HEINEKEN Investor Presentation
November 2019 | Heineken N.V. | Heineken Holding N.V. Disclaimer
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.
1 Approach to long-term value creation
Focus on premium segment to drive superior top line growth and market share Revenue & Market Share Growth
HEINEKEN Golden Triangle Continuous improvement of Focus on efficient deployment operating profit margin, of capital and working capital driving costs and efficiencies Return on efficiencies RONA2 throughout the business Sales1
1 Return on Sales - Operating profit (beia) divided by revenue; based on consolidated financials 2 2 RONA - Return on Net Assets Global balanced footprint with growth potential
Cons. Beer volumes by region 234mhl 56% (2018) 70+ 160+ 300+ Consolidated Of profit from 85,000+ Countries Breweries Brands Beer Volume developing markets Direct Employees 18% AMEE 34% Americas ASP Europe 36% 12%
Operating profit (beia) by region (2018)
10%
36% AMEE Americas Operating Companies 30% ASP Joint Ventures/ Associates Europe Export 24% Licences
3 Limited reliance on individual markets
HEINEKEN operating profit (BEIA)
. Only two countries >10% of profits; Mexico & Vietnam >50 100% . Diversified mix of countries: . Established markets with steady improvements ~80% . Developing markets at different stages of growth 11 . Large collection of small markets with growth potential ~50%
4 ~25% 2 Markets Share of operating profit
4 Heineken®: the most international beer brand
Top 10 global beer brands by market reach
Number of markets Brand size 0 10 20 30 40 50 60 70 80 (mhl)
Heineken 38
Carlsberg 12 . The beer brand with the widest reach
Guinness 10 . Present in over 190 markets Tuborg 17 Budweiser 53 . Meaningful presence in >70 markets Corona 45
Stella Artois 12
Amstel 11
Castle 14
Asahi 23
1-5% 5-10% 10-20% >20%
5 Source: Global data 2018 Strong local operations with local portfolios
Mexico Nigeria Russia Poland UK USA Vietnam France Brazil Spain
Heineken® Heineken® Desperados Heineken® Heineken® Heineken® Desperados Heineken® Heineken® Amstel Amstel Light Tiger Heineken® Heineken® Desperados Affligem Heineken® Desperados International Desperados Sol Strongbow Affligem Strongbow Star Amstel Sol Eisenbahn Amstel Oro Paulaner Tiger Lagunitas Desperados & Domestic Bohemia Gulder Zlaty Bazant Pelforth Sol Cruzcampo Zywiec Affligem Dos Equis Strongbow Premium Affligem Krusovice Fischer Baden Baden Especial Kronenburg 1664 Red Stripe Amstel Edelweiss Radler Bulmers Cider Newcastle Old Mout Cider Coors Warka Upper Dos Equis ’33’ Export Foster’s Biere Larue Krolewskie Amstel Cruzcampo Sol Life Ohota John Smiths Tecate Bivina Mainstream Specjal Devassa Amstel Indio Goldberg Strongbow BGI & Mainstream Lezajsk Tecate Schin Tri Medvedya Lower Superior Kaiser Zhigulievskoe ’33’ Export Carta Blanca More Tatra Glacial Cruz del Sur Mainstream Bochkarev Panach Kloster Bavaria & Value Okskoye No Grau
6 Top 10 countries by volumes HEINEKEN Business Priorities
November 2019 | Heineken N.V. | Heineken Holding N.V. Four business priorities to continue driving long term value creation
Deliver top line growth
Drive Engage and Four business end2end develop our performance people priorities
Brew a better world
8 Strong top-line growth
Developing our international brands Building Craft & Variety Leading Low- and no-alcohol innovations
. High-single digit growth . Low-single digit growth . High-single digit growth . Double digit growth of Tiger and Amstel . Affligem grew double digit . Zero Zone deployed in 20 markets across . Lagunitas now in more than 25 markets Europe and Russia
Shaping the cider category Innovating in draught Rolling-out e-commerce platforms
. Low-single digit growth . The Blade, a counter-top draught system for . Digital B2B platforms operational in 12 markets . Double digit growth outside the UK small outlets, is now available in 22 markets . Digital B2C platforms deployed in 16 markets led by South Africa, Russia, Vietnam with a range of 26 brands and Spain
9 Note: comments refer to HY 2019 results Heineken® volume +6.9%
. Positive performance in all regions, double digit in Africa, Middle East & Eastern Europe and Americas
. Double digit growth in Brazil, Mexico, South Africa, Russia, Nigeria, UK, Portugal, Germany and Romania
. Heineken® 0.0, now available in 51 markets, continues to gain traction
10 Note: comments refer to HY 2019 results Drive End-to-End performance
Examples of Make Sell Support End2End initiatives
. Continuous improvement on New Product Revenue ZBC management Implementation (NPI) process led to faster and more efficient brand and innovation launches (e.g. Heineken® 0.0 rolled out in 51 markets in less than three years) Sell more for more Elliminate bad costs . Commercial Spend Productivity (CSP) to invest more efficiently and effectively Customer Consumer . Deployment of BASE in small and medium size operations in ASP and AMEE to build new capabilites at scale and increase the level of service to customers.
11 Note: comments refer to HY 2019 results Engage and develop our people
. Develop great business driven leaders
. Grow our talent pipeline at all levels
. Build critical capabilities and strengthen functional excellence
. Leverage diversity & our culture
Female role models in HEINEKEN Supply Chain
12 Brewing a Better World
13 Brewing a Better World HY 2019 update
. Steady progress towards our targets
. Launched ‘Every Drop’ water vision for 2030
. Completed projects at the Itu brewery in Brazil and the Schladming brewery in Austria for a total of 12 biomass facilities operational
. New projects to increase local sourcing in Burundi, the Democratic Republic of Congo (DRC), Rwanda and Sierra Leone
. Working with suppliers to expand malting capacity to process local barley in Ethiopia and South Africa
14 Brewing a Better World
15 Every Drop: protecting water resources
32% decrease in water consumption (hl/hl) compared with 2008 3.2 hl/hl average in water-stressed areas surpassing the 2020 target 13 production units successfully implemented water balancing 96% of wastewater volume treated before discharge Restoration of wetland lagoons Water balancing in Spain continues with the restoration of four lagoons and surrounding Launched Every Drop, the 2030 water ecosystems in the Donana wetlands, the largest biodiversity area of Europe and an important resting place for migrating birds and other animals. According to a study by the University of ambition supporting watershed health in Granada, the project will return more than 1 million m3 water to the environment. water-stressed areas
16 Source: Last reported results 17 Drop the C: reducing CO2 emissions
47% reduction of relative CO2 emissions in production compared to 2008 190,000 Green Fridges: 50% less emissions compared to 2010 13% decrease in emissions from distribution compared to 2010/2011 New 2030 committment to increase renewable energy (electrical & thermal) from 14% to 70% without the use of unbundled certificates 2030 targets in development for distribution, cooling and packaging. 18 Source: Last reported results Growing with Communities
Creating economic and social impact 85,000 employees in more than 70 countries €11.7 billion total tax contribution 26.4% effective income tax rate
Investing in our communities Local sourcing projects provided support to more than 150,000 farmer households Since 2007, the Heineken Africa Foundation committed to over 110 projects with a focus on Mother & Child care and Water, Sanitation and Hygiene (WASH)
19 Source: Last reported results Sourcing sustainably
34% of Group raw materials sourced sustainably (target: 50% by 2020) 37% of the agricultural raw materials used in Africa and the Middle East were sourced locally 95% compliance with HEINEKEN’s 4 step Supplier Code Procedure among all operating companies Updated Supplier Code launched
20 Source: Last reported results Advocating responsible consumption
69 markets worldwide dedicated at least 10% of Heineken® media spend to Responsible Drinking campaigns. 46 markets established partnerships to address alcohol-related harm 5.5% of total global volume contributed by low- and no-alcohol options Ingredients and nutrition information on
labels: c.95% of beer and cider brands include When You Drive, Never Drink Formula 1® is the global platform to promote ‘When You Drive, Never Drink’ information on pack or online message. Nico Rosberg, 2016 FIA Formula 1 Drivers’ World Champion starred in the latest film: No Compromises
21 Source: Last reported results Safety first
18% reduction in accident frequency since 2015, but more to do. Specific focus on road safety. Life Saving Rules (LSR) 82% compliance level of LSR in breweries 93% compliance level of LSR in projects, commerce, distribution and other areas outside production Increased investment to accelerate implementation of LSR Operating companies in process of installing Telematics in all vehicles worldwide.
22 Source: Last reported results Values and Behaviours
Refreshed Code of Business Conduct and underlying policies, including a renewed Human Rights Policy
By end of 2018, more than 78,546 employees (92%) had completed Code of Conduct training (online or classroom)
Launched and implemented global policy and actions to ensure safe working environment for brand promoters
Continue working on human rights due diligence process to better understand and address the human rights risks across operations and value chains.
23 Source: Last reported results Heineken N.V. Half Year Earnings Release and Q3 Trading Update for 2019
November 2019 | Heineken N.V. | Heineken Holding N.V. 2019 Q3 Trading Update Key Highlights
. Beer volume +2.3% organically with double digit growth in Asia Pacific.
. Heineken® volume +7.4% with double digit growth in Africa, Middle East & Eastern Europe and the Americas.
2019 Q3 Regional Review (organic growth %) Africa, Middle East Asia Heineken NV & Eastern Europe Americas Pacific Europe
Beer volume 2.3 1.6 -0.5 13.9 1.6
Heineken® volume 7.4 12.0 12.5 -1.0 4.8
25 2019 HY Key Highlights
. Net revenue (beia) OG +5.6% . Net revenue (beia) OG per hectolitre +3.0% . Consolidated beer volume OG +3.1% . Heineken® volume +6.9%
. Operating profit (beia) OG +0.3%, full year expectations unchanged . Operating profit (beia) margin 15.6% (-47 bps)* . Net profit (beia) €1,054 million, -1.2% OG . Diluted EPS (beia) €1.84 (2018 restated: €1.86)*
* Last year restated for IAS 37. 26 Regional Review
2019 HY Organic Growth % Africa, Middle East Heineken NV & Eastern Europe Americas Asia Pacific Europe
Consolidated beer volume 3.1 7.1 2.9 10.4 -1.5
Price mix on a constant 3.5 2.0 6.6 1.9 2.4 geographic basis
Net revenue (beia) 5.6 10.0 7.2 11.0 1.4
Operating profit (beia) 0.3 1.9 -1.7 16.3 -5.7
27 Financial Overview
Key Financials €m unless otherwise stated 2019 HY Total growth Organic growth*
Revenue 13,597 5.9%
Net revenue (beia) 11,446 6.2% 5.6%
Operating profit (beia) 1,781 3.1% 0.3%
Operating profit (beia) margin 15.6% -47 bps
Net profit (beia) 1,054 -0.4% -1.2%
Net profit 936 -1.4%
Diluted EPS (beia) in € 1.84 -0.8%
Free operating cash flow 578
Net Debt/EBITDA (beia) ratio 2.9x
* The impact of IFRS 16 is excluded from organic growth calculations in all metrics and is treated as a consolidation impact. 28 Net revenue (beia): +5.6% organic growth
Organic growth +5.6%
+3.0% € m
+2.5% +1.0% € m
-0.3% 11,446
10,777
2018 HY Net revenue Consolidation impact Currency translation Total volume Net Rev/hl 2019 HY Net revenue (beia) restated* (beia)
* Restated for IAS 37 29 Operating profit (beia): +0.3% organic growth
+2.5% +0.3% € m +0.2% € m
1,728 1,781
2018 HY Operating profit Consolidation impact Currency translation Organic growth 2019 HY Operating profit (beia) restated* (beia)
* Restated for IAS 37 30 Diluted EPS (beia): €1.84, -0.8%
-0.8%
2.3%
-1.2% -1.6% -0.3%
€1.89 €1.86 €1.84
-€0.03 €0.04 -€0.02 -€0.01
2018 HY2018 Diluted HY EPS 20182018 HY Diluted HY EPS Consolidation impact Currency translation Organic growth Shares sold to CRE 2019 HY2019 Diluted HY EPS Diluted(beia) EPS (beia)Diluted restated* EPS Diluted(beia) EPS (beia) (beia) restated* (beia)
* Restated for IAS 37 31 Free Operating Cash Flow of €578 million
2018 HY €m unless otherwise stated 2019 HY (RESTATED)¹ Vs. LY Cash flow from operations (before 2,633 2,232 401 changes in working capital)
Change in inventories -332 -231 -101
Change in trade and other receivables -769 -628 -141
Change in trade and other payables and 818 1,191 -373 returnable packaging deposits
Change in working capital -283 332 -615
Capital expenditure² -1,005 -1,003 -2
Free operating cash flow 578 909 -331
¹ 2018 HY restated for IAS 37 ² Related to purchase of property plant and equipment
32 Net debt/EBITDA (beia)
0.1x 0.4x
• Committed to long 0.1x term target <2.5x
• BBB+/Baa1 ratings 2.9x reconfirmed by S&P/ 2.3x Moody’s with stable outlooks
Net debt/EBITDA IFRS 16 Acquisitions & Other** Net debt/EBITDA (beia) 2018* disposals (beia) HY 2019* Net debt (€ billion): 12.1 1.2 2.4 0.3 16.0
* Includes acquisitions, excludes disposals and includes first time impact of IFRS 16 on a 12 month pro-forma basis ** Dividend paid, cash flow, etc. 33 Net debt/EBITDA (beia) was 2.9x at 2019 HY
Committed to long term target <2.5x A well balanced maturity profile
Long term issuer ratings BBB+/Baa1, currently on stable outlook
*Includes acquisitions, excludes disposals on a 12 month pro-forma basis. **Also includes first time impact of IFRS 16 on a 12 month pro-forma basis. 34 Full Year Outlook
. For 2019, we expect : . Continued volatility in economic conditions . Superior top-line growth driven by volume growth, price increases and premiumisation . Mid-single digit increase of input and logistic costs per hectolitre . Continued cost management initiatives and productivity improvements, together with investment in e-commerce and technology upgrades.
. We expect to grow operating profit organically around 4%.
. We now also anticipate: . An average interest rate (beia) slightly below last year (2018: 3.2%) . An effective tax rate (beia) around 28% (2018 restated: 26.3%) . Capital expenditures related to property, plant and equipment slightly above €2 billion (2018: €1.9 billion).
35 HEINEKEN Leadership
“Our strategic focus continues to be growth oriented with an ever-increasing emphasis on the sustainability of this growth, both socially and environmentally. We invest in innovation and operational excellence so our consumers enjoy our brands and we exceed our customers' expectations, whilst seeking productivity improvements and constantly reassessing our spending behaviour.”
Jean-François van Boxmeer Chairman Executive Board / CEO
36 Regional Update
November 2019 | Heineken N.V. | Heineken Holding N.V. Africa Middle East & Eastern Europe A long standing presence
OpCo’s Joint Ventures Consolidated Non-consolidated Algeria Congo-Brazzaville Burundi Israel DRC Namibia Egypt UAE Ethiopia Ivory Coast License La Reunion Operations Lebanon Mozambique Cameroon Nigeria Ghana Russia Jordan Rwanda Morocco Sierra Leone South Africa Tunisia
Consolidated
Joint Ventures/ Associates
Export 38 Licences Nigerian Breweries Leadership position, committed for the long term
Key Facts Comprehensive brand portfolio 9 breweries and 2 malting plants The Nigerian beer market remains #1 or #2 brands in all segments Segment Core brands very attractive given its high growth potential and the macroeconomic International premium environment is starting to show improving trends
Kudenda Malting Plant National premium 2018 performance is still being Kudenda Kakuri affected by low consumer confidence and cost pressure ibadan Makurdi Mainstream Ota Onitsha Nigerian Breweries is uniquely Ama Lagos positioned to capture the most Aba Malting Plant Discount value from this growth and its Ljebu-Ode Aba strategy to Win with Nigeria! will further solidify market leadership Awo-Omamma
39 Source: Global data, Company data Americas: A collection of highly diverse markets HEINEKEN’s position in premium segment
Canada #3 Key Facts 10 OpCos 7 JVs United States Puerto Rico French West Indies #3 #1 #1 Export business to more than 41 markets
Mexico Central America & Caribbean Bahamas Haiti #2 #1 #1 #1
St. Lucia Jamaica #1 #1 Brazil #2
Suriname Costa Rica #1 #1 Operating Companies Chile
Joint Ventures #1 Argentina Panama #1 Export #1
Source: Global data 2017 40 Premium beer segment defined by Canadean as >= 115 price index. Heineken Mexico Attractive growth prospects for beer
Key Facts Comprehensive portfolio 7 Breweries HEINEKEN’s largest beer operation #2 Position Segment Core brands Positive underlying market fundamentals, including population Premium growth, urbanisation, growing middle class Meoqui brewery, the largest Affordable-Premium greenfield in HEINEKEN’s history, opened in February 2018 contributing to the efficiency of Mainstream local operations Exciting premium segment potential Below Mainstream Targeted regional strategy to drive growth Value
41 Source: Global data, Company data Heineken Brazil Portfolio strategy driving improved market share
Key Facts Strong portfolio 15 breweries Marked acceleration in 2018 c.20% Market share Segment Core brands Heineken® complemented by #2 Position in market premium portfolio now including Premium and Eisenbahn and Baden Baden Super Premium holding, >30% market share Schin provides increased scale to Upper Mainstream further develop premium volumes, & Mainstream especially in the North / North East Synergies of Brazil Kirin transaction from brewery footprint optimisation, Lower Mainstream procurement, logistical, and SG&A & Value savings São Paulo HQ
42 Source: Global data, Company data Heineken USA Relevant presence in premium segment
Key Facts Strong portfolio 9 Distribution Centres Economic indicators are improving 8 Offices Segment Core brands Premium segment outperforming #2 Premium Position led by Mexican brands and craft
Premium & Super Premium White Plains HQ
Mainstream
43 Source: Global data, Company data Asia Pacific: a unique footprint in the region Best placed to access regional growth opportunities
#1 Position Heineken has leadership in the 1 India largest number of markets China Number of #1 and #2 market positions Indonesia in Asia-Pacific (by volume) Malaysia New Caledonia Papua New Guinea HEINEKEN 14 Singapore Solomon Islands Carlsberg Timor-Leste Kirin #2 Position Laos ABI Mongolia Asahi New Zealand Sri Lanka Taiwan Vietnam
HEINEKEN market leadership
HEINEKEN market presence 44 Source: Global data, Company data 2017 Heineken Vietnam An attractive beer market
Key Facts Strong portfolio 6 Breweries Favourable beer market volume #2 Position Segment Core brands trends, with CAGR +5.5% expected #1 position in premium segment by Canadean 2017-2022 Premium volume outperformance
Premium & due to growing middle class Superpremium Continuing to fuel the growth of Tiger nationally and within affordable premium Consolidating position in Upper Mainstream mainstream in both core existing & Mainstream markets with Larue Developing Cider category with game changer ambition
45 Source: Global data, Company data United Breweries Limited Strong potential for growth
Key Facts Strong portfolio 21 Breweries HEINEKEN’s stake in UBL 43.7% 8 contract breweries Segment Core brands #1 Market position India beer PCC is slightly below 2L 2017 beer market size 26mhl Premium and Super Premium Strict regulations on the production, transportation, distribution, promotion, pricing and sale of alcohol Upper Mainstream & Mainstream UBL has the leading beer brand with Kingfisher (market share 43%) 21 breweries ® 8 contract breweries Heineken : rolled-out in key cities Value Strengthened route to market servicing 32 provincial markets
Source: World Bank population estimates, Global data, Company data 46 PCC: Per Capita Consumption China Resources Beer Holdings Unlocking premium potential
Key Facts Strategic collaboration 80 Breweries HEINEKEN’s stake in CR Beer 20.6% Present in 25 out of 34 regions in China #1 Market position PCC 35L, with signficant growth potential Snow, No. 1 beer brand by volume in the world Market leader with MS > 23% Best-in-class, nationwide distribution network 3rd player in the premium segment Started distribution of Heineken® in May 2019 Premium segment expected to outgrow the beer industry Source: World Bank population estimates, Global data, Company data 47 PCC: Per Capita Consumption
(1) Commotra Company Limited is beneficially wholly-owned subsidiary of China Resources (Holdings) Company Limited. Europe: Strong market positions driving growth HEINEKEN Beer Volume Market Share
#1 Position Austria . Europe remains an attractive and Greece valuable market for beer, cider and Italy near category growth potential Macedonia Netherlands . HEINEKEN is well positioned in the Serbia Slovakia context of economic & market Slovenia evolution with growth potential in its United Kingdom key markets #2 Position . HEINEKEN’s diverse local footprint Belgium combined with global scale provides Croatia unique opportunities to meet fast France Hungary changing consumer preferences. Ireland Poland Portugal Romania Spain #1 position Switzerland #2 position < #2 position
48 Source: Global data 2017 Export markets Wholesale strategically important in selected markets
Key Facts Business model
. Wholesale operations focused on on- trade service and particularly draught Off Trade
. Wholesale directly serving 35% of total Brewery HEINEKEN outlets in Europe . Providing synergies with commercial On Trade brewing operations: . Higher proximity to customer . Better access to broad range of data
. Reliable and secure access to markets Cash & HNV 3rd party . Consumer touchpoints Carry Wholesale Wholesale
Outlets
49 Star Pubs & Bars strategically important in the UK
A highly successful & profitable Strategically important business model to the UK business
. >2,800 leased and tenanted pubs since Punch acquisition . Hands-on experience & understanding of the On Trade with a wide UK footprint . Unique consumer touchpoints . Star Pubs & Bars strong investment & performance track-record . Synergies with on trade brewing operations . Attractive returns – Margin, Cashflow & RONA . Unique platform for seeding innovations
Operating profit margin (2017)
UK Avg. Beer & Cider Pubs
50 We Are HEINEKEN.
51 HEINEKEN Executive Team
Jean-François van Boxmeer Laurence Debroux Chief Executive Officer & Chief Financial Officer & Chairman of the Executive Board Member of the Executive Board
Roland Pirmez Stefan Orlowski Jan Derck van Karnebeek Chris van Steenbergen President Africa Middle President Europe Chief Commercial Officer Chief Human Resources Officer East and Eastern Europe
Marc Busain Dolf van den Brink Marc Gross Blanca Juti President Americas President Asia Pacific Chief Supply Chain Officer Chief Corporate Affairs Officer
52 HEINEKEN Ownership structure
Heineken N.V. shares held by Heineken Holding N.V. equals the number of shares issued by Heineken Holding N.V.
FEMSA L’Arche Green N.V. Public
52.599%
12.262% HEINEKEN Holding N.V. 35.139%
Board of directors Public
50.005%
8.632% HEINEKEN N.V. 41.363%
Supervisory board Legal entities Public shareholders Executive board Management
53 Sponsored Level 1 ADR Programmes
Heineken N.V. Heineken Holding N.V.
Bloomberg ticker: HEINY Bloomberg ticker: HKHHY ISIN: US4230123014 ISIN: US4230081014 Cusip: 423012301 Cusip: 423008101 Exchange: OTCQX Exchange: OTCQX Ratio: 2 ADRs: 1 Ordinary Share Ratio: 2 ADRs: 1 Ordinary Share
Depositary bank: Deutsche Bank Shareholder Services c/o American Stock Transfer & Trust Company Investor Relations ADR broker helpline: contact details +1 866 249 2593 E-mail: [email protected] +31 20 523 9590 (Amsterdam) ADR website: www.astfinancial.com E-mail: [email protected] Depositary Bank’s local custodian: Deutsche Bank, Amsterdam
54 Calendar Upcoming events
07 Nov 2019 — What’s Brewing Seminar, Amsterdam
26 Nov 2019 — Redburn Cross Industry CEO Conference, London
18 Dec 2019 — Start silent period FY 2019
55