Slide 1: HEINEKEN USA: Winning in a changing beer landscape
What’s Brewing Seminar HEINEKEN USA: Winning in a changing beer landscape Dolf van den Brink President & CEO Heineken USA New York | 6 September 2013 | Heineken NV
Slide 2: Disclaimer
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 forwar
Slide 3: Agenda
Agenda HEINEKEN USA: Winning in a changing landscape 1 A changing beer landscape 2 The Upscale segment and success of Imports 3 HEINEKEN USA: Our Turnaround Story 4 Bringing our strategy to life 3
Slide 4: Although still challenging, the economic outlook of the USA is improving
Although still challenging, the economic outlook of the USA is improving USA Macroeconomic Indicators % Change vs YrAgo 2.1% 2.0% 1.4% 0.9% 0.7% 0.7% 0.8% 0.7% 0.4% Population GDP Unemployment Growth Growth* Rate Decline 2011 2012 1H 2013 Source: Moody’s Economy 4 *GDP Growth figures are SAAR
Slide 5: USA beer market volume is flat, with population growth offsetting lower per capita consumption
USA beer market volume is flat, with population growth offsetting lower per capita consumption Total USA Beer Market Volume Population and Beer Consumption Beer Volume (M Hectoliters) USA Population 21+ (Million) Per Capita (Liters) 242 240 242 226 230 228 235 221 213 201 188 176 129 118 117 114 110
Slide 6: Rapidly changing retail and consumer landscape
Rapidly changing retail and consumer landscape SKU and Upscale Consumer Repertoire Distributor and Retailer Brand Proliferation Expansion Consolidation 6
Slide 7: It is harder to stand out amongst our consumers
It is harder to stand out amongst our consumers BEER SKU UPSCALE BEER CONSUMER PROLIFERATION BRAND EXPLOSION BEER REPERTOIRE Multiplication of SKUs Multiplication of Brands + # of Beer Brands in Off-Premise Extensions in Off-Premise in Repertoire, 7-8 Brands (2006 to Current) (2006 to Current) Past
Slide 8: A growing number of suppliers in a consolidating distributor and retailer base
A growing number of suppliers in a consolidating distributor and retailer base DISTRIBUTOR BEER ASSORTMENT RETAILER BEER ASSORTMENT CONSOLIDATION SATURATION CONSOLIDATION SATURATION # of Beer Distributors Multiplication of Suppliers % Beer Volume 42% Multiplication of Brands & SKUs & SKUs per Distri
Slide 9: Agenda
Agenda HEINEKEN USA: Winning in a changing landscape 1 A changing beer landscape 2 The Upscale segment and success of Imports 3 HEINEKEN USA: Our Turnaround Story 4 Bringing our strategy to life 9
Slide 10: Upscale in the USA is an attractive and growing segment…
Upscale in the USA is an attractive and growing segment… 60 Growing Segment Volume in Upscale (M hectoliters) 50 40 30 Upscale CAGR CAGR CAGR Segment (90-05) (05-10) (10-13) Crafts 19% 8% 12% 20 Domestics - 4% 5% Imports 8% 2% 4% 10 Total 10% 5% 7% Upscale 0 1990 1995 2000 2005 2010 2013E Imports Do
Slide 11: …with significant upside versus other categories
…with significant upside versus other categories Attractive Segment % Share of Upscale within a Category (+125 Price index), 2012 50% 40% 30% 20% 10% 0% Energy Beer Beer Vodka Spirits Beer Beer Beer Beer Beer Beer Drinks France Italy USA USA USA Canada China Brazil Mexico India USA 11 Source: Canade
Slide 12: An increased number of upscale brands competing for limited shelf space
An increased number of upscale brands competing for limited shelf space 2006 – 24 Brands >1M cases* 2013 – 45 Brands >1M cases* Share = 33% Other Share = 23% Other Other Other ≥160 Price Index 145-160 Price Index 125-145 Price Index Share = 44% Source: Nielsen FDCM+ 12 *Brands = Includes Brand Exten
Slide 13: Imports are the 'hidden' success story in Upscale
Imports are the ‘hidden’ success story in Upscale VOLUME SHARE MULTICULTURAL URBAN OF BEER DEMOGRAPHICS PENETRATION % Share of Total Beer % Volume Purchased by Top 25 Metro Areas (2012) Multicultural Consumer (2012) Volume Index vs Total Beer (2012) 15% 137 13% Other 8% 25% 118 Hispanic 10% Other 10
Slide 14: Imports drive volume through a sustainable growth model, rather than replicate Craft complexity
Imports drive volume through a sustainable growth model, rather than replicate Craft complexity BALANCED SCALE LIMITED # OF SKUS RATE OF SALE LED GROWTH # of Brands that add up to # of New SKUs on Shelf % Volume driven by RoS Growth 70% Volume Share (2012) (2010 to 2012) (2012) 65 571 88% 425 381 78
Slide 15: Agenda
Agenda HEINEKEN USA: Winning in a changing landscape 1 A changing beer landscape 2 The Upscale segment and success of Imports 3 HEINEKEN USA: Our Turnaround Story 4 Bringing our strategy to life 15
Slide 16: To be the leading Upscale beer company in the USA
HEINEKEN USA has a clear ambition: To be the leading Upscale beer company in the USA 16
Slide 17: We have been on a journey during the last few years
We have been on a journey during the last few years Mission Apollo Time to deliver! 6 month effort, 75 employees Beer share growth Internal assessment Flawless execution Identify “Must Win Battles” Embed capabilities Stabilize business Globalize Heineken® Integrate CM brands Acce
Slide 18: Company strategy provides steadfast direction
Company strategy provides steadfast direction “Grow the core and innovate more” Ambition: Become the leading upscale beer company in the USA Re-invigorate Accelerate Win in the Seed New Growth Heineken® National Sunbelt with Growth Drivers Lager Expansion of Tecate Opportunities Dos Equis Strengthen
Slide 19: Agenda
Agenda HEINEKEN USA: Winning in a changing landscape 1 A changing beer landscape 2 The Upscale segment and success of Imports 3 HEINEKEN USA: Our Turnaround Story 4 Bringing our strategy to life 19
Slide 20: Imports compete in a different segment of the consumer occasions map versus Crafts
Imports compete in a different segment of the consumer occasions map versus Crafts Younger Exploring Premium LIFESTYLE Older Domestic Beer Settled Mainstream Wind-up ENERGY Wind-down High energy Low energy Image driven Taste driven 20
Slide 21: HEINEKEN USA's core competency and purpose is brand-building: we will own badge
HEINEKEN USA’s core competency and purpose is brand-building: we will own badge Heineken® Strongbow Dos Equis Newcastle 21
Slide 22: We are reinvigorating our flagship brands and seeding for new growth with our portfolio
We are reinvigorating our flagship brands and seeding for new growth with our portfolio EXPAND WIN IN SEED NEW LEADING BRANDS THE SUNBELT OPPORTUNITIES 22
Slide 23: 1. Reinvigorating Heineken®
1. Reinvigorating Heineken® 2010 Globalize Heineken® 2011 Legends Campaign 2012 James Bond Platform 2013 Global Star Bottle Launch 23
Slide 24: 1. Reinvigorating Heineken®
1. Reinvigorating Heineken® Improving volume trends 2012 +1% or more AK 0% depletions 0% Improvement seen -1% across all geographies WA -2% ME MT ND OR MN VT NH ID WI MA SD NY MI 2009 WY CT RI PA IA AK -9% depletions NV NE NJ OH DE UT IN WA HI CA IL WV MD CO VA ME KS MT ND MO KY DC OR MN VT NH ID NC
Slide 25: 1. Reinvigorating Heineken®
1. Reinvigorating Heineken® Breakthrough Marketing Digital Advertising Sponsorships Activation Events 25
Slide 26: 1. Reinvigorating Heineken®
1. Reinvigorating Heineken® Advertising Deja vu 26 Source: HEINEKEN
Slide 27: 2. Dos Equis: a continued success story
2. Dos Equis: a continued success story Most Interesting Man Campaign National Expansion Breakthrough Activation Innovation 27
Slide 28: 2. Dos Equis: a continued success story
2. Dos Equis: a continued success story Dos Equis Lager Growth Rates – USA vs Texas % Volume Change vs YrAgo 27% 27% 27% 26% 24% 25% 23% 21% 21% 20% 20% 20% 20% 18% 16% 17% 2005 2006 2007 2008 2009 2010 2011 2012 Total US Texas National Brand Distribution %ACV (Nielsen) - - 39% 42% 44% 46% 53% 58% 2
Slide 29: 2. Dos Equis: a continued success story
2. Dos Equis: a continued success story Advertising Sizzle reel 29 Source: HEINEKEN
Slide 30: 3. Tecate is growing share by leveraging Tecate Light's success
3. Tecate is growing share by leveraging Tecate Light’s success Con Carácter Campaign, aligned with broader Hispanic Consumer Focus in Sunbelt and Win in Domestic Premium segment Unleash Tecate Light 30
Slide 31: 3. Tecate is growing share by leveraging Tecate Light's success
3. Tecate is growing share by leveraging Tecate Light’s success Tecate Volume Growth Tecate Light Franchise Potential % Volume Change vs YrAgo Tecate Light % of Franchise Volume 44% 76% 68% 48% -12% 28% -2% 1% 15% 15% 7% 9% Tecate Tecate West Central Arizona MEXICO Regular Light Region Region 2011 Y
Slide 32: We are investing in smart and focused innovation, wielding our global strength
We are investing in smart and focused innovation, wielding our global strength EXPAND LEADING BRANDS WIN IN THE SUNBELT SEED NEW OPPORTUNITIES #7 Seasonal in US #1 Growing Variety Pack 32
Slide 33: We are well-positioned to ignite Strongbow growth within the Cider category
We are well-positioned to ignite Strongbow growth within the Cider category Seed New Opportunities 94% 97% 2013 83% Strongbow Volume Growth (% vs YrAgo) 2014 56% 37% 28% 28% 15% 16% 8% 02/23/13 FY 2011 FY 2012 01/26/13 03/23/13 04/20/13 05/18/13 06/15/13 07/13/13 33 Source: Nielsen FDCM+ 08/10/13 08
Slide 34: HEINEKEN USA is developing sales and distribution capabilities to drive performance…
HEINEKEN USA is developing sales and distribution capabilities to drive performance… Closing Gap between Relationship and Performance Tamarron Survey Results* Three Places Up in Company Ranking since 2009 100% Major Improvement across Key Dimensions 80% Leadership (3rd Place, +11%) Distributor R
Slide 35: …and is expanding its base business through National Accounts and Retailers
…and is expanding its base business through National Accounts and Retailers 34% Focus on National Accounts Top HEINEKEN USA National Accounts (% Volume Growth, 2012) Win with Key Customers Invest in Category Management Upscale Thought Leadership 15% 15% 6% Top 5 Walmart Top 5 Buffalo Off-Premise On-
Slide 36: Walmart is one Key Customer example of improved growth through focus and execution
Walmart is one Key Customer example of improved growth through focus and execution Dedicated Walmart Team Beer Volume Performance in Walmart (% Growth vs Yr Ago, Nielsen) Tripled Account Team 5x Increased Investment 30% 25% Drive Execution Improved Display Execution 20% (25% to 86% by July 201
Slide 37: HEINEKEN USA is growing On-Premise due to renewed focus
HEINEKEN USA is growing On-Premise due to renewed focus Doubled On-Premise Sales Force On-Premise Volume Trends (% CAGR) 34% Significant On-Premise Training Passion 4 Beer Platform 21% Tripled Activation Investment 15% 18% 17% -8% -4% -3% 0% Heineken® Lager XX Lager HEINEKEN USA 2008-2011 2012 2012
Slide 38: Our operations network has been optimized, yielding costs savings and higher service levels
Our operations network has been optimized, yielding costs savings and higher service levels Network Optimization HEINEKEN USA Operations Network (Demand Points, 2013) Demand Point Location AK Cargo ship Truck Direct Shipments WA ME CM Hybrid MTO/MTS model MT ND OR MN VT NH ID WI MA SD NY MI CT
Slide 39: Managing a growing portfolio and innovation to drive revenue per hectoliter growth
Managing a growing portfolio and innovation to drive revenue per hectoliter growth Managing Revenue per HL Innovation at Higher Price Indexes % Change in Net Revenue per HL Brand Price Index vs Mainstream (June 2012 to June 2013) (July 2013) 189 2,9% 170 152 145 146 95 0,7% 0,6% Heineken® Dos Equis
Slide 40: Our change in culture and climate have been the drivers of HEINEKEN USA's turnaround
Our change in culture and climate have been the drivers of HEINEKEN USA’s turnaround success CHALLENGER CULTURAL OFFICE IMPROVING CLIMATE MINDSET PILLARS REDESIGN SURVEY SCORES BE BRAVE +28 Innovation DECIDE +27 Personal Development & DO +27 Management Team HUNT AS A PACK +22 Customer Orientation TA
Slide 41: Our strategy is working: we are gaining share
Our strategy is working: we are gaining share Volume Growth Total Beer vs HEINEKEN USA 2011 2012 2013 2011 2012 2013 8% 8% 6% 6% 4% 4% 2% 2% 0% 0% -2% -2% -4% -4% -6% -6% Total Beer HEINEKEN USA Total Beer HEINEKEN USA -8% -8% 1H 2011 2H 2011 1H 2012 2H 2012 2013* 1H 2011 2H 2011 1H 2012 2H 2012 201
Slide 42: Our strategy is working: we are gaining share
42 4,20% 4,25% 4,30% 4,35% 4,40% 4,45% 2011/Jan 4,50% 2011/Feb 2011/Mar Source: Beer Institute Depletions 2011/Apr 2011/May 2011/Jun 2011/Jul 2011 2011/Aug 2011/Sep 2011/Oct 2011/Nov All Premise BI 2011/Dec HEINEKEN USA Share of Total Beer Depletions, Rolling 12Mo 2012/Jan 2012/Feb 2012/Mar 2012/Apr
Slide 43: Summary
Summary We are adapting our business to the changing beer landscape We are well-placed to win in the high-growth Import segment We are reinvigorating our flagship brands, building a portfolio, and seeding for new growth We are investing in smart and focused innovation We are moving towards
Slide 44: Dos Equis
Dos Equis Advertising 44 Source: HEINEKEN
Slide 45: Question & Answer
Question & Answer Question Answer Question & Answer & Answer Question & Answer New York | 6 September 2013 | Heineken NV