J Switzerland Ireland Other Western European countries Regional Review Western Europe MER and Braustolz performing well. The activ ities of the Scherdel brewery, which oper ates in the same region and was acquired in October 2003, will be integrated into Kulmbacher's organisation. Karlsberg had a difficult year, due to its relatively strong position in the canned- beer segment, but managed to hold the loss of sales volume at 9%, by introducing new packaging and other measures. Karlsberg nevertheless made a satisfac tory contribution to earnings in the first year of its inclusion in the consolidation. Sales of Desperados, our international speciality beer, which had grown strongly in Germany in 2002, fell back abruptly last year as a result of the new packaging charges, coupled with strong competition from ready-to-drink mixes. Higher sales and an improved result Profiting from the very hot summer, the Swiss beer market recorded modest growth. Heineken Switzerland's beer sales were up from 760,000 hectolitres to 805,000 hecto litres and the result improved slightly, mainly due to cost savings. Growth in the beer market was restrained by the continuing weakness of the econo my and on-trade sales declined. Heineken Switzerland maintained its market share. Heineken brand sales remained stable and the local brands achieved modest growth. The BeerTender®, a dispenser for home use, was launched on a trial basis and more David dispensing systems were installed at on-trade outlets. Draught beer volume increased at the expense of other packaging variants. The modernisation of the fully automat ed distribution centres in Domat Ems was completed in the third quarter of 2003 and the wholesalers which had been acquired by Heineken Switzerland earlier in the year were fully integrated into the organisation. The Irish beer market, which contracted significantly in 2003, is expected to continue on its downward trend, in the light of the government's plans for a more restrictive alcohol policy and a smoking ban in pubs, bars and restaurants. Despite the shrinking market, Heineken Ireland's sales remained stable at 1.1 million hectolitres and it increased its market share. The worsening economy, waning consumer confidence and the public debate on alcohol and health all brought pressure to bear on the beer market. Lager volume was down a little, while stout sales again declined sharply. Lager now accounts for over half of total beer sales. The Heineken brand strengthened its leading market position in the lager beer segment. Sales of Murphy's Stout were down, following the trend in the stout segment, but Coors Light, which is brewed under licence, and Amstel recorded vigorous growth. The Heineken brand was supported by sponsorship of the Green Energy music event and the Green Room Sessions. There was also a tie-in with Heineken's sponsorship of the European Rugby Cup and the Rugby World Cup in Australia, in which there was exceptionally strong interest in Ireland. Heineken beer with a 5% alcohol content was launched in the premium segment in the United Kingdom in 2003, and Heineken Cold Filtered, a beer brewed to a different recipe, was withdrawn. As a consequence, sales in the UK decreased from 2.1 million hectolitres to 0.6 million hectolitres. While the UK beer market overall showed little growth, lager beers continued to gain in popularity and now account for 39% of the total beer market. In this segment, the premium lagers recorded the fastest growth, at 2.4%. For historical reasons, the position of Heineken beer in the UK, which is available worldwide, is still modest. The relaunch of the Heineken brand was given intensive marketing support. In the 'Heineken, you have changed' PR campaign, UK celebrities posed for a top photographer in barely recognisable guises. The advertising campaign, which emphasised that the 'new' Heineken beer has a 5% alcohol content, had as its theme 'Heineken: tested around the world, now ready for the UK.' Various promotions, local sponsorship, on-trade support to ensure optimum draught beer quality and the new international can and aluminium bottle contributed to the successful relaunch. The marketing strategy is fully focused on sustainable brand development. Amstel was positioned in the main stream segment, as in other markets around the world. Amstel is now available only on draught in the on-trade, which enables Heineken to offer its on-trade customers a more cohesive brand port folio. Sales of Amstel developed well, but sales of Murphy's Irish Stout and Murphy's Irish Red, which are brewed under licence and distributed by a partner, were lower. The Affligem brewery in Belgium reported sustained sales growth, with REPORT OF THE EXECUTIVE BOARD 31

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