborate on digital campaigns for Heineken’s brands around the world. The new partnership further strengthens Heineken’s position in the digital space. The Heineken Facebook fan page is already the largest for any beer brand with over 4.6 million adult users. Two of the brewing group’s other leading brands, Kingfisher and Dos Equis, are also in the top seven beer brands with the greatest number of Facebook fans.

 

Facebook will provide Heineken with a global marketing platform that reaches millions of people as well as access to Facebook’s deep expertise in building long-term relationships between brands and their audiences. The collaboration also provides Heineken with access to Facebook’s latest products.

 

Alexis Nasard, chief commercial officer at Heineken, comments: “As our adult consumers are increasingly spending more time on digital space and social media, it is important that our brands are active in this environment. Our partnership with Facebook is another significant development in our communication strategy as we continue to look for innovative ways for our brands to ignite the digital conversation and connect with our consumers.”

 

Heineken’s Facebook fan page has enabled the company to deepen its engagement with over 4.6 million adult users. Facebook provides a unique platform to share the brand’s creative award winning campaigns ‘The Entrance’ and ‘The Date’, and engage through its global sports sponsorship platforms – UEFA Champions League and the 2011 Rugby World Cup.

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New Head For Heineken’s Central and Eastern Europe Region


Nico Nusmeier, regional president of Heineken Central and Eastern Europe, has decided to leave the global brewing group. Effective from January 1st, 2012 he will be succeeded by Jan Derck van Karnebeek, currently managing director, Romania. In his new role, Jan Derck will be based inVienna as a member of Heneken’s executive committee, reporting to Jean-Francois van Boxmeer, chairman of the executive board and chief executive of Heineken.

 

Under Nico Nusmeier’s leadership Heineken’s Central and Eastern Europe region has grown considerably through organic growth, M&A and innovations, transforming the business into an important platform for future growth.

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Heineken and Coca-Cola Hellenic Extend Stake in Macedonian Joint Venture


Heineken and Coca-Cola Hellenic are acquiring 41.2% of the shares in Pivara Skopje, their joint venture beverage company in the Former Yugoslav Republic of Macedonia (FYROM). The shares are currently owned by various minority shareholders. The total consideration for the transaction is Eur79.1 million, to be equally divided between Heineken and Coca-Cola Hellenic.

 

The transaction is subject to approval by the FYROM competition authorities and is expected to be completed by early 2012. Following the closing of the transaction, Heineken and Coca-Cola Hellenic will together own 96.5% of the shares in Pivara Skopje. The remaining 3.5% of the shares is largely owned by former and current employees of the company.

 

Pivara Skopje is the leading beverage company in the country – producing, marketing and distributing various beer and soft drink brands, most notably Skopsko and Coca-Cola. Heineken and Coca-Cola Hellenic acquired their initial 55.3% stake in the company in 1998.

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Heineken Faces Tough Second Half


Despite a solid first half performance, Heineken has cautioned that profit for the full year will be flat. Heineken achieved organic growth in group beer volume of 4.2% to 104.1m hectolitres with higher volume across all regions in the first half of 2011. On an organic basis, revenue grew 3.3% to Eur8.36 billion, driven by a positive volume effect of 2.2% and increased price and sales mix of 1.1%.

 

Organically, EBIT (beia) rose 3.9% to Eur1.26 billion, as an increase in revenues, cost savings and higher profit from joint ventures was partially offset by planned higher marketing investment and increased input costs. Reported net profit declined 14%, primarily reflecting a significant exceptional gain last year.

 

Jean-Francois van Boxmeer, chief executive of Heineken.

Heineken’s Total Cost Management (TCM) programme delivered Eur82 million of pre-tax savings in the first half 2011 and is expected to yield further cost savings in the second half. With a culture of continuous improvement now firmly embedded across its business, Heineken plans to introduce a new 3-year cost saving programme from the beginning of 2012.

 

“This is a solid performance for the first half of the year, with higher organic group beer volume across all regions. Our focus on transforming our geographic footprint, aligned with increased marketing investment has enabled us to deliver robust top-line growth and gains in market share,” comments Jean-Francois van Boxmeer, chief executive of Heineken. “Continuing to invest in our key brands is helping us to win with consumers.”

 

Looking ahead, Heineken expects trading conditions in Latin America, Sub-Saharan Africa and Asia Pacific to benefit from a continued positive economic environment. However, volume development in parts of Europe and the US will remain challenging given the current economic uncertainty, high unemployment and ongoing weak consumer confidence.

 

Heineken anticipates a slightly higher rate of input cost inflation in the second half of the year but will continue its focus on long-term brand building through higher marketing investment.

 

Heineken has witnessed volume weakness in the high-selling season of July and early August 2011, reflecting poor weather conditions in Europe, in combination with lower consumer confidence in some key markets. This will affect second half 2011 volume and profit performance and therefore Heineken expects full year net profit (beia), on an organic basis, to be broadly in line with last year.

 

Jean-Francois van Boxmeer adds: “We will continue our relentless focus on tight cost management, realisation of planned synergies from earlier acquisitions and strong cash flow generation to support near-term performance. Whilst mindful of the continuing volatility and increased uncertainties in the global economy, I remain confident that these efforts combined with our strengthened global platform and higher marketing investments, position the company well to deliver sustainable growth over the long-term.”

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Heineken Completes Acquisitions of Two Breweries in Ethiopia


Heineken has completed the acquisitions of the Bedele and Harar breweries from the government of the Federal Democratic Republic of Ethiopia for $85m and $78m respectively. The transactions follow Heineken’s participation in the public auctions for the two breweries.

 

The acquisitions reflect Heineken’s strategy of increasing our exposure to and growth from developing markets. With brands such as Bedele Premium, Bedele Special, Harar, Hakim Stout and Harar Sofi (malt), the two breweries have a combined market share of 18% in the Ethiopian beer market.

 

Ethiopia is Africa’s second most populated country with 85 million people and its beer market (3 million hectolitres in 2010) grew approximately 20% per year over the past five years, compared to a GDP growth of 8%. Beer and non-alcoholic malt consumption in Ethiopia was approximately 4 litres per capita in 2010, which is well below the global average of 27 litres and below beer consumption in other countries in the region, such as Tanzania (7 litres), Uganda (9 litres) and Kenya (10 litres). In addition to a fast growing population and a developing beer market, the country’s political stability and improving economy, make Ethiopia a promising, long-term growth market for Heineken in Africa.

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Heineken Starts Amstel Brewing in Russia


Heineken has commenced the brewing of its Amstel brand at its St Petersburg brewery in Russia. Heineken is reported to be aiming to capture a 1% share of the Russian beer market for Amstel by the end of the year as consumer demand for premium beer brands, such as Heineken and Zlaty Bazant, recovers.

During the past decade the Russian beer market has expanded by more than 40% and is now the fourth largest in the world. However, a 200% increase in beer tax imposed by the Russian Government in 2010 dampened demand.

Five brewers – Baltika Breweries, SUN InBev, Heineken, Efes and SABMiller – control over 80% of the Russian beer market. Calsberg’s Baltika Breweries is the clear market leader with a 40% share.

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Heineken Commences Next Phase of Share Repurchasing Programme


Heineken has announced that in connection with the acquisition of South American brewer FEMSA Cerveza that was completed on 30 April 2010, it will begin the next phase of repurchasing its own shares up to a maximum value of Eur300m. These shares are intended to be delivered to FEMSA or a FEMSA group company under the terms of the Allotted Share Delivery Instrument (ASDI) concluded between Heineken and FEMSA.

The ASDI sets forth the terms under which Heineken will deliver approximately 29 million Allotted Heineken shares to FEMSA. Until 16 June 2011, approximately 14.9 million shares were already repurchased of which 13.1 million shares were delivered to FEMSA. The remaining 1.8 million shares will be delivered before 1 July 2011.

Heineken is Europe’s largest brewer and the world’s third largest by volume. On a 2010 pro-forma basis, including FEMSA Cerveza, revenue totalled Eur17b and EBIT was Eur2.7b. Heineken has more than 200 international premium, regional, local and specialty beers and ciders. These include Amstel, Birra Moretti, Cruzcampo, Dos Equis, Foster’s, Kingfisher, Newcastle Brown Ale, Ochota, Primus, Sagres, Sol, Star, Strongbow, Tecate, Tiger and Zywiec.

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Heineken Looks to Expand in Brazil


Heineken is reported to be considering making an offer to acquire Primo Schincariol Industria de Cervejas Refrigerantes, the second largest brewer in Brazil behind Anheuser-Busch InBev. Primo Schincariol Industria de Cervejas Refrigerantes is estimated to be worth in the region of £2b.

Such an acquisition move would be in line with Heineken’s strategy of developing its presence in fast growing emerging beer markets of the world to help balance its exposure to sluggish mature regions such as Western Europe and the US.

Heineken is already present in Brazil, the world’s third largest beer market by volume, through its partnership with Cervejarias Kaiser.

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Heineken Renews €2 Billion Revolving Credit Facility


Heineken has announced the successful closing of a new Revolving Credit Facility for an amount of Eur2b with a syndicate of 17 banks. The new multi-currency facility replaces Heineken’s existing Eur2b Revolving Credit Facility, which was scheduled to mature on April 22nd 2012. The new self-arranged credit line has a tenor of five years with two 1-year extension options and can be used for general corporate purposes, including acquisitions.

The facility was well-received and oversubscribed, underlining Heineken’s strong standing in the bank market and its high-quality credit profile.

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Heineken Expands in Africa With Two Acquisitions


In line with its strategy of increasing exposure to emerging markets, Heineken is acquiring two breweries in Ethiopia, after being named the preferred bidder by the Ethiopian Government following a public auction. Heineken is paying $85m and $78m respectively for the Bedele and Harar breweries.

The two breweries have a combined market share of 18% with brands such as Bedele, Harar, Hakim Stout and Harar Sofi (malt). Ethiopia is Africa’s second most populated country with 85 million people and its beer market (3m hectolitres in 2010) has grown by approximately 20% per year over the past five years, compared to a GDP growth of 8%.

Beer and non-alcoholic malt consumption in Ethiopia was approximately 4 litres per capita in 2010, which is well below the global average of 27 litres and below beer consumption in neighbouring countries, such as Tanzania (7 litres), Uganda (9 litres) and Kenya (10 litres). In addition to a fast growing population and a developing beer market, the country’s political stability and improving economy, make Ethiopia a promising, long-term growth market for Heineken in Africa.

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Heineken Starring in National Geographic TV Documentary


Heineken is starring in the first episode of the new European season of Mega Factories, the successful documentary series on National Geographic Channel. Mega Factories Heineken will be broadcasted in the Netherlands, Belgium, Luxembourg, Sweden and Denmark on Thursday night, March 24th; in Turkey on March 25th and in France on March 26th.

The 45-minute documentary shows how Heineken beer is brewed in the Dutch cities of Zoeterwoude and Den Bosch following an almost 150-year old recipe. The National Geographic filmmakers follow the various steps of the brewing process; selecting the right barley and hops, using top-quality water, malting, brewing, fermenting, lagering, and of course packaging the beer in the iconic green Heineken bottles.

In addition to the brewing process, the documentary provides great insights in the many other aspects that make Heineken the leader in the international premium beer segment. The film pays special attention to how the company has incorporated sustainability in all of its business processes, most notably in the efficient use of water and energy.

Jean-Francois van Boxmeer, chairman and chief executive of Heineken, comments: “It’s a huge honour for us that National Geographic has made this film about Heineken. It provides unique insights in the Heineken beer, brand and company, and shows the great people behind every glass and bottle of Heineken beer.”

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Another Milestone For Heineken


Heineken has reached another important milestone in Mexico, the world’s fourth largest beer profit pool and a market that is expected to show ongoing incremental volume growth in the coming years, less than a year after the acquisition of Cuauhtemoc Moctezuma (CM) as part of the FEMSA beer operations transaction. The new developments include the brewing of the Heineken brand in one of CM’s most modern, high-tech breweries located in Orizaba, Veracruz, as well as the introduction of new, innovative bottle and can designs for the premium Heineken brand.

Over the past few years, the company has successfully developed the Heineken brand in the Caribbean region and in Latin American countries such as Brazil, Argentina and Chile. The company is now poised to do the same in Mexico.

“The premium segment is currently a relatively small and underdeveloped part of the Mexican beer market, but it is growing fast as popularity for premium brands among consumers continues to increase,” comments John Nicolson, regional president of Heineken Americas.  “Our decision to implement this new stage for the Heineken brand in Mexico is an exciting development for our business which, together with our established distribution network and portfolio of other leading international and local brands, creates a strong platform for future growth in the region.”

The Heineken brand will now be available in Mexico in unique embossed long-neck bottles and in innovative cans featuring tactile inks. The new packaging designs will be showcased in a print campaign in up-market magazines and in outdoor advertising on premium locations that both capture the cosmopolitan nature and international heritage of the brand. This will be amplified by consumer activations that build on the brand’s sponsorship of the UEFA Champions League.

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Robust 2010 Performance by Heineken


Helped by the integration of its FEMSA acquisition in Latin America and continued growth of its flagship brand, Heineken increased net profit by 41% to Eur1.44b for 2010 on revenue up 9.7% to Eur16.13b. On an organic basis, net profit (beia) rose by 19.7%, driven by solid EBIT (beia) growth and lower interest costs, but consolidated beer volume and revenue were down by 3.1% and 2.2% respectively.

During the year, Heineken successfully completed the integration of the beer operations of FEMSA. On a pro forma basis, EBIT (beia) of these operations increased 44% to Eur397m and pre-tax cost synergies of Eur42m have already been realised. Heineken’s Total Cost Management (TCM) programme delivered Eur280m pre-tax savings in 2010.

Jean Francois van Boxmeer, chairman and chief executive of Heineken.

“Heineken delivered a robust performance, generating double-digit organic net profit growth for the fifth consecutive year. We achieved this against a backdrop of an improving yet still challenging economic environment in a number of our key markets. At the same time, we have made significant investments in our platform for future growth. The most transformational event being the acquisition of the beer operations of FEMSA which provide us with significant new opportunities in three of the four largest profit pools in the global beer market: Mexico, Brazil and the USA,” comments Jean Francois van Boxmeer, chairman and chief executive.

He continues: “I am particularly pleased that the Heineken brand has once again outperformed our broader brand portfolio, the overall beer market and the international premium segment as a whole. We will continue to invest in our leadership position in this segment. In addition to the acquisition of the beer operations of FEMSA, our new partnership in India and strong growth in Africa and Asia have further enhanced our exposure to emerging beer markets.”

Outlook

The relentless focus on cost reduction, global synergies and cash flow generation, which was a feature of 2010, will continue in 2011 and beyond.

Heineken expects volume sales in Latin America, Africa and Asia to benefit from ongoing robust economic conditions aided by the group’s marketing and investment programmes. Despite an improving economic environment in Europe and the US in 2011, the impact of austerity measures and high unemployment will result in continued cautious consumer behaviour in these markets, according to Heineken.

The international premium segment will continue outgrowing the overall beer market, benefiting the Heineken brand and supporting improved sales mix. Heineken forecasts a low-single digit increase in input costs and plans to mitigate this impact through increased pricing.

In Europe, Heineken will shift its prime focus towards volume and value share growth, with increased investments in marketing and innovation in Heineken and other key brands, further supported by the international roll-out of higher margin brands. Whilst this is expected to affect profit development in Europe in the near term, it underlines the brewer’s commitment to strengthening its leadership position in the region.

The TCM programme will deliver further cost savings, although at a lower level than in 2010 following the earlier than planned realisation of savings in 2010. As a result of ongoing efficiency improvements, Heineken expects a further organic decline in the number of employees.

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Heineken Launches a New Global Brand Campaign


‘The Entrance’, the first installment of a new global brand campaign for Heineken, is proving to be a major online success, with close to four million hits on You Tube in just three weeks. The film premiered on Heineken’s Facebook fan page at the end of 2010 to more than 900,000 Heineken fans and will start to appear on television and cinema screens around the world from the first quarter of 2011 onwards.

Created for Heineken by the Amsterdam office of leading advertising agency Wieden+Kennedy, the film’s hero demonstrates the ultimate party entrance. Charming his way past a coterie of colorful characters, including the beautiful wife of a dignitary, a gun slinging oil baron and even a kung fu assassin, he ends up on stage performing with the lead singer of The Asteroids Galaxy Tour. The Danish alternative pop band sings its latest single and backing track of the film, ‘The Golden Age’.

“‘The Entrance’ confirms the brand’s differentiation from other beers”, says Cyril Charzat, senior director Global Heineken Brand. “Its world-class production values project the brand’s premiumness and exclusivity.”

The widely anticipated campaign includes 90’’, 60”, 45’’ and 30” length commercials and 11 extra short entertaining films, viewed on YouTube and Heineken’s Facebook pages, which reveal the secret backstories of the key characters starring in the film.

Through this campaign, Heineken introduces its new universal tag line ‘Open Your World’ across all marketing executions. The new global tagline is designed to convey the brand’s worldly, open-minded and confident personality. Heineken’s new campaign will see the release of more intriguing films and surprising ways to engage its consumers in the coming months.

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Heineken Expands in Nigeria


Heineken has strengthened its platform for growth in Nigeria with the acquisition from the Sona Group of two businesses which have controlling interests in each of the Sona, IBBI, Benue, Life and Champion breweries in Nigeria. The acquisition provides Heineken with an additional technical capacity of 3.7m hectolitres, helping to alleviate the Dutch group’s current capacity constraints in the market and improving the geographic location of its breweries. This will enable Heineken to take advantage of the attractive future growth opportunities that exist in different regions of the country.

The acquisition has been funded from existing resources. The transaction price has not been disclosed. Heineken will explore the possibility of consolidating the newly acquired breweries into its existing business structure in Nigeria during 2011.

At about 16.5m hectoliters, the Nigerian beer market is the second largest in Africa and has grown at a compound annual growth rate of 9% over the past decage. Nigeria is the most populated country in Africa with over 150 million people. Beer and non-alcoholic malt consumption was approximately 11 litres per annum in 2009, well below the global average of 27 litres.

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Ten Brewers Control 61% of Global Beer Market


Worldwide beer consumption has increased by over 3% per annum during the last ten years and the top ten brewers now account for over 60% of global beer volume, compared to 38% in 2000. A new report by Rabobank titled ‘Value creation in the Beer Sector through M&A activities’ looks at changes in the beer sector in the last decade. Following consolidation, four leading global brewers have emerged. These four beer companies – AB InBev, SABMiller, Heineken and Carlsberg – have tripled their combined market share since 2000 and have almost quadrupled their volumes.

Most of the rise in worldwide beer consumption has come from rapid growth in Asia, Eastern Europe, South America and Africa, while volume growth in developed markets was negligible. “The major brewers reacted to these changes by entering emerging markets and consolidating in developed markets. This has radically altered the competitive landscape,” says Francois Sonneville, a food & agribusiness analyst at Rabobank. “The most striking change is the emergence of a top-four.”

Do Acquisitions Add Value?

According to Francois Sonneville the strategies of the top-four are similar. By making acquisitions they seek to grow their volumes to benefit from economies of scale. “The advantages of scale have led to improved profitability and the margin development of the top-four has been better than the rest of the market,” he says.

But many brewers outside the top-four are not convinced that acquisitions can add value at today’s prices. Francois Sonneville explains: “Over time, acquisitions have become more expensive. So brewers find it difficult to decide the best course to add value to their business in an increasingly aggressive environment.” Ignoring the developments however is not an option. As the chief executive of one market leader says in the Rabobank report: “You’re either at the table or on the menu.”

The Rabobank analyst acknowledges that the traditional method of comparing the return on capital employed (ROCE) to the weighted average cost of capital (WACC) is ideal for predicting value creation, but difficult to use for evaluation purposes. Therefore, a second method, devised specifically for this report, compares the top-four with a constructed peer group of 20 listed major brewers.

The conclusion is that there is no justification for brewers to disregard acquisitions in general for fear of destroying value. A comparison of developments in return on capital employed shows that the acquisition strategy of the top-four brewers not only improved margins, but also led ultimately to value creation. Francois Sonneville continues: “Despite initial pressure on the ROCE from M&A activity, the top-four have managed to outperform the peer group in the long run. So these four have found it better to be at the table than on the menu.”

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Major Bottle Redesign by Heineken


Heineken has restyled its famous green bottle design using a longer neck and reduced the number of bottle sizes from 15 to five as the Dutch brewer seeks to improve brand uniformity across its international markets and to simplify its supply chain and enhance efficiency. The new bottle design will be launched in Western Europe early in 2011 and across the rest of the world, with the exception of the US which favours shortneck bottles, by 2012.

The new bottle is available in two versions – embossed and standard. The new design features a unique curved embossment on the neck and back. The new packaging also incorporates updates to key brand elements including an ellipse curve, derived from Heineken’s iconic racetrack logo, Heineken’s trademark green colour has been enriched and its red star emblem has been raised above the logo.

“We believe that with one recognisable bottle the global Heineken brand will be further strengthened. With uniformity comes greater impact,” explains Mark van Iterson, global manager of Heineken design and concept. “The bottle will reinforce the new packaging visual identity which has already been applied to the contemporary tactile can and embossed glasses that were introduced in selected markets earlier this year. As the market leader we pride ourselves on being progressive in design as well as taste.”

Heineken’s new can design features tactile ink, which is created by a series of small raised dots on the surface of the can, to give consumers a better feeling in the hand and better grip.

He adds: “Our consumer focuses on details. This is why Heineken has dedicated time and resources to this design update, making sure every single element was taken into consideration. We have looked at each and every packaging detail to ensure our sophisticated consumers feel a subtle but significant difference. Consumer response has been excellent. They see the new design to be modern, appealing and innovative.”

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Coca-Cola Retains Position as World’s Most Valuable Brand


Coca-Cola has retained its leadership of Interbrand’s 11th annual ranking of the ‘Best Global Brands’ beating off competition from the likes of IBM, Microsoft and Google. This is the eleventh consecutive year that Coca-Cola has earned the distinction of being the world’s most valuable brand. Coca-Cola was valued by Interbrand at $70.45b, up 2% on the previous year.

A total of 16 food and drink brands featured in the top 100. Ranked 23rd overall with a brand value of $14.6b, a rise of 3%, Pepsi was the second ranked food and beverage product. Nescafe, with brand value down 4% to $12.8b, was the next highest, followed closely by Budweiser, up 4% to $12.3b.

Other food and beverage brands to make Interbrand’s top 100 league table in descending order were: Kellogg’s (+6% to $11.0b), Heinz (+4% to $7.5b), Nestle (+4% to $6.5b), Danone (+7% to $6.4b), Sprite (no change at $5.8b), Jack Daniels (flat at $4.0b), Moet & Chandon (up 7% to $4.0b), Corona (static at $3.8b), Smirnoff (down 2% to $3.6b), Johnnie Walker (no change at $3.6b), Heineken (flat at $3.5b) and Campbell’s (up 5% to 3.2b), which was ranked 99th overall.

Only Nescafe and Smirnoff actually declined in brand value.

Interbrand, the leading brand consultancy, publishes the ranking of the top 100 brands based on a unique methodology analysing the many ways a brand touches and benefits an organisation, from attracting top talent to delivering on customer expectation. Three key aspects contribute to a brand’s value – the financial performance of the branded products or services, the role of brand in the purchase decision process and the strength of the brand to continue to secure earnings for the company.

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Heineken Presented With 2010 World Business and Development Award


Gloabl brewer Heineken has been presented with the 2010 World Business and Development (WBD) Award for its groundbreaking sustainable local supply chain initiative in Sierra Leone. Heineken is one of only ten organisations to receive the 2010 WBD award. According to the members of the International Judging Panel, Heineken impressed by demonstrating a clear link between vital business practices and the contribution of the project towards the Millennium Development Goals.

Heineken’s local sourcing project in Sierra Leone is part of the company’s Africa-wide strategy to procure at least 60% of its raw materials locally. Moreover, the Sierra Leone case has stimulated local entrepreneurship, created hundreds of new jobs for local population and increased smallholder farmers’ incomes significantly, thereby alleviating poverty.

Since 1988, Heineken has been developing its sorghum brewing technology and know-how. The award-winning project in Sierra Leone was established in 2005 with the goal to develop a sustainable local supply chain for Sierra Leone Breweries (SLBL). SLBL trained farmers in good agricultural practices, organised bulking and transport and tested new sorghum varieties for better processing quality and yield. The sustainable local supply chain was established with co-funding of the Common Fund for Commodities, an international institution that specialises in commodity development.

The project has helped local farmers compete against imported grains. It has raised smallholder farmers’ incomes derived from sorghum, which has directly contributed to the alleviation of poverty for this critical group of farmers.

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Strong Showing From Heineken


Global brewer Heineken has produced a strong first half performance but remains cautious on the development of beer consumption in Europe and the US due to continued weak consumer spending and planned austerity measures across many countries. Heineken reported a 42% jump in net profit to Eur695 million, partly due to positive exceptional items, on revenue up by 5.2% to Eur7.52b but down organically by 2% for the first half of 2010 as group beer volume declined by 2.3% organically, impacted by the weak economic environment and the effect of excise duty increases, partly offset by strong growth in Africa, Asia and Latin America.

Heineken’s organic net profit (beia) increased 17% to Eur621m, driven by higher EBIT (beia) and lower interest costs. The Dutch brewer’s Total Cost Management programme delivered savings of Eur104m during the first half.

Jean-Francois van Boxmeer, chairman and chief executive of Heineken.

“Heineken achieved strong organic net profit growth in the first half year 2010. Trading conditions remained challenging in Europe and the USA, but we realised strong group beer volume growth in Africa and Asia. The effectiveness of our premium strategy was reinforced by the continued strong performance of the Heineken brand which once again outperformed our broader portfolio and the overall beer market,” comments Jean-François van Boxmeer, chairman and chief executive of Heineken.

In the second half of 2010, Heineken will continue its focus on brand building and increase investments in key brands, which will be largely offset by lower input costs. The TCM programme will deliver further savings in the second half of the year. In addition, Heineken will focus on developing the performance of companies acquired during the last three years, including South American brewer FEMSA Cerveza, and the unlocking of synergies.

“We are well placed for the future. Our expanded footprint in Latin America complements our strong positions in Africa and Asia where we continue to see excellent opportunities for future volume growth. Our focus on cash flow has strengthened our balance sheet and our key brands are benefiting from our increased marketing investments,” he adds.

The recently completed acquisition of FEMSA Cerveza, which is expected to yield annual cost synergies of Eur150m by 2013, consolidates Heineken’s position as the world’s second largest brewer by revenues and third largest by volume, and expands its exposure to developing beer markets. In addition, it creates a platform for future value growth in three of the four largest beer profit pools in the world.

Heineken expects the organic increase in net profit (beia) for the full year 2010 to be at least in low double digits.

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Heineken Disposes of UK Drinks Wholesale Business


Heineken has sold Waverley TBS, its loss-making UK wholesale drinks subsidiary, to private equity firm Mansfield Partners for an undisclosed sum. Heineken took over Waverley following its joint £7.8b acquisition with Carlsberg of Scottish & Newcastle in 2008.

Waverley employs 1,100 staff, after announcing 220 job cuts as part of a restructuring programme. Heineken will continue to sell its main brands such as Heineken, Foster’s, Kronenbourg 1664 and Strongbow, through Waverley.

“From a Heineken perspective, the sale enables us to better concentrate on our core business, and to focus investment behind our brands,” explains Stefan Orlowski, managing director of Heineken UK. “For WTBS, it builds on a successful restructuring programme already in place and the new owners will be well-placed to develop the business further, bringing the focus and strategic direction that will come from an independent operation.”

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