Priorities for action

We remained focused on our four Priorities for Action:


Accelerate top-line growth

Looking back at the past few years, much has been achieved in terms of top-line growth. For the year 2005 we announced revenue growth of 7.3 per cent, of which 2.2 per cent was organic. For 2006, revenue growth had risen to 9.6 per cent, of which 7.1 per cent was organic. In 2007, we once again increased our positive annual revenue growth by 6.2 per cent, of which 7.3 per cent is organic.

We have also significantly grown the Heineken brand – our key strategic asset – which again showed excellent growth of 10 per cent in 2007.

The market-by-market implementation of our brand portfolio reviews is well under way. It has clearly delivered growth on many of our leading regional and national brands such as Primus (+14.5 per cent), Star (+13.1 per cent), Ochota (+14.5 per cent), Cruzcampo (+1.7 per cent), Żywiec (+8.2 per cent), Gulder (+10.9 per cent), Goldenbrau (+15.5 per cent) and Three Bears (+46.2 per cent).

This focused approach to investment in brand building, innovation and execution is ultimately what allows us to increase our profitability.

Accelerate efficiencies

Key in our drive for efficiency is our ‘Fit2Fight’ three-year-cost reduction programme, aiming to save €450 million (including inflation) before tax from our fixed cost base over the period 2006–2008. This year, the second year of the programme, we delivered additional gross savings of €191 million. To date, as we promised we would, we have realised €305 million or 68 per cent of the total programme.

The savings are flowing through to the bottom line, enhancing our profitability. In combination with stronger top-line growth, this has delivered the strongest operational profit growth in many years. The Fit2Fight rationale and the techniques for achieving it are becoming more and more embedded in the organisation and are crossing all disciplines.

Looking ahead to 2008, we will complete our Fit2Fight programme on time and with the stated level of savings.

Accelerate speed of implementation

We have begun the implementation of an internal project on information logistics, which will support and simplify our Company-wide decision-making processes, by ensuring that the right level of accurate information on any aspect of our business is available in a timely manner.

In parallel, we have made good progress on our major business-wide change programme to centralise IT and to introduce common systems and processes.

Ultimately, however, it is not about processes and systems. It is about whether we do or do not implement decisions quicker. For me, there is no better example of this than our experience in South Africa, where from a virtual standing start in March of 2007, we had Amstel back on the market and in the hands of our consumers by September. Within six months, we had brewing, packaging, shipping, marketing, sales and distribution up and running and delivering for our consumers and trade partners – a great achievement.

Focus on selective opportunities

Although the focus during 2007 was of course on our planned acquisition of parts of Scottish & Newcastle, we were also active on other fronts. Total investment in acquisitions amounted to €245 million net of cash acquired, with much of this focused on markets in Central and Eastern Europe.

In Vietnam, thanks to our acquisition in 2007, we are now the number two brewer with Heineken brand volumes of more than one million hectolitres. In the Czech Republic, we acquired the Krušovice Brewery, a strategic addition that considerably narrows the gap between the number two brewer and Heineken.

In December 2007 we acquired the Rodic Brewery in Novi Sad in Serbia and announced the acquisition of Syabar Brewing Company in Belarus. In January 2008 we acquired Tango Brewery in Algeria, and announced a cooperation with Efes Breweries in Uzbekistan, Serbia and Kazakhstan.

All these transactions take us forward in both our strategy to become the number one or two player, in key identified markets and where we see opportunities to grow the Heineken brand.

Thanks to our performance-driven approach and our strategic focus, at the beginning of 2008, I believe that we emerged stronger, more efficient, and more competitive than we were a year ago.

Looking ahead, we will continue to invest the energy of our people and resources of our business into ensuring that environmental and social sustainability remain high on our agenda. We will strengthen our existing commitment to responsible consumption activities in partnership with our employees, the industry and third parties in order to play an active role in addressing alcohol misuse. In addition, we will maintain our focus on meeting the environmental and safety targets that we have set ourselves. Our 2007 Sustainability Report will once again transparently set out what we have done and what we have achieved in this regard.

In 2008 and beyond, we remain resolute in our desire and determination to deliver value for all our shareholders through the sustainable growth of our business and our position in the global beer market.

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