COMMERCIAL ASSERTIVENESS in Western Europe Ronald den Elzen

Managing Director HEINEKEN Portugal

1

London, 12 November 2014

Agenda Commercial Assertiveness in Western Europe

Commercial Assertiveness OFF-TRADE – Stepping up competitiveness MARKETING – Leading the innovation agenda ON-TRADE – Winning in the On-Trade

2

Changing consumer behaviour has driven a need to become more commercially assertive… 12% 10.2%

11.8%

Beer lost almost 2% “share of throat” in beverages*…

“Share of throat”

2000

2013

Western Europe Volume Split

…and the market has “polarized” with premium and private labels growing

3

Source: Canadean (UK, France, Portugal, Netherlands, Belgium, Spain, Italy and Ireland) *Beverages include Wines, Spirits, Soft Drinks, Cider and Beer

Premium Mainstream Economy

28.7%

31.4%

34.8%

36.8%

59.6%

57.0%

52.2%

49.2%

11.7%

11.5%

12.9%

14.1%

2000

2005

2010

2014F

…leading to a changing beer market landscape

…resulting in an average beer market decline of 1.6% each year since the financial crisis, stabilizing in recent years

On-Trade Off-Trade

56.8%

52.4%

46.0%

41.5%

43.2%

47.6%

54.0%

58.5%

2000

2005

2010

2014F

Western Europe Beer market evolution

CAGR +0.3% Beer market in mhls

The market shifted from On-Trade to Off-Trade (accelerated by the smoking ban mid 2000s)...

Western Europe Volume by Channel

CAGR -1.6% 165 166 165

170 170 169 171 168

163

158 156 155 152 151 150

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F

4

Source: Canadean ((UK, France, Portugal, Netherlands, Belgium, Spain, Italy and Ireland)

Commercial assertiveness is about creating value by growing the pie and winning it!

Becoming more competitive in the beer category

5

Grow the boundaries of the beer category

Win outside the category

Agenda Commercial Assertiveness in Western Europe

Commercial Assertiveness

OFF-TRADE – Stepping up competitiveness MARKETING – Leading the innovation agenda ON-TRADE – Winning in the On-Trade

6

Clear strategy to step-up competitive in Off-Trade Based on 4 key pillars

Availability Perfect assortment Share of shelf Cold availability

7

Pricing Premiumise the category Being competitive where it matters

Visibility Primary & secondary placement Enticing the shopper

Innovations Keep the category

attractive Attract new consumers to the category

Availability is more than just being ‘everywhere’

• The right pack types at the right consumer price points

Primary Shelf

Cooler

4m

1m

• Share of Shelf > Share of Market Availability Perfect assortment Share of shelf Cold availability

8

• Cold availability for (near) instant consumption

8/16m

2/4m

Pricing is a key lever in every segment

Leverage pricing as a signal and proxy for premiumness…

Pricing Premiumise the category Being competitive where it matters

9

…whilst staying competitive in the mainstream segment to sustain market share

We continue to grow our premium brand ahead of the category Volume growth Western Europe

Revenue per Hl

YTD September 2014 vs LY

vs local brands (indexed)

+9%

c.130%

+17%

c.220%

+19%

c.240%

+28%

+3% beer volume growth Western Europe 10

c.150%

Premiumisation drives top and bottom line growth The success story of HEINEKEN France Against a beer market decline HEINEKEN increased its volumes…

…became market leader, with 82% of its portfolio being premium…

… which resulted in c. 50% EBIT increase in 4 years.

100% 95%

HEINEKEN market

2009

11

2013

37.4%

34.9%

36.1%

30.9%

HEINEKEN main competitor 2009 2013

Source: Company estimates on market development, internal numbers for premium volume (Heineken®, Desperados, Affligem), restated for excise duty front loading

Indexed EBIT

105%

Value market share total market

indexed volume development

147%

100%

2009

2013

‘Price index’ for HEINEKEN brands ahead of the market Western Europe Modern Trade Consumer Price per litre 1.95 1.95 1.84 1.83 1.87 1.79 1.67

2011

2012

2013

2013 YTD

Total off-trade beer category

12

Source: Nielsen modern trade consumer price, YTD August

2014 YTD

2013 YTD

2014 YTD

In the total beer category price per litre has increased year-on year HEINEKEN brands are priced around 4% above the market average…

In Spain we encountered a specific issue with continued increase of Private Labels… Case study: Curbing private label growth in Spain

A decade of private label growth in Spain…

…driven by a large price gap with branded beers €/litre

50%

1.80 €

Private Label market share

1.60 €

+18%

1.40 €

in 12 years

1.20 €

1.00 € 0.80 €

0.73€

0.77 €

1.53€

0.76 €

1.50€

1.52€

0.77 €

0.75€

1.51€

0.75€

0.60 € 0.40 € 0.20 € - €

25% ‘01

13

1.37€

1.45€

‘04

‘07

Source: Nielsen, internal data HEINEKEN Spain

‘11

YTD YTD

’13 ’14

2007

2008

Private Label

2009

2010

Branded beers

2011

YTD 1Q JUL 2012

… where we “condensed” the price ladder

to offer an attractive proposition to consumers and retailers …Amstel Clásica introduced at an attractive price point…

….…leading to a decline in private labels

€0.35

€0.20 Price per liter

14

Before

Amstel Clásica

After

Amstel Clásica

Source: Nielsen consumer prices Spain, Nielsen Private Label Spain

CAGR: -1.7% 3%

MAT Sep ´14

2% 1% 0% -1% -2%

-3% jan-13 feb-13 mrt-13 apr-13 mei-13 jun-13 jul-13 aug-13 sep-13 okt-13 nov-13 dec-13 jan-14 feb-14 mrt-14 apr-14 mei-14 jun-14 jul-14 aug-14

€0.50

volume growth rate for Private Label

Off Trade Price Ladder Spain

Visibility a key driver of sales… Approx. 30% of purchase decisions made at point of purchase

Working with retailers to develop ‘shelves of the future’ Secondary placements, close to other categories

Visibility Primary & secondary placement Enticing the shopper

15

 Affligem in the wine category  Desperados close to spirits  Beer & food combinations

Multiple innovations launched across Western Europe, with Radler the largest

Extensive sampling across Europe (on-pack, hostesses in supermarkets, beaches and events)

Innovations Keep the category attractive Attract new consumers to the category

16

Almost 1mhl sales across Western Europe expected for 2014 Value enhancing with an approx. index of 120 versus mother brand

Trial and purchase of innovations driven by increased on-pack sampling Over 1.5m on-pack samples sold in 2014 on Radler Major benefits • Significant cost saving versus sampling by hostesses • c.40-60% of consumers who are buying the innovation had bought the sample-pack before • Sales uplift and rotation increase of main brand • Positive feedback of customers and consumers 17

Source: internal company data

…HEINEKEN is delivering three times more value from innovations than its nearest competitor Western Europe Innovation consumer value1 in €m

157

49 Competitor 1

18

45

34

Competitor 2

Competitor 3

1 Source: Nielsen Modern Trade, YTD August– innovation value is calculated as retail sales value of new beer SKU´s introduced in the last 3 years

HEINEKEN has strong market share momentum in Western Europe Market share development August YTD 2014

Market share development: Western Europe August YTD 2014 30% 28% 26%

0 – +1% >+1%

value share

24%

volume share 22% 20% 2011

19

Source: Nielsen Modern Trade, YTD August

2012

2013

2014 YTD

Agenda Commercial Assertiveness in Western Europe

Commercial Assertiveness OFF-TRADE – Stepping up competitiveness

MARKETING – Leading the innovation agenda ON-TRADE – Winning in the On-Trade

20

Also driving an assertive & consumer inspired marketing agenda

INNOVATIONS

21

CLAIMS

TASTE

CREATIVITY

INVESTMENT

Consumer Inspired Marketing starts with thorough Consumer Insight

22

Sagres Commercial

23

First to market with uniquely creative propositions CLAIMS

Example – Italy: Launch of Birra Moretti Radler made with 100% Italian lemons

First to claim Radler beer made with 100% Italian lemons

Supported by a TV campaign

and big public relations campaign, helping Birra Moretti

to uniquely ‘own’ this Italianity

24

TASTE

Enlarging the category with an appealing alternative to non-beer Example – Portugal: Introduction of Sagres Radler 0.0% Radler 0.0% source of volume

Category Expansion 28% Shifting (within Category) 57%

Category New Buyers 15%

Total Shifting 41%

25

Source: Nielsen HomeScan Portugal

Category Expansion 59%

Radler 0.0% source of volume within non-category buyers

CREATIVITY

Uniquely creative marketing campaigns A record 23 awards in Cannes for 2013

TOTAL 2 gold Lions 8 silver Lions 13 bronze Lions

26

Cost savings enabling investments in marketing and and top-line growth

INVESTMENT

HEINEKEN Western Europe Marketing & selling spend in €m

+14%

2013

27

2014 YTD Sep

Agenda Commercial Assertiveness in Western Europe

Commercial Assertiveness OFF-TRADE – Stepping up competitiveness MARKETING – Leading the innovation agenda

ON-TRADE – Winning in the On-Trade

28

Commercial assertiveness an important driver of on-trade success Based on 4 key pillars

Availability Net Gains & Losses Perfect assortment Quality of distribution

29

Visibility

Throughput

Touch points Segmentation

Activation Rotation per outlet

Quality Cold availability Perfect Serve

We are rolling out a standardised process to improve our sales execution capabilities 8 sales execution principles…

1 2 3 4

30

Leadership

Alignment 100% Data Focus & Simplicity

5 6 7 8

…with a bi-annual assessment Audit Traditional Trade : 32 questions

Principle

Sell Out Step by Step Empowerment

Accountability

Leadership

Concrete Ambition

Cascaded

Time invested in the market

Feedback 360°

Full Alignment

With Heineken priorities & OpCo strategy

Within Sales

Functional Alignment

External Alignment

100% data

Trade Census

Full Market Universe

Statistically robust

Self measurement with control

Accountability

1 to 1link with outlet

Binary KPI Measurement

Monthly Scorecard with Ranking

Variable Reward

Empowerment

Guidelines & Sales Arguments

Steps of the visit

Resources & Decisions by Sales Rep

Coaching & Training

Sell-Out

Measurement Sales Execution KPIs

Targeting Sales Execution KPIs to all levels in Sales

NND + FS measured & targeted

Distributor Focus on Sell-Out

Focus & Simplicity

Routing Plan

Focus SKUs

Max 5 KPIs

Max 2 activations

38 Step-by-Step

X+1

Real live data & monthly Targets

Individual smart targets

Targets vs competition

Gaining draught beer outlets in Western Europe

Availability

HEINEKEN Western Europe: number of draught beer outlets • Number of openings and closings is almost balancing out after years of strong decline

1-1-2014

31

Source:Company data

Net openings & closings

Net gains & losses

30-9-2014

• Thanks to a strong agenda on innovations and activations we have been able to add circa 3% net draught beer outlets to the total base of HEINEKEN NV in Western Europe

The perfect portfolio needs aligning between the brand role and customer segmentation Availability Having the right assortment, in the right outlet  Heineken® and Affligem in a premium restaurant  Heineken® and Desperados in nightlife  Sagres in a mainstream bar  etc.

Luminoso exterior

Esplanada

Avental

Carta / Menu

Descapsulador

Eq. Frio portfolio Bandeja Montra

Ardósia exterior

Bases de copos

Copos Bar runner

Troca de copos a 10%

Welcome drink

32

Coluna

Welcome spot SCC

Formação do Staff

Ação de incentivo do Staff

Visibility

Increased visibility is driving sales Every outlet should have 3 key Touch Points that are visible and in good condition  Branded beer tap(s)  Beer menu  Back bar branding  Staff clothing  Beer mat  Beer coaster

33

Throughput

Engaging activation is stimulating customer sales Traffic programmes  Pub quizzes  Cross promotions  Product experience Bar staff training programmes Interior architects  Over 1,000 outlets per year

34

Quality

Delivering the best draught experience to the consumer Draught is the golden standard in beer More than 75,000 bar staff were trained in the Netherlands

Uplift in average volume per outlet of 5% Rolling out a perfect serve programme in various countries in Western Europe

35

Quality

Cutting edge innovation and high quality draught equipment Optimal quality at point of sale…

…and the best consumer experience

David

Extra cold Visible beer tank Cool flow Technology

36

HeiLight

Summary Changing consumer behaviour has driven the need to be more commercially assertive:  Changing consumer preferences

 Shifting channel trends

HEINEKEN is winning in Western Europe  Stepping-up competitiveness in Off-Trade driving share gains in all markets in Western Europe  Winning in the On-Trade through best in class Innovations and Activations, resulting in incremental draught beer outlets  Leading the premium segment and innovation agenda with strong marketing plans supported by the right level of investment 37

Q&A

38