What's Brewing Seminar 21st March 2014 - The HEINEKEN ...

WORLD TELEVISION

Heineken

What's Brewing Seminar

21st March 2014

Heineken - What's Brewing Seminar - 21st March 2014

Heineken

George Toulantas, Director Investor Relations

Roland Pirmez, Regional President, Heineken Asia Pacific

QUESTIONS FROM

Sanjeet Aujla, Credit Suisse

Analyst, Société Générale Jon Fell, Ash Park Capital Trevor Stirling, Sanford Bernstein Tony Bucalo, Santander Olivier Nicolai, UBS


Introduction


Good afternoon everyone and welcome to our What’s Brewing Seminar here in London

and to everyone who's listening to this seminar on the webcast as well. I'm very excited

to update you all on our business today in the Asia Pacific region, which now, following

the acquisition of Asia Pacific Breweries in 2012, represents close to 20% of our Group

operating - or consolidated - I should say consolidated operating profit.

So today's presenter, Roland Pirmez was appointed Heineken's Asia Pacific Region

President and CEO of APB last year and prior to that he was Managing Director of

Heineken's operations across a number of markets, including Angola, Thailand, Russia

and of course CEO of our joint venture Asia Pacific Breweries from 2008 to 2012.

So I'll hand over to Roland now who will take you through the presentation which will

then be followed by Q&A as well. Thank you Roland. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Heineken: Positioned for growth in Asia Pacific


Good afternoon, a very exciting time for me because first it's the first time that I'm

doing this kind of nice, exciting exercise, but also very exciting because I will tell you a

very nice story about the region, Asia Pacific.

First the agenda, I will try to describe how attractive is the region for Heineken, also why

we believe and we are sure that we have a very nice winning position and a unique

position in the Asia Pacific region. I will give you a short update about APB's result in

2013 to give you some flavour of the regional priorities and of course some key market

updates like China and Vietnam.

The region itself - as you know Asia Pacific the key word is growth and as you know in

our business the growth of the business is mainly coming from the population, the

demographic - a favourable demographic, GDP growth, middle class growing are very

important things, the outcome is of course the consumption per capita. And there you

can see in Asia the potential growth is there, the average consumption per capita in Asia

is only 29 litres per year per capita, compared to the average world of 48 and 59 in

Europe.

But what you can see in Asia is diversity; we have very diverse markets in Asia. It's a

mix of emerging markets and mature markets, where you can see the highest

consumption per capita is mainly in the mature market like Australia with 79 litres, and

you have emerging markets with a huge potential, the best example is of course India,

we have a huge population, GDP growth, a very young population and you have only two

litres of beer per capita, per year, a huge opportunity for us.

The second favourable demographic is a very, very young population; where you can see

the percentage of the population under the age of 35, the average of Asia it's above


Europe with 52% compared to 41% in Europe, but the most important thing once again

is diversity. And you can see we have a very diverse picture, with of course a little bit

outstanding China, where you don't have such a young population because of the one

child policies and you have a very exciting time like Cambodia, the Philippines, and Laos

- where we have a very, very young population - like Laos where you have 73% of the

population that are under the age of 35.

Wealth, the middleclass - as you know the bulk of our business is middleclass people

enjoying a beer and you can see the trend in example four markets, China, India and

Vietnam or Thailand, you can see first the proportion of the middleclass is growing very,

very fast and most important also is the size of these population, you can see China, you

know the numbers, the number look always very impressive, you have 464 million

people who will be in 2017 in the middleclass.

Vietnam we have 25 million people who will be in the middleclass. And you can see in

Vietnam the average growth for the next five years will be 23% for the upper

middleclass and 29% for the middleclass with income above US $10,000 per year.

A very exciting time, I don't need to explain to you, everybody has seen the graph of

consumption per capita versus GDP and the GDP is always driving more consumption of

beer.

Urbanisation, one of the key drivers it is very clear that this example in Vietnam the

consumption per capita is twice bigger in urban areas and then in the rural areas,

because of affordability, accessibility and GDP. And when you go back to the region of

urbanisation - once again we have a diverse picture, but you can see the potential, we

have many markets that we are operating in, it's a very low urbanisation - like

Cambodia, like Vietnam, like Thailand compared to a mature market like South Korea.

What is also interesting in Asia is a little bit of a different way of urbanisation. In

number we have a number of cities, in Asia we have megacities, you have a huge

concentration of the population. Don't forget that when you go to the top ten megacities

in the world eight of them are coming from Asia and the top seven is Asia, from Tokyo to

Shanghai, to Jakarta, or Bangkok. And when you see our portfolio and you see our

expertise of sales and marketing capabilities we are very, very well equipped to work in

the megacities with our portfolio of brands.

The premium segment, most importantly it's very clear when you have urbanisation,

favourable demographics and GDP growth, the IPS segment is growing faster than the

mainstream and you can see the forecast of the IPS segment in the region, it's a growth

of 8.7% compared to the mainstream of 3.5% the IPS segment will grow faster than the

market itself.

When you can see also in the current picture of the IPS we still have a lot of room to

increase the IPS market share in many beer markets. You can see for example in Asia

Pacific the IPS market share in the total beer market is only 3.9 with a different picture,

a quite diverse situation, compared to the average in Europe of 10. And you can see the

huge potential that we have and especially with our portfolio of brands with Heineken


and Tiger and all of the global brands in some markets like China, today the IPS market

is only 2% of the total market.

But very interesting in Vietnam, showing us what we can do when we are building the

IPS segment, don't forget that in Vietnam we are the leading company in the IPS

segment. We have been able in Vietnam in 20 years to build the IPS segment with 15%

market share. This is what we can do in some markets.

Growth - it's very clear that all of the fundamentals are in place in Asia to have growth

of the beer market and after that you see worldwide it is very clear that for the next five

years the majority of the incremental volumes will come from the Asia region. Of course

China, 50% of the incremental volumes worldwide will come from China, not a big

surprise.

I think the most important is to see a little more of the details - when you see 25 million

hectolitres will come from Southeast Asia, or Pacific, of which the majority will come

from Vietnam. The forecast 15 million hectolitres will come from Vietnam within the

next five years. The rest of Asia, the majority of these 15 million hectolitres will come

from India, of which five million hectolitres of growth incremental volumes will come

from India.

In summary all of the fundamentals are in place in Asia to have growth of the beer

market. It is very clear that this is the place to be. After that we have a really winning

position in Asia and especially after the acquisition of APB and I will explain to you why.

First - footprint, we have the largest footprint in the Asia Pacific region. We are

operating in 20 countries, we have 52 breweries, 10,000 employees, 50 brands, but

most importantly in 14 markets we have a broad leadership position. We are number

one or number two. We have the best example and it's well known, we are number two

in Vietnam, we are number one in India, we are number one in Indonesia. On top of

that we have also everywhere an IPS leadership position. We are number two IPS

player in China, we are number one in Thailand, we are number two in South Korea, and

we are number two in Australia via our joint venture with Lion Nathan.

We have a very large footprint, we have a broad leadership position in many markets, if

not we are one of the leading players in the IPS.

Second - I think competitive advantage, we are a premium led portfolio. It is very clear

and we can see our volumes, 40% of our volumes are coming from premium brands,

generating 55% of our operating profit. And of course our premium brand - the main

brand, the key brands are Heineken and Tiger, you can see that we are commercialising

and producing Heineken and Tiger in the majority of the market. But on a very, very

strong mainstream brand platform, you can see this example here - we have Anchor

brand in China, Larue brand in the centre of Vietnam, Singapore of course Tiger, Tiger

being a mainstream brand in Singapore, and of course I don't need - if somebody has

been to Bali I don't need to explain to you what the Bintang brand means in Indonesia it

is the brand.


We have Kingfisher in India, as you know the Kingfisher brand means beer in India. The

Kingfisher brand has 40% market share, three times - four times more than any

competitive brand in the segment.

IPS - we are really well positioned to capture the IPS growth because first we have the

footprint, but more importantly we have also the portfolio of brands we have Heineken

and Tiger within our portfolio, plus all of the global brands like Desperado. Strongbow,

Sol and Affligem.

The first forecast is the IPS growth for the next five years will be 16 million hectolitres

and you can see where it's coming from, it's mainly from five markets, China - the

majority of them where we have very focused strategies, to be very focused on the IPS,

successfully - you will see some results. Vietnam, where we are leading in the IPS and

we have the number two position in the countries, but also Australia where we have a

joint venture with Lion Nathan, the number one player in Australia. In Thailand we are

number one in the IPS segment in the premium segment, and of course India where we

have a very, very strong position.

One of the key success factors of Heineken in the region is partnership, it is part of the

DNA of our company in Asia, we are operating in many markets with a joint venture.

And a joint venture - there are many advantages; the first advantage is the first mover

advantage, we have two examples, anecdotes, we have been moving very quickly in

Myanmar, we signed a joint venture very quickly with an outstanding partner and we

started building a brewery in Myanmar, we have been very fast to move into Myanmar.

History - Cambodia, we have been the first mover, we have the industrial licence

number one. Vietnam, we opened a brewery in Ho Chi Minh before many European

embassies are opening an office. We have been very fast to move. Also giving us a

local advantage, local knowledge, local awareness, sensitivity, local network, local

connections and we believe that is one of the key success factors for us in Asia.

To name the majority of the partners, in Vietnam we have a stake of 60% our partner is

Satra, it's one of the holding companies from the People Committee of Ho Chi Minh. We

have - I don't need to explain to you in India we have a colourful partner, Dr Vijay

Mallya - a very successful story. Diageo in Malaysia. We have a joint venture with Lion

Nathan in Australia. We have Chanyawan Group and Sarasin Group in Thailand; it's

more an insurance company. And we have of course Kirin in Japan. On the top of that

we have MCS in Mongolia. We have AP Alliance in Myanmar and we have many other

smaller joint ventures in the region.

The footprint - diversity, you can see that from a volumes and operating profit point of

view we are well diversified. You can see that when you split our different operations

into five sub-regions, the first one being Indochina, it means Cambodia, Laos and

Vietnam. The second one is other Southeast Asia; Indonesia, Malaysia, Singapore and

Thailand. After that we have North Asia, China, Hong Kong, Mongolia, South Korea,

Japan and Taiwan. Oceania and Pacific Island, Australia, New Zealand, New Caledonia,

Solomon Islands and Papua New Guinea and we've India, Sir Lanka - South Asia. This is

how we split the different countries into sub-regions in our business in Asia.


The first thing, it is very clear - Indochina is the main contributor of volumes and

operating profit. Interesting to note that like many players in China, volume is

important, but less important for profit. The same with India, you can see India is high

an important contributor of volumes, but a very low contributor for profitability and

operating profit.

APB, a quick update, as you know APB has quite a strong track record of delivering nice

financial results and APB has delivered in 2013 - sorry first I will start with integration.

Very quickly the integration went very smoothly and I think I am the best example by

the way. I think that went very smoothly because as you know APB and Heineken have

a long history. As you know APB was a joint venture between Fraser and Neave and

Heineken starting 80 years ago, Heineken was as a shareholder always a part of APB

and it's very clear that APB process, policy, supply chain, sales and capabilities was

already 70 - 75% Heineken systems. It means the integration was quite smooth.

We have been delivering against an ambitious plan, we maintain and strengthen the

winning team, we have today one company, one portfolio, one team I think that's quite

important. And I think the most important thing is when you can see unlocking the top

line synergies and confirmation of a 25 million cost synergy, it's very clear that it's not

the cost synergy deal, it's the top line growth synergies. The deal of APB is top line, top

line growth and we are delivering.

Symbolic - one regional office, one company, one identify, we changed the name of the

company today is it Heineken Asia Pacific. We closed the Heineken office, we closed the

APB office and we have been moving to a very nice new office in Singapore; integration

done - successfully.

And of course following the acquisition of APB by Heineken it's very clear that the whole

exposure to Asia is totally different compared to two years ago. You can see Group

operating profit, Asia Pacific was only 9%, today it's 18% of our operating profit is

coming from Asia. And you can see numerous points of view - in three years' time we

double the revenue coming from the Asia Pacific region and we more than double the

Group operating profit coming from Asia. It's very clear that the Asia Pacific region - is

and starts being a very strategic region for the Group worldwide.

The results of APB post-acquisition - APB continuing the momentum of the delivering

results. 18.6 million hectolitres with an average growth rate of 7% over the past three

years and 17 operating profit average growth over the last three years, 2013 has APB

has delivered as in the past.

Our regional strategic priorities we have seven; first is of course leveraging the Heineken

brand's success. The second is positioning Tiger as the iconic Asian beer brand, we

strongly believe that Tiger has huge potential, not only in Asia but worldwide.

Accelerating innovation, as you know the top line growth - one of the key drivers will be

innovation, especially in the region. Capitalising on the strength of the mainstream

brand, as you know we have a very nice platform of very strong and iconic mainstream

brands in the region.


Drive excellence in outlet execution - it's very important for us, it's how all of our sales

reps in the region can really win the consumer and the point of sales, it's the key for us.

And you will see that we have quite a diverse market and diverse outlets and diverse

consumers.

Investing ahead from the curve to capture the future growth, when you see the growth

rate it is very clear that in many markets we have to increase every year, in the past, in

the future the capacity. And of course leverage the global scale.

To summarise I think the key priority is two things, it's the Tiger brand, I believe that we

have a huge potential and it's leverage. It's very clear that APB moving to Heineken the

main synergies are leveraging the global scale of Heineken, the global scale of the

Heineken brand, the global scale of procurement, the global scale of sales and

capabilities. And the main value creation will come from leveraging the global scale and

on the top of that the Tiger brand.

The Heineken brand, of course is the number one international premium brand

worldwide, the successful story in Asia and we have to continue the position and the

success of Heineken in Asia. We have to leverage more the global partnership, example

the Champion's League; we're activating a lot more the Champion's League, for example

in Vietnam this year, than in the past.

We have also to activate more the global digital, it's very clear when you organise global

events, world class events you are driving more digital strategy. And as you know today

the Heineken brand I think in terms of Facebook followers is the biggest brand in the

world with 17 million followers. But also quite importantly we have also to use the local

spin, where you activate some platforms locally with the Heineken brand. And of course

we have local music, we've the Global Event Sensation and we have a local celebration

we have a very famous New Year countdown in Ho Chi Minh City in Vietnam.

A video - I would like to show you what it means really in Asia a global event organised

by the Heineken brand it's quite outstanding, it's a sensation, it's a music platform, very

energetic, very inspiring and I would like to show you this event that we have been

organising in Taiwan, Korea and Thailand. Video please. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Video Played . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


In line of course with the DNA of the brand is the Man of the World, a world class event.

The Heineken brand in Asia, as you know it's a successful story, in a six year period of

time we have 7.7 average growth. We have with the Heineken brand the number one

position in the premium segment in ten markets from Vietnam to Indonesia. Heineken

volumes in China - quite important, grew by 20% last year and we crossed the one

million hectolitres milestone in China and we are really the number two international

premium brand in China.


South Korea, a nice story, we had 17% growth last year and have successfully

introduced Heineken Light in Taiwan.

Tiger, I didn't spend a lot of time on Heineken because I know that you know a lot about

the Heineken brand, what is unknown is the Tiger brand. As you know it's the second

iconic brand that we have within our premium brands. First you see the result of the

growth in the last three years, 33% growth, today the Tiger brand is a more than 5.1

million hectolitres brand. It's a very strong growth contributor for us in Asia, it's a very,

very interesting and attractive price positioning. It's what we call affordable premium, it

means it's the price positioning between the mainstream and international premium

segment that we cover very well with the Heineken brand.

Innovation - also this year we've successfully launched Radler in Singapore and Malaysia

in December 2013. And of course Tiger, we are expanding the footprint; today we are

selling Tiger in more than 60 countries. And one of the best examples I think is London

that we started four years ago to launch and to commercialise Tiger with a very, very

attractive proposition, a little bit young, urban, unconventional, it's a successful story in

the UK and especially in London.

Tiger, the iconic Asian beer brand when you can see the brand positioning of Tiger, the

brand proposition of Tiger is really a young urban adult who would like to up-trade a

little bit from mainstream to premium and Tiger is perfectly fitting this need. It's

extravert, a little but unleashing your talent, a little bit unconventional but the Asian

way, unconventional Asian way is quite an important aspect. And I will say to

summarise it is to ignite the Tiger inside you; it's a very dynamic brand. And you can

see also what the platform we are using as a global category; original event is Tiger

Street Football, a very energetic event with a lot of coverage, more than 600,000 people

in two years' time.

Tiger Translate - it's I will say an artist platform and we would like to have a show case

to see the young Asian artist and the young energy in Asia, quite a successful story.

And also a little bit unconventional, we are one of the only brands in Asian to organise a

Christmas … - and we're organising in Vietnam. An unconventional, urban, modern

brand, but an Asian brand, proudly Asian.

Video about Tiger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Video Played . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


To take Tiger to the next level - we are very excited about the Tiger brand, it is very

clear that it is already the iconic Asian brand, but we strongly believe that Tiger one day

can be an Asian global brand. And we strongly believe from the consumer point of view,

the Asian origin, the Asian energy will be more and more appealing for the consumer.

Today it is very cool to go to Shanghai, very, very cool - I won't name London, but


Shanghai is very cool. And you can see little bit little that the Asian origin will be very,

very appealing for the consumer.

Following the acquisition of APB it's very clear the Tiger brand today has access to the

global scale of the Heineken Company, global marketing expertise, but also global

distribution. And it's very clear that due to the global footprint of Heineken we will

accelerate the growth of the Tiger brand, but not only in Asia, but also the world. We

are working to a stronger position, it's very clear that Tiger itself is a powerful name, it's

grace, it's power. We have a new communication platform, a little bit challenging the

convention and of course really expanding the geography.

An important topic for us and especially for the top line growth is innovation. In 2014 I

cannot disclose a lot of things there, but in 2014 we will have 25 launches in the region,

including Desperado in many markets, Sol, Strongbow and Tiger Radler. And on top of

that we plan to launch the Radler concept in many, many countries. It's already done in

New Zealand, New Caledonia, and we'll follow by - sorry Malaysia is done and Singapore

is done, it's a very important brand position and consumer proposition - the Radler

concept. And we are very excited to really drive the innovation agenda in the region.

To capitalise our strength in the local mainstream - local mainstream is one of the

powerful platforms to build our business in Asia, but also to build the IPS segment and

the premium segment. And I will give you some examples of the very strong

mainstream brands that we have in the region.

We have Larue brand in Vietnam, still an original brand but expanding very quickly with

8% growth. It's a brand with outstanding heritage, more than 100 years in Vietnam, we

have Anchor in Cambodia, a very nice equity, we are the number three brand in

Cambodia, with 13% growth in 2013. And of course we have the iconic brand in

Indonesia with Bintang, with more than 49% market share and 7% growth and of course

Kingfisher in India with 40% market share and almost four times larger than any of the

nearest competitors brands.

Diverse market conditions - it is very clear that due to the diversity, the route to the

market and the channels are quite different in the region. But the majority of our

business is still very traditional off and on outlets and we have some expertise there.

The second thing, our route the market - the majority of the route to market is via

distributors. It means we are developing very professional and successful distributor

management tools in place. And of course very important we have a very strong local

understanding of the sales drivers, you will see that we strongly believe that excellence

in outlet execution is the key. Every day it is how can we win the consumer at the point

of sale? And this one is the key for us.

And to do that we have to understand the shopper and the consumer insights, we have

developed a very, very professional CMI department for the region in the majority of the

countries. Segmenting outlets with a clear channel strategy, very clear; and also it's

very important to do the right things in the outlets and we have embarked to invest a lot

in IT sharing information systems for our sales reps in the region. And we strongly

believe that this is one of the main competitive advantages that we have in the region.


Capacity, you have seen the growth rate in the past, in the future it is very clear that we

have to increase the capacity and we have to continue to increase to supply the demand

of the market. From 2010 we have extended 15 breweries, we've three Greenfields, we

started Greenfield in 2011 in Guangzhou, we just had a grounding ceremony two days

ago in Zhejiang in China for a second Greenfield in China. And of course we started six

months ago to build a brewery in Myanmar. But also we have capacity expansion

everywhere, Vietnam, Papua New Guinea, Indonesia, Laos, India and Mongolia. We are

expanding everywhere and we will continue to supply the market.

One of the most important things I think is really leveraging the scale of the Heineken

Company; it's really covering many, many different things. It's leveraging the global

sales and customers, quite important, leveraging the global marketing platform, the best

example is James Bond 007 Skyfall, or you have also the Champion's League.

Leveraging the global innovation agenda, Radler is a good example, we will be launching

Radler in three months' time in Indonesia and Malaysia. And of course global

procurement, from a small company APB we have been moving to the global scale of

Heineken for procurement. We have some synergies there.

The key market update - Vietnam, of course Vietnam is a very favourable market, all of

the drivers are there we have the size, the population; it is the third biggest market in

Asia with 32 million hectolitres. A very young population, high GDP growth, urbanisation

rising and of course very important to know it's a drinking culture. Very few people

know that 96% of the alcohol consumption in Vietnam is beer; beer is the main alcoholic

beverage in Vietnam. So there is huge potential there, it's really a beer culture in

Vietnam. And when you can see the growth of the market from 2009 there's average

growth of 10%, a growing market with today a 32 million hectolitre market.

Heineken is winning in Vietnam, this one is very clear when you can see our growth

compared to the market, we have average growth of 14% for the last five years and we

are delivering continued profit growth of average growth in operating profit of 38%, a

successful story.

And of course we are very, very well positioned to continue to win in the Vietnamese

market. We have the scale, we have five breweries, we are number two in Vietnam, we

are consistently gaining market share. We have the number one position in the

premium segment, we are strengthening our route to market, we are building a

mainstream brand from a regional footprint to a national footprint with Larue and we

have excellent outlet execution. I believe that if you have been visiting Vietnam you will

have seen what we can do in some markets.

China, China as you know in 2008 we decided to be focused on the international

premium segment and I think it was a successful decision. When you can see the IPS

volumes in Vietnam it is anticipated to have growth of 10% for the next five years and

will be a 23 million hectolitre market, the IPS segment. And with the Heineken brand

and Tiger we are today the number two and we are very well positioned to win this IPS

segment.


You see in the past, you can see from 2008 we have averaged Tiger volume growth of

22% and Heineken 24%. We have to continue to leverage the Heineken brand strength

in China, we have to expand our footprint and it's mainly to the coastal region and we

have to enlarge our portfolio. And as you know with the Heineken brand we have a lot

of global brands that we will really commercialise and to push in China. And of course

we have to continue to invest in brand building in China in mainly the Heineken and

Tiger brand and of course to invest in people and capabilities in China.

India, a very, very long term dream but a real opportunity; I think it's one of the main

opportunities in the Asia Pacific region. When you can see all of the fundamentals are

there to have a very nice story in growth. First we have seen the consumption per

capita is very, very low it's only two litres per capita, for a huge population. A very

attractive demographic, the largest population in the world in 2013 and also one of the

youngest populations in the world; when you can see 20% of the population in 2013 will

be less than 25 years old.

Quite a challenging market, affordability - you have to understand that India is not only

one market it's 15 different markets with 15 different regulations, with a different duty

structure, export and import structure. The main opportunity - issues and opportunity is

the limited outlets due to the high regulated market in India, the main limiting factor of

the growth is the number of outlets. We have only one outlet for 17,000 people.

To give you an example in Indonesia we have 230 million people you have 550,000

outlets. You have outlets every 50 metres in Jakarta. In India it's totally different, it's a

huge opportunity that you can see some signs of deregulation of the number of outlets it

means less regulation in order to sell alcohol and beer in India.

Highly regulated, all of the states are different, you have advertising bans, it's a black

market - a dark market sorry and a highly diverse market. Never look at India as one

market it is 15 different markets. You have a huge diversity of price, you have the same

Kingfisher bottle that can be 60 rupee in one market, next door in that state it's 160, it

depends on the excise, and in some states the state is fixing the selling price.

Where are we in India? As you know we are operating in India via a joint venture, a

successful joint venture with UB Group, we have today 38.7% and UB Group 36.1%; it's

a listed company; 51% market share, a 22 million hectolitre market. We are the very

clear number one player in India and on top of that we have the number one beer brand

in India with Kingfisher, with more than 40% market share.

It's very clear that in India we have a strong foundation for growth, we have the

Kingfisher brand it's really the iconic brand in India. We have extensive routes to

market; you have seen we have 28 breweries in India, we have breweries in all of the

key states for the beer business and we have a very, very experienced management

team in place for more than ten years.

In summary - a highly attractive growth region, I don't need to explain to you, we have

a very favourable demographic, it's the largest contributor to the global beer growth to

2018 and IPS to significantly outpace the mainstream beer growth. This means a very

exciting region for the beer business.


The Heineken Company - I think that we are really, really well positioned in this growth

because we have the largest footprint, we have APB still delivering against expectation

and of course we have a very unique position with the IPS segment with the Heineken

brand and Tiger brand.

The business priorities - focus in further strengthening our position. We have to

continue of course to invest behind a winning portfolio led by the Heineken brand;

accelerated innovation you have seen we have quite a heavy agenda to accelerate the

innovation in Asia Pacific. Excellent outlet execution is the key for us. Further building

capabilities and especially on the platform of the global sales and market expertise from

Heineken global and of course leverage Heineken's global scale; one of the key words -

leveraging the Heineken scale; this is what will make the difference for us in Asia.

I apologise for my English, I hope that everybody is understanding and I'm ready I think

for questions and answers. What is the protocol here, I don't know - ladies first - no, no

ladies, okay. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Questions and Answers

Sanjeet Aujla, Credit Suisse

Just a couple of questions please, firstly how comfortable are you that you can maintain

that 7% volume growth you've achieved in recent years over the next year or two? In

other words are you seeing any signs of an economic slowdown in any of these markets?

And the second question just relating to M&A, what is your M&A criteria for the region,

would you look to perhaps consolidate your associate JV stakes there and are you

actively pursuing M&A in the region? Thanks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


I will answer directly by M&A because as you know we never comment about any M&A.

The only things that I can say to answer your question is consolidation, it is very clear

that when you see the Asia Pacific region it's the least consolidated region for the beer

industry. You still have a lot of independent private companies owned; you still have

many state owned companies. It's very clear that there are many opportunities in Asia

Pacific and we will always look at the opportunities.

Concerning the joint venture it's always the same, it's the same answer. If there are

opportunities we will look at it and it's clear that if we have to continue to invest in our

core business we will do.

After that you have the growth - that was the first question; all of the fundamentals are

there, it's very clear for us that there are no reasons when you see GDP, favourable

demographics, there is no reason for the growth to slow down, especially when you see

the per capita consumption.


After that we have some experience in the region, you have some slowing down - I will

give you an example, today as you know you have some exchange rate volatility,

currency volatility, causing some pressure - inflationary pressure. And of course due to

that we are increasing the price and there is a risk of some slowing down of the growth.

But we are very acquainted with this kind of situation, so it means we are not so

concerned. It's not the first time that we will face in the region currency volatility and I

think that we are well equipped and experienced to manage this kind of situation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Analyst, Société Générale

Two questions, one on China, we've seen your competitors ABI and SAB focusing much

more on the premium segment now, what does that mean for your growth rate going

forward, are you going to change your strategy and do you think you can achieve the

same growth rate?

And maybe a second question on Papua New Guinea, I think it's a big profit driver for

you, or profit contributor, could you talk about the recent trends there and what your

strategy is in that market? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Okay, first China, I think we changed - we have been focused on the IPS segment from

2008, the strategy is working and we'll continue this strategy. After that I don't see -

our main competitors - international competitors in China are still very focused to gain

market share in the Chinese markets. I don't see any very real signs of change of

strategy. And for us it doesn't change anything, our strategy is working and we will

continue to the strategy.

After that, as you know we never mention specifically countries, but to go to Papua New

Guinea it's more the Pacific Island region Oceania - once again all of the fundamentals

are there. Papua New Guinea is a good example; you have seen some numbers, GDP

growth, demographic - a very young population. We are very confident about the

growth rate in that region because the fundamentals are there. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Question

One question on Vietnam, what is your market share today in the premium and

mainstream segment and what do you think your fair share is going to be in the future? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


The future as much as we can, this is very clear. No I think I don't mention - we are

number two and I said that we are around 25% market share to be very clear and we

are the clear leader in the premium segment, with very clearly more than 50% market

share - even more of the premium segment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Question

A follow up question on Vietnam and then China. Sorry first of all China, can I take from

your comments therefore that you don't feel a need to be in the mainstream segment in

China because in markets like Vietnam, or other parts of the world like Nigeria the

business has been sort of backfilling into mainstream. Can you achieve your IPS goals

without that sort of scale?

And following on from that point I found it very interesting to see that the volume

growth in China has had operating profit growth almost matching it. Has that red line

always been positive, i.e. has it always been operating profit, or has it been a

diminishing loss in China? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Both … We are profitable in China to be very clear, no the question in China IPS without

mainstream can work when you can see the size of the market and especially the city

set up in China, we strongly believe that we are focused only in the IPS we can have a

very nice and sustainable strategy, because of the potential of the IPS and also I will say

the urban footprint and the footprint in China.

I agree with you it's not for that - because only IPS can work in China can be replicated

worldwide; it depends really on the nature of the market. But with China we are very

confident that first it's a successful strategy and it's a sustainable strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Question

And a follow up on Vietnam, I mean a very strong performance in volume growth and

profit growth in Vietnam, effectively with almost that premium segment to yourself. In

terms of the level of sales and marketing support that the Heineken brand gets in

Vietnam, is it comparable to the brand worldwide, or is it - have you been able to do it

more effectively there because of limited competition up until now? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


It's in line with the worldwide standard, the investment behind the brand. No there is no

specificity in Vietnam how much do we invest behind the Heineken brand and what kind

of - I will say activation we are doing in Vietnam, with have of course a local spin, but

it's very comparable to the global - to the Group levels, very comparable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Question

Just a follow on in Vietnam, it seems to be a very profitable market for you can Heineken

is the independent player there, two companies owned by the government, one of them

looks like Carlsberg is in driving seat, ABI is building a brewery there as I understand.

So what do you think about - you know if you can talk a bit about your expectations for

the level of competition in the market going forward and if profitability levels can be

sustained in the future?


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It is very clear that the level of competition will increase in the region because it’s an

attractive region for many players. The people will look more and more in the region.

Nothing surprising there. After that I think that we look very positively on the

competition because first it’s accelerating the market because you have more

competition. And we strongly believe that we have been gaining market share and we

will continue to gain market share. And it’s also I will say sharpening a little bit our

management team and our way to work.

Vietnam is a good example. It’s very clear that one day Sabeco, Carlsberg will be done

and we will face very professional competitors. But I strongly believe that we are ready

to welcome them.

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Question

And just a follow on, if Sabeco becomes privatised, would you be able to bid for that or

on antitrust grounds you would not be allowed to?

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As you know on this one I will never comment about potential M&A deals. The only

thing is that you know better than me because you read more newspapers than me, the

privatisation process will continue in Vietnam, this one is very clear. When, how?

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Jon Fell, Ash Park Capital

Can I come back to China? I think unlike some of your international competitors you've

always kept the taste of Heineken exactly as it is in the rest of the world. Maybe Tiger

meets local tastes a bit better. Can you see a situation where Tiger actually ends up

growing faster than Heineken in the nearer term because it’s more acceptable to local

tastes? And are you trying to sell those brands in different channels, or is there a unified

strategy for both?

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No, it’s a different question. Well it’s not even a question, yeah it’s a comment. No, I

think first we strongly believe that Heineken’s taste, unique taste is a differentiation

point. When you can see many brands have been going to variants to try to fit taste and

price, need from the consumer, we are not going there with Heineken. I think that

Heineken’s unique taste is really a part of differentiation.

After that you talked too about Tiger. Tiger I would say from a portfolio point of view it’s

a more affordable premium brand. It means we have to pay a little part in the game,

but it’s already done. In China we don’t have the original Tiger, it’s Tiger Crystal. It


means low alcohol content, easier to drink. It means the move that you have been

expecting is already done six years ago. It’s a very nice complementary brand to

Heineken, to enter for example the Chinese restaurants, that you need some affordable

premium on top of the Heineken. But the change of taste is already done for Tiger.

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Jon Fell, Ash Park Capital

Do you think though given that differentiation in price positioning as well as taste, I

mean should we expect Tiger to grow and become larger than Heineken in the near term

in China?

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Possible, yes it’s possible but the key is to continue to work with the portfolio and to

have a successful story with Heineken. And if one day Tiger is bigger than Heineken in

China, yeah welcome, the most important is the growth of Heineken in China, and to be

a unique proposition. I will never refuse the growth of volumes.

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Trevor Stirling, Sanford Bernstein

You showed us that the APB business in general did 7% volume growth, Heineken 7.7%

and Tiger 30%, implying that the rest of the portfolio actually saw some declines. Could

you just expose to the world where the weakness has been, and is it something that was

part of the growth of Heineken or Tiger, or there's something that you think you need to

fix elsewhere in the portfolio?

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No, I won’t go into details by brand, but it is very clear that Heineken growth is nice,

Tiger growth is outstanding, it’s a successful story in some specific markets. And after

that I will say we are facing some challenges in the markets, but it’s mainly due to the

nature of the market itself rather than us. Though the majority of the market that we

are operating we are getting market share, this is most important.

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Trevor Stirling, Sanford Bernstein

And are you able to say which of those are the weak markets, where the market is weak

and that’s giving -

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No, I think it’s when - the only market where we’re losing market share is Cambodia

because we have some constraints on capacity. But we have a very nice portfolio of

brands there. It’s one of the examples of one market we are getting market share for

external reasons.


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Question

Roland, you were a Heineken guy running APB before it was acquired outright by

Heineken. What difference has it made running the business under Heineken’s full

ownership?

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Dream because of scale. APB was a successful company, sure, but I've been lucky to

run for five years with the support of the shareholders. But it’s very clear that from a

very small successful company, now we have access to the global scale. It’s very

exciting and global scale I explained is everything. And of course the management team

and majority - all of the operating company are very excited to move from a very

successful company, APB, to a global successful company, this is Heineken. Especially

for me.

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Tony Bucalo, Santander

Following on, you just made a comment about Cambodia being capacity constrained.

Overall your APB division, or your Asia division, how are you running as a group in terms

of capacity utilisation? Are there markets where you’re capacity constrained? Are there

markets where, you know, you have room to grow into your production? I mean what

does it look like in terms of the brewery footprint in terms of meeting the needs of

growth over the next few years? Basically capex needs.

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Yes, I got the point because once again it's a little bit diverse, but if I can give you,

except China, a helicopter view. It’s one of the challenges that we are facing because

many markets that we are operating in, it’s a regulated market to produce beer. The

example that you know is Vietnam. To produce beer you need a licence. So it means

you have some bureaucratic process to go through, or Indonesia. It’s one of the main

challenges is not to build the capacity, to have the capacity on time; it’s one of our

challenges, sure.

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Tony Bucalo, Santander

So can you comment on any specific markets where you've got …?

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You go back to the list where we have been in the past, Indonesia, Vietnam, no change

of the list because the source of growth in the same markets.


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Question

Two questions. First one, when APB bought Bintang you paid six times EBITDA for the

business. Do you think that was a correct value for the business?

And two, again on Bintang, what is the strategy on the normal alcoholic side that given

that Indonesia is a very large Muslim population?

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I know the first question is the worst for me because I acquired Bintang from Heineken,

you know, in the Heineken book - no it was - I don’t need to go back to the deal, but it

really was a global deal involving two, maybe three countries, and I think that for APB,

from Heineken’s point of view, was a win/win deal at the end. Now this one is for the

Bintang or MBI deal.

After it the soft drink, we have always a soft drink business in Indonesia, but mainly

focused on the non-alcoholic beer. And we are calling soft drinks only because it’s the

legal name for the licence, but it is very clear that our main business in Indonesia

concerning soft drinks is non-alcoholic beer, and we strongly believe that we have to

continue to develop this segment in Indonesia especially because it’s a Muslim country.

And the non-alcoholic beer, we strongly believe that there are some opportunities there.

After that we will go to the soft drinks. My answer is no, because it’s a huge market, it’s

not our core business. And the soft drinks don’t help our route to the markets.

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Question

A question on Australia and some of your other sort of joint venture markets. You said

at the start you've got these successful joint ventures, but in terms of the Heineken

brands positioning in markets like Japan, Hong Kong, Australia particularly. I mean do

these joint ventures really live up to your potential expectations, and particularly in a

market like Australia where brand ownerships have been changing and your partner

seems to have a very crowded portfolio now? Are you comfortable that you can really

control the Heineken brand in these markets to the extent you want?

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Successful story the past, and when you can see your partner in Australia Lion Nathan

and quite a very professional, successful company, and I think when you see the

strength of Heineken brand within the portfolio we are very confident about the future.

And you see the last past year’s results is quite very nice, and Heineken brand is doing

quite well in Australia.

And we are never afraid within the Heineken portfolio compete with other brands,

because we strongly believe in the strength of the Heineken brands, and especially with

our support. Japan exactly the same.


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Question

And specifically on India, I might have missed it in the presentation but did you share

specific numbers on how the Heineken brand was developing in India, how far it’s been

rolled out, what its distributions at, that sort of stuff?

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Heineken is still a very small base, Heineken. It’s growing above expectation but as you

know India is quite a challenging market for the IPS for two reasons. First, very difficult

for beer to travel in India. It means you need a multi-location production automatically,

because the Heineken request and we produce Heineken only in one brewery. It means

logistic limitations to spread the brand all over India.

The second reason, 85% of the market in India is strong beer, it’s not lager beer. IPS is

only a small part of a small part of the market. It means the potential of IPS in India is

limited because it’s a strong beer market, 85%. Kingfisher brand is a strong beer; it’s

more than 7% alcohol content. And the limitation is there for the IPS market.

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Question

A brand like Guinness in Africa went stronger to meet local needs, and I know it’s a

brand that you guys have looked at with some degree of - you know, it was a good

example in stout what you could maybe do in lager. Would you ever consider going

strong Heineken in India?

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No.

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Question

Just a follow on from Tony’s question on capacity in Asia as a whole. I know in India

you’re loyal to the fact that it should be looked at as like 15 different markets, but still

28 breweries in India. So looking at Asia overall, are there opportunities to kind of

organise capacity or production in a more efficient way?

And the second one, which is a bit more specific but relates to the first, looking at China

itself, Laos, Cambodia and Vietnam, are you able to look at these three countries as one

region - put your production base like two plants in Vietnam supplying the other

markets, given Laos I think it’s 7 million people, Cambodia is probably 15 and Vietnam is

a much bigger market?

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Yeah, there are different elements there. I think that the first thing is mainstream

brands because the profitability doesn’t travel well, it’s only international premium

brands that travel well because you have the transport costs covered it because you

have a high price.

And after that you have to imagine the size. Vietnam is 2000 kilometres; it means it’s

not a small country. It means to compare to Europe between London and Paris I think

you have 15 breweries and the distance is a very small part of Vietnam. You have

distance in Asia. The continent looks small but it’s huge. And it means you need an

industrial footprint to transport your beer, and from a profitability point of view to

optimise your profitability you need quite a large manufacturing footprint. And Vietnam

is a good example; we have five breweries there because it’s a 2,000 kilometre country.

And after that, on top of that you have the licence. You don’t build your brewery where

you want and when you want, you have a licence that you are using as much as you

can. With the optimisation of the capacity in Vietnam for example, it’s quite a limiting

impact factor is the licence. After that Laos, Thailand is the same. Laos, Thailand, you

are talking about kilometres, and of course transporting ..... not like in Europe. But

there are very few opportunities to say let’s go to a mega brewery and let’s develop

some synergy because of transport costs. Very few opportunities at the time being, very

few. It’s huge, Vietnam is huge.

And from Hi Chi Minh to Hanoi by car is five days.

Laughter

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Question

And the production rationalisation in India was the other question.

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No, having competitive advantage is to have breweries everywhere. You have breweries

you can produce and you can sell. The number of breweries dominates a little bit your

market share. The real competitive advantage in India is the number of breweries.

Close competitors have two or three breweries, it means they can play in two or three

states, maybe ten states or five states because there are some open states, but they

cannot play in all of the states. Look, India is a beauty; we have a multi, very large

manufacturing footprint, one brand, Kingfisher. So really a beauty.

You can see I'm very excited about India.

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Question

Could I just go back to the very first question you were asked, because I think you

stopped your answer before you’d finished, which was to do with the volume


performance this year across your business. And you started talking about the fact that

FX was causing imported inflation which was affecting demand. Can you tell us which

countries in particular you’re seeing that, and whether relative to that 7% average

volume growth you think that’s going to cause slower volume growth this year than last

year?

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This year, I won’t make any comments. No, I think that for the market itself it’s very

simple, you go back to which currencies are a little bit volatile today, and you have to

picture it’s very clear that for example the best example is Indonesia. Indonesia there is

some volatility of the currency, but for example we don’t see any sight of slowing down

of the market. But it’s very diverse. After that for one year I won’t make any

comments.

What I know and I can see because we have some experience in the past, even if we

have the slowing down of the growth because of the inflationary pressure, what you can

see in Asia and especially in the past experience, you have to very quickly shift. The

consumer confidence can shift very, very quickly. In Europe it takes time, in Asia it can

be two, three months. Look, it’s very clear that due to the currency volatility and the

inflationary pressure we can see some slowing down in some markets, yeah sure. But

we are not concerned about the year because we have some experience how to manage

this kind of environment, and we know very well that it can shift very, very quickly,

very, very quickly.

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Question

And while I've got the mic, you mentioned that you’re planning 24 new product

introductions I think this year. Can you say what that was last year and the year

before?

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Oh good question. Two years ago was the APB time. It means innovation was not the

priority, it’s very clear. And last year I don’t know the numbers, we’ll say maximum ten.

And the year before I'm talking about less than 10, yeah. It means it’s very clear that I

know that Heineken company on board with APB, it’s very clear that it’s one of the key

agendas is to accelerate the innovation and innovation is the key to accelerate the top

line growth. This is very clear.

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Question

I've got two questions on United Breweries. The first one would relate to the

productivity programme there. Could you perhaps comment on where we are in that

programme now, whether there's any more low hanging fruits that could potentially be

picked in that business, or is that process basically over?


Also a follow up question on the process of brewery footprint consolidation in India,

because I understand that, you know, you have breweries in every state, but also I think

that you have multiple breweries in some individual states. So is there, you know, the

possibility of consolidation at a state level of - you know, where that applies?

And actually sort of another question on India, you recently increased your stake in

United Breweries. That didn’t buy you control, and you paid a very high valuation for

those shares, so what was the rationale for making that transaction?

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Let’s go first. UBL strategy, it’s very clear. You can go into details, optimisation of the

footprint synergies, the key priority in India and the key priority of the UBL management

team is to capture the growth, to capture market share. And after that, if you have in

two details one brewery why not to close, it’s naturally on the agenda. The agenda of

the UBL management team is capturing growth and gaining market share. It’s really the

priority day to day of the people in India and I think they are right. It’s really the

priority.

After that your second question, it’s of course you have seen that we acquired very small

participation, additional stake in UBL, first it’s not significant. And to be very clear

doesn’t change the governance of the company, doesn’t change the nature of our joint

venture. And there is no reason to change the nature of the joint venture in India or the

governance of the company.

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Question

So why do it? Why did you buy these shares?

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Because we trust in India, better to increase our participation in UBL because we trust in

India, very simple. And the second reason, our promoters, as you know we have two

promoters, we always prefer the shares to stay with the promoters than to go to the

open market. Simple.

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Olivier Nicolai, UBS

I've got just two questions. First of all on Vietnam, Tiger is obviously growing much

faster than Heineken. Can we expect some margin pressure or is there a big difference

in terms of margin between the two brands?

And then second question is just can you give us an idea of what percentage of your raw

materials is actually sourced locally in Vietnam and for the region? Thank you.


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Margin, no because you have top line growth and you have also scale. Look, it’s very

clear that Vietnam, you have seen - the profitability of Vietnam is quite high but we are

very confident that we can keep this kind of level, mainly because of scale. It’s very

clear that we have scale now in Vietnam. It means the investment behind Tiger brand

for example, percentage of revenue is a lot less than five years ago compared to today,

because we have scale. We are quite confident to keep the profitability in Vietnam.

And sorry the second question?

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Olivier Nicolai, UBS

Your percentage of raw materials sourced locally.

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Raw material, don’t forget that in our business the main raw material is the packaging

material, you know bottles, cans, c...... Majority of them are locally produced nearby in

the region in Vietnam. And after that you have the raw material itself, it’s mainly rice

and malt. Malt of course we try to develop more and more suppliers in China, in

Australia, more than Europe. But the majority of our purchasing is locally done, is

packaging. We have a huge can producer in Vietnam, bottle producer in Vietnam, c.....

producer in Vietnam, or labels.

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Question

On Myanmar if I understand correctly at the moment F&N is now the main brewer in

Myanmar which used to be actually Heineken when they had to exit out of Myanmar.

And Carlsberg is entering and you are now entering back. How do you see the

landscape in five years' time on the beer side in Myanmar? I mean do you have any sort

of idea; are you going to go mainstream? Are you going to go only premium? What’s

the strategy of entering that market?

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I won’t elaborate too much about that strategy if you don’t mind. But it’s very clear that

Myanmar, because you have been, because you exit - we've got quite some knowledge

of the market by the way. No, you see the fundamentals, population, GDP; demographic

is very, very positive. And of course it will be quite a competitive environment because

Carlsberg is there and the people are looking, we are there. But we are very confident

that the fundamentals are there. We know quite well this kind of market. I won’t

explain to you which brands are new to the market of course, but it can be a new

Vietnam in 15 years, sure.

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Question

I was interested in your comment just then that you were confident about maintaining -


What I can disclose, Heineken brand will be available in Myanmar.

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Question

Tiger as well?

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Tiger as you know, the Tiger brand is managed by MBL, by T..... for a period of time.

And when the Tiger brand will be available, of course we will take it back.

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Question

And the global partner, does it have a local brand? I mean I don’t know -

Just to make sure, so you’re going with Heineken, Tiger there is a little bit of an issue,

but does your local partner have a local beer brand?

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No. Our local partner is number one in the spirit business. It means yes, some routes

to market.

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Question

Roland, I was interested in your comment that you’re confident of maintaining

profitability in Vietnam because of scale, when recent examples in Poland and Nigeria

would surely caution you against that, that when you get an aggressive new entrant or a

resurgent current player, that holding onto profitability is a very difficult thing to do.

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Okay, I don’t know Poland and Nigeria well, I know a little bit. Yeah but the scale - okay

to come back to competitors coming to Vietnam, once again you have the scale. And

once again you have the limiting factor of the licence. As you know there is a well-

known group, worldwide group who are building a brewery in Vietnam with 500,000

hectolitres, and we have the scales of millions of hectolitres. Look, we are very clear;

we have a very strong portfolio, very high growth. We have quite an optimal footprint,

manufacturing footprint. And any additional growth will be scale. No, we are quite

confident.


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Question

It’s specifically those licences for production volume that is the barrier to entry in

Vietnam you’re saying?

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It’s one of them. Yeah, one of them. And also on top of that you have seen with Larue

brand we are building very nicely and very quickly a mainstream platform there, that

you have to still have some room for the improvement of profitability, even in the future

if you are facing competitors. But we’re already facing competitors.

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Question

And then a follow up on India. It seemed we shouldn’t expect any margin expansion at

United Breweries for any time in the near future. The way it’s reported it’s a significant

part of your group sales, but a small margin. So if India, I would imagine, would be a

consistent drag on your regional profitability because I would expect India to be growing

top line faster. Is that a fair way to think about it?

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Can you repeat because I am not a - you have seen my background; I am a basic brew

master, who needs to go very slowly in finance.

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Question

It seemed clear that UBL is driving market share gains and profitability is secondary to

that which is, as you say, the right thing at this point at the market. But given that

India is a very big market in terms of sales in the region, and I would imagine those

sales are growing at a faster rate than the group average in your model, that there's

quite a significant drag on the regional margin potential because India must be a third of

the level of profitability of the region.

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Yeah, but you can see the growth rate in India. It’s not above the regional growth. But

you don’t have this dilution effect for the group point of view, for the region point of

view, because the growth rate in India, it’s in line with the growth rate of the region. It

means you don’t have a dilution effect. It’s not dragging down the profitability in the

region. If mathematically it makes sense.

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Question

Yes, I mean if you look at a per capita basis the volume opportunity in India is

significantly higher than some of the more mature markets. Are you managing volume

so it doesn’t -

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UBL company like any company you have priorities. The priorities are market share and

volumes, but it’s not for that - you forgot some profitability target. It’s very clear that

that management team is improving little by little the profitability, but it’s not the

number one priority of the company. The growth is now today and you have to capture

it.

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Okay, I think we’ll stop there. Do we have any questions from the webcast? No.

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Thanks a lot for your questions.

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Take care everyone. Thank you Roland.

Applause

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Okay well why don’t we - I suggest we make our way outside and hopefully many of you

can stay with us to sample a few Tigers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

END

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What's Brewing Seminar 21st March 2014 - The HEINEKEN ...

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