Heineken Holding

NV 2021 Full Years Results Call. My name is Charlie and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can do so by pressing star followed by one on your telephone keypads. Please limit your questions to two to allow time for every participant to ask their questions. I'll now hand over to the Heineken management team to begin. Please go ahead.

Good afternoon, everyone. Thank you for joining us for today's live webcast of our 2021 full year results. Your hosts will be Dolph Vandenbrink, our CEO, and Harold Vandenbroek, our CFO. Following the presentation, we will be happy to take your questions. The presentation includes forward-looking statements and expectations based on management's current views and involve known and unknown risks and uncertainties, and it is possible that the actual results may differ materially. I will now turn the call over to Dolph.

Thank you, Federico, and welcome everyone. I hope you and your families are all well and safe. We're happy to be here to share our 2021 results. Now, we hoped that 2021 would be a somewhat calmer year, but it turned out to be quite challenging. Our mantra of navigate the crisis while building the future continued to guide our actions. We moved with agility to adapt to the fast-changing environment, yet took time to build the future deploying Evergreen. I am proud of how our colleagues, customers and suppliers continued to show agility and resilience, supporting one another and delivering strong results. The speed of recovery remains uncertain and we face big inflationary challenges, yet we are encouraged by the strong performance of our business and how Evergreen is taking shape. This gives me confidence we are on course to deliver superior and balanced growth to drive sustainable long-term value creation, as is our goal with Evergreen. Today we would like to share our 2021 results and the progress on Evergreen. We will cover a select number of topics and look forward to find time to share a more comprehensive overview later in the year. Details will follow on that later. So let's see some highlights. We are pleased to report strong results, a big step towards recovering to pre-pandemic levels and in part going beyond. Net revenue by year grew 12.2% organically, benefiting from strong volume growth and revenue per hectolitre growth. Revenue per hectolitre by year grew organically by 8.3%, with more assertive pricing in the second half. Beer volume grew 4.6% organically in the Heineken brand, 17.4%. with more than 60 markets growing double digits. Our operating profit growth grew 43.8%, and the margin was 15.6%, improving 331 basis points. Due to top-line growth leverage, continued cost mitigation actions, and big strides in structurally right-sizing our cost base, net profit and EPS grew even faster from the low base of last year, higher profits from our JV partners, and lower financing costs. Let's look now into the regions, starting with AME, the Africa, Middle East, Eastern Europe region. Net revenue grew organically by 25.9% and operating profit by 89%, with strong growth in the majority of our operations, especially in South Africa and Nigeria. Beer volume grew 10.4% organically and is now ahead of 2019, led by Nigeria, South Africa and the DRC. Price mix was up strongly, 12.5% on a constant geographic basis, mainly driven by decisive pricing in Nigeria and Ethiopia, and premiumization, especially in Russia, Nigeria, and Egypt. Nigeria continues to grow fast. Volume was up in the low teens ahead of 2019. Our premium portfolio grew by more than 30%, led by Tiger, Heineken, and successful launch of Desperados. We're expanding our Ama brewery in Nigeria to unlock further growth. In South Africa, volume grew by more than 40% ahead of the market. The strong growth came from all brands, particularly Heineken, Amstel, Windhoek and Strongbo. In November, we announced the intention to acquire Distel and Namibian breweries to create a regional beverage champion. I'm very happy to inform that yesterday we secured a major step, the approval of shareholders. Full completion is still pending other conditions, including regulatory approvals across various jurisdictions. Moving on to the Americas region, net revenue and operating profit grew organically by 17.9% and 19.5% respectively, mainly driven by Mexico and Brazil. Organic beer bullion grew by 8.2%, finishing in line with 2019. Price mix on a constant geographic basis grew by 10.3%, with Brazil growing in the 30s. In Mexico, beer volume grew in the high teens ahead of the market and in line with 2019. The premium portfolio grew more than 30%, led by Amstel Ultra, Bohemia and Heineken. Amstel Ultra has been a great success, more than a million hectoliters now, and we're rolling it out to other markets. Heineken 00 continued its strong momentum and strengthened its position as the number one non-alcoholic beer. our six stores accelerated their expansion, reaching close to 15,000 stores. In Brazil, we gained value share in a year, with revenue per hectolitre growing in the 30s, as we mentioned, driven by strong pricing and mixed effect as we continue to rebalance the portfolio. Premium beer volume grew close to 30%, led by Heineken and Eisenbahn. The Heineken brand is now two times its pre-pandemic volume, Our mainstream portfolio grew in the mid-20s, led by Amstel Devasa and the launches of Tiger and Amstel Ultra. Our economy portfolio declined close to 30% and the non-beer volume declined by around half. Heineken USA grew by a low single digit ahead of the market, led by continued momentum on Heineken, Dos Equis and our innovations like Ranch Water and Lime and Salt. We observed strong growth across the majority of our markets in the region, especially Panama, Peru, and Ecuador. Our joint venture partners grew strongly in Chile, Argentina, Colombia, and Costa Rica. Next up, Asia Pacific. After a strong start, the region was severely impacted by the pandemic in the second half. Beer volume declined 11.7% organically. Net revenue was down 6.1%, with price mix-up 2.1% on the constant geographic basis. Operating profit declined 13.5% organically driven by Vietnam and Cambodia, partly offset by growth from Indonesia, Malaysia, and the restructuring of our business in the Philippines. Our growth momentum in Vietnam was disrupted by the lockdowns. These were more severe in our strongholds, particularly Ho Chi Minh City. We restored our national leadership position towards the end of the year as restrictions were lifted. Despite these challenges, BAV yet grew in the high 20s as we continue to grow outside our strongholds. Heineken grew slightly, led by the success of Heineken Silver. In India, UBL grew in the 30s and outperformed the market. The integration is progressing well. And China continued with its strong momentum. The Heineken brand is today close to two times its size before the pandemic. And China is now the fourth largest market for the brand globally. Across the rest of the region the picture was mixed, volume declined in Cambodia and New Zealand due to lockdowns. We saw double digit growth in markets showing a partial recovery like Indonesia, Singapore, Myanmar and Laos. Moving to Europe, net revenue grew by 8.6% with price mix up 4.3% on a constant geographic basis due to positive channel mix effect, premiumization and pricing. Operating profit more than doubled. Beer volume grew by 15% in the fourth quarter to finish the year up 3.8%. On-trade volume grew in the high teens, mainly from Q4 when restrictions were less widespread and severe than last year. However, we are still 30% below 2019. Over the last six months, we observe a steady 80% to 85% of outlets reopened versus 2019. So still some way to go to fully recover. On the other hand, the off-trade was broadly stable versus last year and ahead of 2019 by nearly 10% rhythm by premium. We held or gained share in two-thirds of our markets. The premium portfolio grew in the low teens from a broad range of brands including Heineken, Desperados, Moretti, Amstel, Gürser, Ignusa and El Aguila in Spain. Our focus on fewer bigger bets on local premium brands meeting the needs of younger consumers has had great results, with these brands growing in the 30s, so now close to 8% of the volume in Europe. Now, on to our refreshed BRUT better world strategy, which has three parts, as you may recall. Our path to net zero environmental impact, our path to an inclusive, fair and equitable world, and our path to moderation and no harmful use. We shared our goal to reach net zero carbon emissions in the full value chain by 2040, ten years ahead of the Paris Agreement, and published our climate action plan on how we aim to reach this goal. The Science-Based Target Initiative approved our targets to reach net zero emissions in production by 2030 and to reduce total value chain emissions by 30% by 2030, in line with the 1.5% degree pathway. We are making good progress, but our journey is going to be challenging and will require coordinated action with many suppliers and stakeholders around the world. In 2021, we raised the bar further on governance and transparent reporting. We began the year as a founding signatory to the WEF stakeholder capitalism metrics and towards the end committed to the recommendations of the task force on climate related financial disclosures. We started two sustainability responsibility committees, one at supervisory board level and one at executive management level. This will ensure that all levels of leadership are actively involved in the delivery of our commitments. We also assessed how best to align our renumeration policy with the creation of sustainable long-term value. You will see our proposal in the coming weeks as we bring it for approval to the 2022 AGM this April. Moving on to our Evergreen balanced growth algorithm, we introduced it to you last year. Today it's not our intention to give an update on all dimensions of the execution of our strategy, But we thought it important to share a few examples of how we are on track to deliver superior growth, sharper and more intentional investments behind growth, and our productivity program. I will touch upon the examples of premiumization and our eB2B. Later, Harald will share our productivity program and how we are embedding a cost-conscious mindset. In the next slide, we have the pillars of our growth strategy. These pillars focus on the renewal of our portfolio, shaping our route to consumer digitally and strengthening our footprint. I've touched earlier on the changes to our footprint with the incorporation of India and our intentions in Southern Africa, so I will now focus on our portfolio. In particular, how we are driving premiumization at scale led by Heineken. Premiumization is a key driver of our superior growth, and it has been. Premium is expected to grow two times faster than overall beer and even faster than total alcohol. 40% of our beer revenue is coming from premium, the highest versus our peers. So we are best positioned to capture this opportunity. Our intent is to further amplify this advantage under the leadership of the Heineken brand, making it the number one brand of choice for the younger generation. The brand has strong momentum, growing 70% ahead of 2019, growing in a very broad base of markets. Close to 40% are showing double-digit growth versus pre-pandemic level. And as I said earlier, 60 markets double-digit up versus last year. 00 and Silver are further supporting the growth. Heineken 00 grew in the 30s this year and is now present in more than 100 markets. Heineken Silver has been a great success in Vietnam and China, more than doubling its volume this year. We're also scaling and replicating the success of our premium international brands. Desperados, Tiger Crystal, Amstel Ultra and Bira Moretti are significantly ahead of 2019. And our local premium champions are growing fast. like these, our focus brands in Europe, showing 61% growth versus 2019. But that is looking backwards, so I want to share some examples of the bold innovations that will boost the growth further in premium. Building on its success in China and Vietnam, we will roll out Heineken Silver to 27 markets in 2022 across all regions. Building on its success in Mexico, we began the rollout of Amstel Ultra, for example, with the launch in Brazil. We will have Amstel Ultra in 18 markets in 2022. We have been rolling out Tiger Crystal in the APEC region and have plans to make it big in other regions. In Europe, we will continue to focus on our brands targeting younger generations, reaching more than 10% of the portfolio in this year. We started to roll out of Edelweiss and have plans to make it big and large in APEC. We're also testing and scaling premium non-alcoholic alternatives like Desperados Virgin Zero Zero and premium ciders with Strongbow Ultra coming to the UK soon. So moving on, now I would like to share our progress on shaping and strengthening our route to consumer to be fit for the future, our fourth pillar. We have done a steep acceleration of the rollout of our proprietary eB2B platforms globally. We now operate them in 30 markets which represent 75% of our net revenue. With these platforms we build on our strong relationships with our customers in the fragmented trade, so they can grow their business with more and better services and data insights while we can increase sales and productivity. We capture 2.8 billion in digital sales value, a growth of 130% versus last year. driven by strong growth in Mexico, Brazil, Vietnam, Nigeria, the UK and many other markets. And we are on track to 10 billion of revenue, digitally enabled revenue by 2025. The chart to the right gives you a sense of the speed of the acceleration throughout the year, starting at just 15% and finishing at 47% of our businesses online as a percentage of the total in scope, the fragmented trade in these markets. We are now connected to 370,000 active customers, more than three times the level of last year. In the next slide and my last, I would like to share a little bit more color on the world of our proprietary eB2B platforms. To further accelerate our strategy, performance, and capabilities in this area, we created a dedicated eBusiness development unit to combine the power of our business and IT teams and better leverage our skill. Under this area, we brought together close to 750 people in our organization working to develop these platforms with further support from external developers. Our teams are continuously developing digital solutions under customer-centric mindset and in close collaboration with our opcos. Let me illustrate with some examples how these create value for our customers and our business where we have measured them in their pilot phase. For example, in Mexico, Using image recognition technology and rewarding our customers for properly stocking our fridges, we were able to improve compliance by 34% and sales by 5%. Two other examples. Our loyalty program solution in Nigeria rewards customers with loyalty points for purchases in the platform and recorded the volume uplift to 7%. And our digital onboarding solution in the UK provides a rich, personalized experience for new customers and we increased the size of the first order by 14% versus clients onboarded offline. Our central unit will be focused on further improving these solutions while developing new ones, strengthening further our relationship with our customers. And with that, I would like to hand over to Harald.