Milan, Italy | May 8-9, 2018 | Heineken N.V.
Heineken Italy
Winning in ItalySøren HaghManaging Director Heineken Italy
1
Summary
✓ Complex and highly competitive market, where HEINEKEN has a
strong leadership
✓ A growing market, having recovered past historic record
✓ A Strategy to WIN based on 6 priorities creating a sustainable
competitive advantage
✓ Strong delivery of results with significant upside potential for
the future
2
Agenda
Italy Market OverviewHITA Strategy to WIN
Results and Opportunities
3
Landscape
Food
GDP per capita (€) 34,000 33,000 30,000 18,000 17,000 20,000
GDP growth 0.9% 1.3% 0.8% 0.8% -0.1% -0.9%
Unemployment 8.1% 6.8% 10.4% 19.6% 22.1% 17.8%
Italy: a large economy with regional differences
▪ #3 economy in Eurozone
▪ #8 economy in the World
▪ 60m Nationals with strong appreciation for food, drinks, quality and design
▪ 60m Tourists per year (+5% vs 2016)
Source: Istat 2016 and Confturismo - Confcommercio
4
17.9
18.5
17.8
16.917.2
17.7 17.5 17.5 17.8
18.919.0
19.6*
30.3
28.0
29.8 29.2
30.831.4
32.5*
105 10398
84
69 68
47
31 31
Growing market with per capita consumption upside
Beer market and Consumption per capita
Consumption per capita 2016(litres per year)
Beer market (million hl) Consumption (litres per capita)
Source: Associazione dei birrai e dei maltatori (ASSOBIRRA) and Global data Forecast
* Internal Estimation
5
• 43% of the market - 8m hl• 1,800 Distributors• 280K Points of Consumption
ON PREMISE
• 57% of the market - 11m hl• 250 Customers (International and Local) • 25K Stores
OFF PREMISE
Two strong channels with a range of formats
Source: Internal estimates based on Associazione dei birrai e dei maltatori (ASSOBIRRA)
55%
45%
PackedDraught
43%
24%
18%
8%7%
Day Bar
Pizzeria
Restaurant
Night Bar
Pub & Disco
53%
13%
13%
13%
7%
SuperDiscountProxiHyperTraditional
32%
26%
20%
12%
10%
Bottle 66
Bottle 33
Other bottles
Can 50
Format Sub ChannelsFormat Sub Channels
6
Heineken Italy: a story of successful integrations
1974 1989
1986 1994 1996 2008
1995 2003 2017
7
Regaining market share in a competitive market
Source: Internal estimates based on Associazione dei birrai e dei maltatori (ASSOBIRRA) and internal volumes
HITA market share development
MainBrands
MS 2016
IMPORT +OTHER ITA
28.0%
18.3%
9.1%
6.1%
9.9%
28.5%
FORST MENABREA + CASTELLO
Market share by player
30.1%
29.0%
28.9%
27.6%
28.0%
29.4%
2012 2013 2014 2015 2016 2017
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A strong and vertically integrated leader
Source: Global Data 2016
AostaComun Nuovo
Massafra
Assemini▪ 40K customers
▪ 41 warehouses
▪ 10,000 skus
▪ 1,000 employees
▪ Market leader
▪ 4 breweries
▪ 1 microbrewery
▪ 1,000 employees
▪ Comprehensive portfolio of brands
27%
42%
11%
16%
4%
Main Brands
BEER BUSINESS HORECA DISTRIBUTION BUSINESS
Hibu
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The team
Søren HaghManaging Director
Marco LucianiOn Premise
Tiziano SomaschiniLegal
Riccardo GiulianiMD Partesa
Floris CobelensMarketing
Alfredo PratolongoCorp. Affairs
Gabriele GiudiciFinance
Mario PeregoHuman Resources
Mara MaffeiIT
Barbara GarioniOff Premise
Alberto CorteseSupply Chain
2,000 employees
Average age: 45 years
Gender Mix:
75% 25%
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Agenda
Italy Market Overview
HITA Strategy to WINResults and Opportunities
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Road Safety
Safety First
Fatalities
24
1613
Accidents
Life Saving Rules
24
16 13
23
2014 2015 2016 2017
No fatalities
in the last 3 years
Safety Culture
Training and Tracking
for employees and
contractors
12
Our global strategy in an Italian context
Deliver best in classinstore visibility
Lead in Drink Different
Defend Good Deal
DELIVER END TO END PRODUCTIVITY
Leverage Partesa
Optimize Regional Opportunities
Embrace Digital Transformation
Lead with Heineken® and Birra
Moretti
Make Ichnusa a Blockbuster
Shape the future of Drink Different
DEVELOP AND ENGAGE OUR PEOPLE
RESHAPE CATEGORY INMODERN TRADE
GROW INHORECA
WIN IN PREMIUM
Our Must Win Priorities
BREW A BETTER WORLD
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Heineken®: the leader in premium
Source: Internal data
2013 2015 2017
CAGR: +0.2%
CAGR: +5.0%
FORMULA 1®
SPONSORSHIP
ON & OFF PREMISE BIG BANG ACTIVATION UCL
JOBS TO BE DONE KEY ACTIVITIES HEINEKEN® PERFORMANCE
REINFORCE CREDENTIALS ON PREMISE FLAGSHIP ACCOUNTS
& VISIBILITY
CONVERT SUPERIOR EQUITY INTO PENETRATION
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Birra Moretti: the market leader*
Source: Internal data; *IRI
2013 2015 2017
CAGR: +4.4%
CAGR: +6.4%
WHO WE ARE KEY ACTIVITIES BIRRA MORETTI PERFORMANCE
NEW CAMPAIGN AND VISUAL IDENTITY
ON & OFF PREMISE BIG BANG ACTIVATION
INNOVATIONS
PLAYFUL ITALIAN CRAFTMANSHIP
GATEWAY TO DRINK DIFFERENT
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Ichnusa: the super-premium blockbuster
WHO WE ARE KEY ACTIVITIES ICHNUSA PERFORMANCE
INNOVATION
UNCORRUPTEDRESPECTFUL
RAW
A small, stubborn brewery proudly rooted in Sardinia, loyal to the island and its people
BREAKTHROUGH CAMPAIGN
NEW ICONIC PACKAGING
2013 2015 2017
CAGR: +1.9%
CAGR: +8.2%
Source: Internal data
16
Drink Different: shaping the future of the category
Step change capabilities Shape digital opportunity
Leverage power brands Grow local jewels and craft Change the game with LNA
17
Horeca: a highly fragmented market
8.3mhlMarket
6 Regions
110Provinces
1,800Distributors
280,000Beer Outlets
▪ 90% with turnover below € 5m (avg 2.8m)▪ Each owned by local entrepreneur▪ 99% work with at least 3 beer companies
▪ 95% with single outlet ownership▪ 85% of market is cash payments
45% Draught and 36% Import
With major differences in beer culture and route to market
Each defining a distinct local market
High fragmention with diverse level of maturity at distributor and outlet level
Hyperlocal market in a regionalized country
Most distributors opportunistic in dealing with suppliers
Implications
18
Grow in Horeca by changing the game
Develop Top 100 Partners
OptimizeTier 2 distributors
Beer Cellar technology
Blade Draught technology
B2B Digital Platform delivered to fundamentally change way of working in Horeca
LEVERAGE PARTESA TRANSFORM THE DRAUGHT EXPERIENCE
Build Premium Brands
Data Led Insights
Category Development
Leverage Partesa Focus On Top Distributors Transform the Draught Experience
Reinforce Strongholds
19
High incidence of Price Promotion
Modern Trade: high promo share and complexityDynamic Market
+2 +1.6 +3.9
Beer is the fastest growing category
28% 29% 36%% Promo Vol
Vs 2012
High Trade Fragmentation
40% 52% 56% 68%
4 Layers of Negotiation
Major Regional Differences
North H+S Weight:
73%
South H+S Weight:
54%
Weight of Top 3 retailersHigh Penetration but low Frequency
Low presence of beer in small baskets
Low Frequency High Complexity
# of players per level of negotiation
Int.Buyinggroup
4National Buyinggroup
11
Banners
71
Customers
251
Source: GFK and IRI
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Reshaping the category in modern trade
TRANSFORM THE DRAUGHT EXPERIENCE
WHERE WE ARE WINNING in SECOND PLACEMENT
2016 2017
x10Shopper Repertoire Insights
based on 250K
shopper transactions
KEY ENABLERS
Systematic rollout with top retailers
x5
2016 2017 2016 2017
SHOPPER INSIGHTS CATEGORY LEADERSHIP
BIG BANG ACTIVATIONCOOLER PLAN ACTIVATION
SUMMER ISLANDS
CUSTOMER VALUE PLAN SYSTEMS & TOOLSSELL OUT SALES FORCE
x100
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Relentless drive for E2E efficiency to fund growth
SellMake Support
ConsumerCustomer
Revenuemanagement
Sell more for more
ZBC
Eliminate bad costs
Saving 2017 – 2018: 5% of cost base
Brewing
Sourcing
Packaging
Distribution
Commercial
4%
2%
2%
2%
15%
Brand portfolio pricing
Pack price architecture
Mix management
Promotion optimization
Discounts & trade terms
22
Develop and engage our people
MT
MT-1
MT-2
MT-3
10 Culture Principles
30 Town Hall Meetings
New Internal Com Platform
110 MD Customer Meetings
Heineken in Fabbrica
Community work for allHITA Leadership Development Program
End of 2017:101 Participants
50+ Leadership Training Sessions500+ Individual Coaching Sessions
Engage the Organisation Develop Leaders Change Culture
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Brewed by the SunWinning
▪ 13,000 Solar Panels in use
▪ Massafra Brewery: Largest solar panels
installation in the world of beer
▪ Generating 4.4 GWh of electricity per year
▪ CO2 reduction of 1,700 tons
▪ Birra Moretti Specialty Beers certified
“Brewed By The Sun”
#BREWEDBYTHESUN
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Agenda
Italy Market Overview
HITA Strategy to WIN
Results and Opportunities
25
Significant results
Source: IRI Source: Internal data Source: Internal data
Market Share Evolution Modern Trade
Net Revenuebeia excl IC
2013 2015 2017
CAGR: +4.6%
CAGR: +1.9%
2013 2015 2017
Operating Profitbeia
CAGR: +3.6%
CAGR: +0.5%
26
Significant growth opportunity
Source: internal estimates based on Associazione dei birrai e dei maltatori (ASSOBIRRA) and internal assumptions
Estimated beer market and consumption per capita
Beer market (million hl) Consumption (litres per capita)
17.8
18.7 18.819.6
21.2
24.631.4
34.0
39.0
2014 2015 2016 2017 2020 2025
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Summary
✓ Complex and highly competitive market, where HEINEKEN has a
strong leadership
✓ A growing market, having recovered past historic record
✓ A Strategy to WIN based on 6 priorities creating a sustainable
competitive advantage
✓ Strong delivery of results with significant upside potential for
the future