Foreword by the Chairman
bottle or can. Heineken is the first brewer
in the world to launch a dispensing system
of this kind for the take-home market.
Improved market positions
in growth markets
Vigorous sales growth in emerging
markets such as Poland, Russia, Egypt and
Nigeria are making a major contribution to
safeguarding our long-term profit growth.
For the same reason, it is essential for us
to continue building our positions in
developing markets. In China, we formed a
closer alliance with Asia Pacific Breweries,
with the result that local production of
Heineken beer is to start in April 2004.
Heineken also undertook a new venture in
China with the acquisition, via Heineken
Asia Pacific China, of a minority interest in
Guangdong Brewery Holdings in January
2004. In Guangdong province, which has
a population of 85 million, the Heineken
brand will benefit from the distribution
network operated by Guangdong Brewery
and inclusion in its brand portfolio. We are
seeking to further extend our position in
the Chinese market.
The opening of a new, ultramodern
brewery boosted brewing capacity in
Nigeria by 3.4 million hectolitres per year
and sales gained 23%. A new brewery
was also opened near Hanoi, to meet the
rapidly rising demand in Vietnam. In Chile
and Argentina, the production and
distribution of Heineken beer was trans
ferred to our new partner CCU, following
our acquisition in 2003 of a 50% interest in
CCU's holding company. Al Ahram Bever
ages Company in Egypt, which we acquir
ed in 2002, performed exceptionally well
and sales of Fayrouz, a fruit-flavoured non
alcoholic malt drink, increased sharply.
Al Ahram will work on expanding exports
of Fayrouz in 2004.
Although, after the major acquisitions in
2002 and 2003, Heineken is concentrating
primarily on making synergy gains within
the new operations and improving
our debt position, growth through new
alliances and acquisitions will still be an
option. Heineken applies strict profitability
conditions in assessing potential candi
dates. Important criteria which we con
sider when contemplating brewery
acquisitions, apart from market position
and acquisition price, are a strong brand
portfolio, distribution opportunities for
the Heineken brand and potential for cost
savings. As well as China and other parts
of Asia, Russia and South America are also
attractive markets in which Heineken has
scope to advance its position.
Result reflects adverse
exchange rates
Heineken has substantial revenue in the
US dollar, which lost 17% of its value
against the euro over the course of 2003.
Fortunately, our hedging policy enabled
us to postpone the negative effect of
the weaker dollar to 2004 and 2005.
Our result in 2003 was also adversely
affected by movements in other curren
cies, such as the Nigerian naira, the
Russian rouble, the Polish zloty and the
Singapore dollar.
A significant factor in this context was
that most Heineken beer for export is
produced at our Dutch breweries, where
major reorganisation exercises have been
carried out. This meant that we were able
to compensate for part of the negative
exchange effect by lower production
costs.
Professionalisation
We may be a leading international brewer
on the global beer market, but our internal
organisation still has ample room for
improvement. Our 'Taking Heineken to the
Next Level' project is designed to achieve
greater professionalism, which will enable
us more accurately to measure, compare
and improve our own performance and
exchange information on the most suc
cessful working methods more frequently
with one another. This will enable us to
introduce more swiftly the innovations
needed to maintain our appeal to the
consumer. In some cases, professional
isation also means rationalisation or
even compulsory redundancies, as was
the case last year in the Netherlands and
elsewhere. Sadly, this is unavoidable.
Increasingly heavy demands are being
made on our organisation and our per
sonnel. Consumer behaviour is becoming
more diverse, international competition is
growing and many mature beer markets
are under pressure, but my confidence in
the future is strengthened by the commit
ment and understanding with which our
people are facing these changes. For that,
and for the contribution they have made
to our predominantly good performance
in 2003,1 thank them most sincerely.
Thony Ruys
Chairman of the Executive Board
HEINEKEN N.V. ANNUAL REPORT 2003
