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WHAT’S BREWING SEMINAR€¦ · Innovation driving top line growth ahead of peers 1 The innovation...
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11 DECEMBER 2017, LONDON
WHAT’S BREWING SEMINAR
INNOVATION: DRIVING TOP LINE
GROWTH
JAN DERCK VAN KARNEBEEK
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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.
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Jan Derck van Karnebeek
Chief Commercial Officer
President Central & Eastern Europe & Chief Sales Officer
Managing Director Romania
Managing Director Bulgaria
General Manager HEINEKEN Beer Systems NL
Commercial Director HEINEKEN Slovakia
Joined HEINEKEN1991
2001
2006
2009
2013
2015
1999
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Agenda3
2 2 2
Innovation: setting the scene
EMERGING CATEGORIES
E-COMMERCE CHANNELS
CONSUMER DRAUGHT EXPERIENCE
DRIVING INNOVATION
SUMMARY
3 4
1
5
6
Blade
The SUB
Beerwulf
B2B
Low and no alcohol
Cider
Craft and variety
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Innovation driving top line growth ahead of peers
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 rate1
20162014 2015
7.7%
9.2%10.6%
Revenue Organic Growth HEINEKEN vs. Peers
2014 2015 2016 2017 H1
3% 4%
5%6%
Heineken
Innovation revenue
2014 2016
€1.5bn
€2.2bn
Innovation revenue
2015
€1.9bn
Innovation rate reporting ceased at end of 2016 as culture of innovation fully embedded in organization, to be replaced with more disclosure of specific categories (i.e., Cider, LNA)
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Focus areas of today expected to continue to drive top line growth
Forecast medium term volume growth
2011 2016
Revenue / hl indexed to group
Average Cider (ex UK)
Low/No Craft & Variety
LNA, C&V and Cider share of HEINEKEN consolidated beer and cider revenue
19%
Source: Canadean forecast 17-20
Beer market LNA Cider(excl. UK) C&V
Beer Average
Cider (ex UK)
Low/No Craft & Variety
0.0%
1.4%
3.5% 3.7%
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Changing external environment is providing HEINEKEN with opportunities to win
Bigger competition
Digitalisation of life
The craft revolution Blurring categories
Rise of women
Wellness
REPERTOIRE BEHAVIOUR
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Agenda3
2 2 2
Innovation: setting the scene
EMERGING CATEGORIES
E-COMMERCE CHANNELS
CONSUMER DRAUGHT EXPERIENCE
DRIVING INNOVATION
SUMMARY
3 4
1
5
6
Blade
The SUB
Beerwulf
B2B
Low and no alcohol
Cider
Craft and variety
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A rich Low & No Alcohol business comprising of 3 sub-categories
Split by subcategory of consolidated volumes in 2016
Split by alcohol level of consolidated volumes in 2016
29%42%
25%
38%
62%
4%
Malts
Radler and beer mixes
Beer
Others No alcohol Low alcohol (<3.5%)
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Comprehensive & complementary portfolio from classic beers to innovative new propositions
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0.0 beers are on-trend, doubling the accessible market
Healthier choices
100mls21Kcal
100mls48Kcal
100mls42Kcal
100mls42Kcal
Rising of wellness
66%of people are interested in buying
products which make claim for “natural”
Source: Globaldata
The sources of volume are vast
Global CSD Market2,246 MHL
Global Beer Market = 2,025 MHL
CSD consumed in
adult occasions1,110 MHL
Existing LNA Market80 MHL
Beer consumed
where moderation or
health are relevant310 MHL
Source: HEINEKEN analysis
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Heineken 0.0 exceeding expectations
0.0 launch in Spain returned category to growth
• Highly successful launch and off trade sell in • Fastest distribution build in the beer category in 7 years • Heineken 0.0 has turned around the declining category trend
since 2009
Heineken® volumes in Europe
2015 2016 2017E
3.5%CAGR
20142013
Heineken® Lager Heineken® Innovation
103.2%CAGR
Heineken®
Source: Nielsen scantrack
Market share LNA vs. LY
HEINEKEN LNA SEGMENT Competitors
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Radler already a big success with 2.0% ABV, with further upside from 0.0% ABV
HNV Radler continues to grow steadily
Radler 0.0% is an emerging growth driver for segment with strong double digit growth
2013 2014 2015 2016
+13%
2013 2014 2015 2016
+76%
✓
✓
✓
Launched in 2011, introduced in 48 markets to date
Additional flavors (>40) and broad range of pack types
Significant opportunity with 0.0% Radler, which is still small at 17% Radler volume and in 18 markets
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Malt providing natural refreshing nourishment with a long shelf life
Our Malts business is significant
83%
17%
>4.5 mhlsin 2016
1 Based on UN Food and Agriculture Organisation study for 2014-16 2 World Bank, Sub-Saharan Africa Poverty and Equity Data3 Guardian 2011
Significant opportunity for growth particularly in Africa
Estimated that 230m people are undernourished in sub-Saharan Africa (1)
500m people (47% of the population) living on $1.90 a day or less (2)
A women in sub-Saharan Africa will give birth to 5.2 children in her lifetime (3)
We have brands and packaging innovations
Nigeria Other
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Agenda3
2 2 2
Innovation: setting the scene
EMERGING CATEGORIES
E-COMMERCE CHANNELS
CONSUMER DRAUGHT EXPERIENCE
DRIVING INNOVATION
SUMMARY
3 4
1
5
6
Blade
The SUB
Beerwulf
B2B
Low and no alcohol
Cider
Craft and variety
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Consumer trends play well to Cider’s strength
Rise of women50/50
Naturalness1. Apple 2. Refreshment 3. Over ice
AuthenticMade from apples, craftmanship
Sweeter tasteNo bitterness barrier
Range & varietyLends itself well to different flavours
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Making cider in existing breweries bringing instant scale and sweating the assets
Brewery with capabilities forcider and beer production
in 15 countries
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Scaling cider rapidly through localisation with the same brand
Local recipes
Local packaging
Local brand name
International Brand!
✓
✓
✓
✓
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Strongbow disrupted South Africa’s established cider market
Successful first year built on three points:
• Passion & Belief: buy-in from everyone in the business; failure not an option!
• Go big on Launch: nationwide media, comms, and sampling.
• Category Norms and Variety: Gold and Dry liquid. Red Berry variant for consumers hungry for change.
3mhl market. In one year reached 9% market share!
Cider adds crucial scale to our integrated beer and cider business.
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Agenda3
2 2 2
Innovation: setting the scene
EMERGING CATEGORIES
E-COMMERCE CHANNELS
CONSUMER DRAUGHT EXPERIENCE
DRIVING INNOVATION
SUMMARY
3 4
1
5
6
Blade
The SUB
Beerwulf
B2B
Low and no alcohol
Cider
Craft and variety
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Craft is an exciting opportunity, both in volume and value
Repertoire continuum
Easy to drink Challenging taste
Big lager brands
Crafty lineextensions
Weiss & sour/ fruity beers
Blondes &(Abbey) ales
HoppierBeers (IPA)
More complex
High volume High margin
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3 Complementary strategies to capture craft growth
Extending credible lager brands
Craft brands that can travel
Grow / acquire local craft in selective markets
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Extending credible lager brands into accessible craft… large volumes at good prices
• Brand extensions +33% CAGR 2013-16
• 20% of lager volume • 43% higher Rev/Hl vs Brand
Regular
• Zywiec Craft 9% of lager volumes; 76% CAGR 2013-16
• 35% higher Rev/Hl vs ZywiecRegular
• Moretti Regionale 13% of volumes; 71% CAGR 2013-16
• 69% higher Rev/Hl vs Birra Morettiregular
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Applying HEINEKEN know-how to capture scale and make the right brands travel
Mort Subite Lagunitas
12
Affligem Heineken®
Number of countries brand is sold in
15
47
192
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Growing and/or acquiring local craft in selective markets
Eisenbahn driving Brazilian craft category:
• Launched 2002 with acceleration driven by new pack types, new price positioning and new style launches to keep the craft aura.
• A gateway to craft with a full portfolio of styles and seasonal varieties; Pilsen style represents c.90% of brand volume.
Eisenbahn volume
CAGR =105% > 1mhl in 2017
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Agenda3
2 2
Innovation: setting the scene
E-COMMERCE CHANNELS
CONSUMER DRAUGHT EXPERIENCE
DRIVING INNOVATION
SUMMARY
3 4
1
5
6
Blade
The SUB
Beerwulf
B2B
EMERGING CATEGORIES
Low and no alcohol
Cider
Craft and variety
2
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The real draught experience: easy, affordable and accessible
A clear "'First come.... take all" opportunity
• Increase draught penetration in low volume rotation outlets
• Easy variety enabler providing an extra brand on top of lager beers
With BLADE, you can order & serve fresh draught beer everywhere
Launched in 11 countries in Europe
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Bringing the real draught experience to our homes
Now using E-commerce as the accelerator
✓ Available in 8 European markets by 31st Dec 2017, all from 1 e-commerce team based in Amsterdam
✓ The ultimate beer experience at home
✓ Rolling out in China and the USA
✓ 12 to 15 brands per market: HEINEKEN owned and third party craft.
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Agenda3
2 2
Innovation: setting the scene
E-COMMERCE CHANNELS
CONSUMER DRAUGHT EXPERIENCE
DRIVING INNOVATION
SUMMARY
3 4
1
5
6
Blade
The SUB
Beerwulf
B2B
EMERGING CATEGORIES
Low and no alcohol
Cider
Craft and variety
2
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Agenda3
2 2 2
Innovation: setting the scene
EMERGING CATEGORIES
E-COMMERCE CHANNELS
CONSUMER DRAUGHT EXPERIENCE
DRIVING INNOVATION
SUMMARY
3 4
1
5
6
Blade
The SUB
Beerwulf
B2B
Low and no alcohol
Cider
Craft and variety
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HEINEKEN's growing edge in innovation: Speed at Scale
IMPROVING THE PACE AT WHICH WE ROLL OUR INNOVATIONS GLOBALLY
Shared in one global, digital community
SHAREOne language, one culture, a growth
mindset
Driving proven growth models
RE-APPLYCopy, and call it Innovation
Desperados
Cider
Blade / Heineken® 0.0 1 year to pan-Europe
5 years to over 50 markets
20 years to 20 markets
* Minimal Viable Product - ie market test or first generation product/service
DOEncourage entrepreneurship and
accept failure
Development and executionof small MVPs
Improve offer in the market
LEARNBe curious, measure and adjust
1995
2008
2017
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Agenda3
2 2 2
Innovation: setting the scene
EMERGING CATEGORIES
E-COMMERCE CHANNELS
CONSUMER DRAUGHT EXPERIENCE
DRIVING INNOVATION
SUMMARY
3 4
1
5
6
Blade
The SUB
Beerwulf
B2B
Low and no alcohol
Cider
Craft and variety
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Key takeawaysJD first attempt
• HEINEKEN is now delivering superior revenue organic growth and Innovation is one of the key drivers.
• Beer category set to benefit from emerging 21st century trends.
• HEINEKEN ideally placed to capture growth from these trends by driving categories, experiences and (e)channels.
• HEINEKEN footprint and experience is enabling the company to implement innovations faster and more extensively than competitors.
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