Countries

Spain

Consolidated beer volume 10.9 million hectolitres
Market share 30.8 per cent
Market position 1

Heineken España reported EBIT (beia) growth mainly driven by lower costs. Revenue was marginally higher as better pricing across all trade channels exceeded the effect of lower volume.

The beer market decreased by more than 2 per cent affected by the decline in consumer confidence due to the financial crisis and the collapse of real estate prices. In particular, the on-trade channel came under pressure and consumption of low-priced beers in the off-trade increased. This had an adverse effect on beer volume of Heineken España, but the company maintained its market share in the branded beer segment. Heineken brand volume was 5.5 per cent lower, but brand equity improved as a result of new commercial activities and the Extra Cold beer programme activation. Cruzcampo, our leading mainstream brand, was impacted by the shift from mainstream to low-priced beers whilst Buckler volume fell only slightly.

At the end of 2008, Heineken España announced the closure of the brewery in Arano. The four remaining breweries will take over the production from Arano.

France

Consolidated beer volume 5.9 million hectolitres
Market share 26.3 per cent
Market position 2

Heineken France and France Boissons, our wholesale business, increased market share. The beer market in France fell 1.3 per cent due to a 14 per cent decrease in on-trade consumption. The introduction of the smoking ban, the economy and unfavourable weather are the major drivers of this decrease.

Volume of the Heineken brand grew 4.6 per cent, and the brand now has a 12 per cent share of the market, and is the market leader by value.

Revenues were stable, as organic growth was offset by the effect of the sale of the St. Omer brewery, the private label unit. EBIT (beia) was lower, due to higher variable costs, which were not fully compensated by higher prices.

The streamlining of the French operations, both in wholesale and production is well under way. The sale of the St. Omer brewery was finalised in the summer and the Fischer Brewery in Schiltigheim will be closed at the end of 2009.

Italy

Consolidated beer volume 5.6 million hectolitres
Market share 31.5 per cent
Market position 2

Heineken Italia increased market share thanks to the positive performance of its key brands. Beer volume at Heineken Italia fell 2.2 per cent, broadly in line with a market affected by substantial price increases, prolonged periods of wet weather and declining consumer confidence. Volume of the Heineken and Moretti brands were slightly lower due to significant price increases. Moretti Zero the alcohol-free version of Moretti, continued to grow satisfactorily.

Revenue grew organically, driven by better prices and stable revenue of the wholesale operations, Partesa. Higher input and energy costs and declining volumes in the ontrade resulted in a lower EBIT (beia). The streamlining of the Italian wholesale operation is proceeding as planned.

The Netherlands

Consolidated beer volume 5.4 million hectolitres
Market share 47.6 per cent
Market position 1

The beer market slowed due to unfavourable weather, the introduction of the smoking ban in July and lower consumer confidence.

Beer volume of Heineken Netherlands was 2.2 per cent lower, affected by a substantial price increase, ahead of the competition. The Heineken brand, sold as a mainstream proposition in the Netherlands, was able to maintain its volume.

EBIT (beia) grew, driven by a better packaging mix, strict cost control and higher prices. Revenue was also higher.

In 2008, the wholesale operations were streamlined further and the range of products was expanded.

EBIT (beia) at Vrumona, the soft drink unit, was higher thanks to better prices and a favourable shift in sales mix.

The United Kingdom

Consolidated beer volume 8.9 million hectolitres
Market share 28.2 per cent
Market position 1

The UK beer market experienced an exceptionally challenging year, decreasing by 5.1 per cent. This was driven by a number of external factors such as the financial crisis, two increases in excise duties within 12 months and continued impact of the smoking ban in the on-trade. The on-trade segment was hit particularly hard (-9.5 per cent), whilst off-trade volume was still slightly positive (+0.5 per cent) due to higher price promotion activity by retailers.

The sharp decline in the beer market was aggravated by the steep drop of the British Pound against the euro (-21 per cent). The abrupt and unexpected change in the market, led to a much lower than anticipated revenue and EBIT (beia) in euro of S&N UK. Its domestic beer market share was slightly lower, mainly due to its overweight in on-trade and a reduction of price promotions in the off-trade.

Since the acquisition of S&N, Heineken has strengthened the UK brand portfolio with the inclusion of Heineken® and selected other brands from the Heineken Group. The business now has the strongest and most complete brand portfolio in the market and is the leader in cider. Increased marketing investment in the beer brands will further strengthen the brands’ equity and performance.

The Heineken brand performed strongly, growing 24 per cent to more than half a million hectolitres thanks to the success of the Extra Cold beer programme, the extension of the distribution network and new commercial activations.

Cider volume grew 6.5 per cent and market share in cider reached 48 per cent, driven by the excellent performance of both the premium Bulmer’s brand and of the mainstream Strongbow brand.

Foster’s, the key mainstream brand, refrained from heavy promotional activities, preserving its long-term brand equity and positioning. This affected volume, which was 10 per cent lower. John Smith’s, our leading ale brand, and Kronenbourg 1664, the second premium lager in our portfolio, performed in line with the market.

The exceptional economic circumstances required us to reduce the value of our pub portfolios in the UK by €51 million.

Belgium

Consolidated beer volume 1.0 million hectolitres
Market share 11.9 per cent
Market position 2

The beer market continued to decrease due to declining consumer confidence. Market share of Alken-Maes Breweries, acquired from S&N, was lower, as sales of its main brand Maes were affected by a 5 per cent price increase. EBIT (beia) was lower as better pricing was offset by the combined negative effect of lower volume and higher input, and energy costs.

Finland

Consolidated beer volume 1.1 million hectolitres
Market share 29.5 per cent
Market position 2

Despite the overall beer market trend, 2008 marked a turnaround for the Hartwall business, as the business grew its market share for the first time in 10 years. The beer market declined 3.5 per cent, affected by the introduction of the smoking ban and exceptionally poor summer weather. Hartwall, part of the S&N acquisition, gained more than 1 per cent market share, mainly thanks to its strong performance in the off-trade.

Both the Foster’s brand and the Karjala brand improved their equity and sales volume, and partially offset the lower volume of the Lapin Kulta brand. The Heineken brand will become part of Hartwall’s portfolio in 2009.

The market trend for other beverages in Hartwall’s wide product range, mainly waters and soft drinks, was weak. Total beverage volume decreased 1 per cent and, together with higher costs, affected EBIT (beia) negatively.

Ireland

Consolidated beer volume 1.3 million hectolitres
Market share 22.3 per cent
Market position 2

Heineken Ireland increased its market share. The Irish beer market decreased 5.5 per cent in 2008, mainly in the on-trade. Revenue and EBIT (beia) of Heineken Ireland increased organically, thanks to higher prices, which more than offset lower volume (-1.5 per cent) and higher costs. The Heineken brand increased its share in the beer market.

Reported EBIT in Ireland decreased slightly due to exceptional costs related to the first-time consolidation of Beamish & Crawford as of 3 October 2008.

In the last quarter of 2008, Heineken received anti-trust approval for the unconditional acquisition of Beamish and Crawford, part of the S&N acquisition. After a review of the business, Heineken announced its intention to close the Beamish & Crawford brewery in Cork in 2009, in order to reduce overcapacity and improve efficiency.

Portugal

Consolidated beer volume 2.4 million hectolitres
Market share 44.5 per cent
Market position 2

Centralcer, part of the S&N acquisition, grew its market share. Volume of Centralcer was slightly lower (-2.1 per cent), marginally ahead of the market trend. Revenue grew 6.4 per cent.

Sagres, the flagship brand, outperformed the market by maintaining its volume thanks largely to its performance in the on-trade, where it gained leadership. Heineken® was included in Centralcer’s portfolio. The weak on-trade affected volume of the soft drink and water portfolio.

Switzerland

Consolidated beer volume 0.9 million hectolitres
Market share 26.0 per cent
Market position 2

The positive effect of the UEFA European Football Championship in June and strong growth of private label beer boosted the beer market by 4 per cent. Heineken Switzerland’s volume grew 22 per cent, as a result of a 4.5 per cent organic growth and the first-time consolidation of Eichhof Beverages Holding as of 29 August. Heineken Switzerland received unconditional approval to acquire the beverage division of Eichhof Holding. The integration of Eichhof into the existing organisation is proceeding at pace and will lead to substantial synergies, in particular in overhead costs and distribution.

Organic volume growth of Heineken Switzerland was driven by its Calanda brand and private label business, whilst the Heineken brand was broadly stable. Underlying EBIT (beia) increased more than 20 per cent, thanks to higher revenue and cost-cutting under the Fit2Fight programme.

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