Report of the Executive Board
Net profit
Operating profit
€795 million
11.2%
Net turnover
€1,282 million
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Total beer sales
€10.3 billion
10.3%
Heineken beer sales
108.9 million hi
3.8%
22.9 million hi
2.5%
Foreword by the Chairman
In pursuit of its unvarying strategic objectives, Heineken
continued resolutely on its course in 2002. The climate
in which we had to operate was dictated by a flagging
global economy and wet weather in Europe. Net profit on
ordinary activities was 11.2% higher at €795 million.
Profitable companies with good development potential
were acquired, while we worked steadily on improving
our organisation's effectiveness and strengthening our
ties with customers, suppliers and consumers.
The increase in operating profit reflects both organic
growth and contributions by newly consolidated partici
pating interests. Higher beer sales, a better sales mix and
higher selling prices were responsible for the organic
growth in turnover. Demand for international beers and
national premium beers in the global market continued
to rise, and sales were substantially higher in the United
States and Poland in particular. Although increased sales
of the Heineken brand accounted for much of the improve
ment in the sales mix, other beers such as Amstel Light
and our speciality beers, notably Desperados, also helped.
Consistent implementation of strategy
It is still our goal to defend and strengthen our global mar
ket position and preserve our independence. Two strategic
objectives have been defined to help us realise that goal.
The first is to achieve profitable volume growth. Last
year, organic growth and acquisitions raised our beer
sales to 84.8 million hi, making us the world's third largest
brewer and yielding economies of scale at all levels in the
supply chain. Our average operating margin (operating
profit as a percentage of net turnover) increased for the
seventh consecutive year, rising to 12.5% in 2002.
The second objective is to consolidate our leading posi
tion as the international brewer with the strongest portfolio
of beer brands. Sales of our Heineken brand increased last
year to 22.9 million hi (+2.5%), mainly reflecting vigorous
growth in the United States, Poland and Thailand. We also
made good progress in strengthening the positions of our
other international and local beers, as evidenced by the
17.1% growth in sales of Amstel Light in the United States and
the rising sales of Desperados, our speciality beer. Sales
of Amstel, which is positioned in the mainstream segment,
remained steady at 10.8 million hi.
Merger and acquisition activity continues
The process of consolidation and internationalisation in
the brewing industry around the world continued in 2002.
This process is already well advanced in most countries,
but in China, Russia and Germany in particular the market
is still relatively fragmented. In some European countries,
Heineken's market share is so large that we are no longer
able to obtain competition authority approval for further
acquisitions, while in other cases the purchase price bears
no relation to the value of the potential acquisition
together with any synergy gains. Although, in Western and
Southern Europe in particular, there are fewer opportuni
ties now than in the 1980s and 1990s, when Heineken
played a prominent role in consolidating and building
breweries, there are still ample opportunities to acquire
breweries with national or cross-border positions which
offer sufficient added value for shareholders and can help
to grow profits. In 2002 we were, however, able to acquire
breweries which met our criteria.
Acquisitions in 2002
The acquisitions we made in 2002 and early 2003 have
strengthened Heineken's positions in Russia, the Middle
East, Germany, Central and South America, Kazakhstan
and the Balkans. Heineken sees all these regions and coun
tries as growth markets for the business.
The acquisition of the Bravo International brewery in
Russia has secured a strong starting position for Heineken
in the world's fifth largest beer market.
In Egypt, we made a successful public offer for the
shares in Al Ahram Beverages Company, the country's only
brewer, which also produces and distributes a comple
mentary range of other drinks, and in Lebanon we in
creased our stake in the Almaza brewery from 10% to 81%.
H E
HEINEKEN N.V. ANNUAL REPORT 2002
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