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WORLD TELEVISION Heineken Financial Markets Conference Day One - Mexico City, 5th December 2013 Heineken Financial Markets Conference, Mexico City - Day One Heineken George Toulantas, Director Investor Relations Jean-François van Boxmeer, CEO and Chairman of the Executive Board Stefan Orlowski, President Heineken Americas Marc Busain, Managing Director, Cuauhtémoc Moctezuma Leandro Berrone, VP Marketing, Cuauhtémoc Mockezuma QUESTIONS FROM Audience Members Andrew Holland, Société Générale Sanjeet Aujla, Credit Suisse Olivier Nicolai, USB Robert Ottenstein, ISI Page 2 Heineken Financial Markets Conference, Mexico City - Day One Introduction George Toulantas, Director Investor Relations Good morning everybody, I hope you enjoyed that, we're going to loop that over a few times during the breaks as well, but it's an example of a very successful execution of our Champions League Sponsorship. Well I'm delighted to welcome you here in Mexico City for Heineken's Financial Markets Conference. Since the acquisition of FEMSA Cerveza in 2010 we've made tremendous progress here in Mexico and the wider Americas region. And I know this is a part of the business that you are all very interested in. And over the next day and a half we have a very full programme of management presentations and market visits as well that will give you some great insights into our operations here in Mexico, but also the opportunities and priorities for the Americas region. Now we're also webcasting this event live today, so I'd like to welcome all of those who are listening in to the presentations. Let me get the programme underway, there's lots to get through and it's my pleasure to invite to the stage, Jean-François van Boxmeer, Chairman of the Executive Board and CEO of Heineken. Over to you Jean-François. Heineken: Focused on delivering shareholder value Jean-François van Boxmeer, CEO and Chairman of the Executive Board So good morning everyone, I hope you had a good night; I'm there in the morning to wake you up. And I'm afraid that I will be very consistent in my story and today for those who have attended more of my presentations you will have perhaps a new layout, so graphically it looks a bit different, but I think that the content will be quite repetitive and those who were together with us last year in Nigeria will recognise that we are consistent in what we want to do. Let me first start by - can I have the next slide please. Now we are at the end of 2013, which has been as you all know a very - a more difficult year than the years before, it has also been a difficult year for Heineken. We had over the last couple of months quite a number of strong headwinds. Those were essentially macroeconomic in their nature, but also we have seen the decline of a lot of currencies in which we have a number of countries with high growth, so those are all headwinds which didn't help our earnings per share for this year. What I always used to say is that the results of our company are largely, and I leave the percentage open for what largely means, but by and large it depends from macroeconomic developments on which we have very little power to move. But what is in our power is of course to win in a competitive market and create value for our shareholders. And on the right side of this slide I'll show you a triangle and the triangle is a little bit how and on what levers do we create value in our company. Page 3 Heineken Financial Markets Conference, Mexico City - Day One Here I have to say that every single operating company of Heineken has targets alongside what we call the golden triangle, as well as a region, and as well, of course, as a result of it the whole and the total company. And so we focus very much on revenue and market share growth and everybody got a target about revenue and market share growth, and whether the market is growing, or the market is declining you can still increase your market share at least. The second pillar of creating value for shareholders is of course return on sales and the third one is return on invested capital. So everybody in our company is measured around these three pillars. We of course never show what these asks and targets are, but this is how we organisation our target setting inside the company. Obviously to get there it's not to dream about revenue growth and increasing returns on sales and our return on capital. It's about what we do. And therefore I will articulate my presentation today to you in the eight key drivers of action that all our operating companies work on and that if you do well on all these dimensions, well that golden triangle will move in the right direction. So eight strategic pillars for actions - the first one is a strategy one; it's to increase our exposure to developing markets. That is a journey we have been embarking on over more than a decade ago; it's a very simple concept. We have to increase and enlarge our footprint in geographies where you have an accelerated economic growth, where you have strong population growth and certainly a strong population growth in its younger drinker cohort. You have to look for markets where there's still a lot of room for urbanisation. And finally you look also for - you compound that by political stability when you go and invest in any geography. And you look and that's the end of the chemical equation, you look whether there is a lot of sun or not, because that last one helps also a lot in beer consumption I can assure you. So this is our first strategic pillar, it's how we take our investment decisions. The second one is to grow Heineken disproportionately. The thing is about disproportionately one has to realise that we are the only brewer to have a global brand, i.e. present in 179 countries around the world, or b) that the Heineken brand is in effect only 15% of the total volumes of the company - it is close to 30% of the profits of the company. You see if we had to take the Heineken brand as a business unit, as an operating company on its own it would be our first one. And we have seen and the past has shown that this particular brand is not only what defines us and what unites us, but it's also the principal growth engine of our business model and therefore we give it disproportionate attention. Now, we have 235 other beer and cider brands who make up the other 85% of the volume of this company. And so we have to continue not only for the Heineken brand, but for all our brands, and you will have many examples of it today, about Mexico and some other territories in the Americas. We have to continue our investments in brands and innovation, because at the end of the day it's out consumers who choose a brand. And for that you can only activate or mobilise them and make them choose your brands Page 4 Heineken Financial Markets Conference, Mexico City - Day One if you have superior and exciting marketing as well as you can demonstrate your capacity to surprise them by innovations in the market. Then comes the excellence in sales execution, it's kind of a buzz word, but it says you have to reach your consumers and you have to reach out for clients. Now clients can be very different from geography to geography, but you have to make sure that these people are with you to win in the market; whether you do it yourself - like you will see in Mexico where we have a very large secondary distribution to the retailer, or whether you do it via a distributor. The rule - in organised, global, modern retailers, it's all about that somebody who sells your product wants to see throughput and wants to see margins. So margins times velocity, as they say in the United States is what counts and we have to organise that make it work for us. And there is a lot of repetitive executional work in it, but if you do it well day after day, with a mindset to always improve it day after day you're going to win in the marketplace. Then I skip number five and I go to number six which is drive cost efficiencies, that's the third pillar on which our company drives. Obviously you have the cost side; we will never compromise on quality at Heineken. We stand for quality. That's very important. All our people have got that through their ears and that's from day one, never compromise quality, never cheat the consumer; he will recognise what quality is. That is notwithstanding how efficient you can be on delivering that quality. And so the drive of cost efficiencies it has been a discipline in our company for the last 20 years in the supply chain, but it has also been extended in distribution processes as well in other SG&A processes in our company and that relentless target of improving on cost and productivity is an integral part of how we deliver value. With that goes the notion - number seven, of a capital allocation which we have to put the money where our mouth is.