Driving performance
23 Heineken N.V. Annual Report 2004 Report of the Executive Board Chairman's Message
IN 2004, WE AGAIN DEMONSTRATED HOW HEINEKEN HAS BEEN ABLE TO REMAIN ONE OF THE WORLD'S
LEADING CONSUMER AND CORPORATE BRANDS FOR MORE THAN 130 YEARS. IT WAS A YEAR IN WHICH
WE NOT ONLY CONFRONTED DIRECTLY THE CHALLENGES IN MANY OF OUR MARKETS TO DELIVER
ORGANIC PROFIT GROWTH, BUT ALSO CONTINUED TO FOCUS ON BUILDING THE LONG-TERM FUTURE
OF OUR BRANDS AND BUSINESS.
This approach has been both a philosophy and a differentiator versus our competitors since
Heineken was founded in 1864. It has enabled us to provide our shareholders with above average
returns for the sector over the long-term, and has built Heineken into the world's most valuable
international beer brand.
Against this background our 2004 results showed progress, particularly the organic growth in
net profit of 8.1%, in turnover of 1.4% and in volumes of 1.5%. There were, though, a number of factors
that adversely affected the development of our profit, most notably the write-down in the value of
our 20% stake in Kaiser, a negative exchange rate effect and the non-recurrence of large exceptional
items occuring in 2003. There were pressures too on margins due to shifts in drinking occasions
(less on-premise), shifts in packaging (less draft) and the increasing strength of our retail customers.
The consolidation of the industry in 2004 was also a notable feature and will continue to be so
in the future. We will, as we have always done, continue to play our part in this process.
Western Europe remained probably our most challenging trading environment. During the year,
markets were under pressure due to a combination of declining consumption, increased competition
and poor weather. In this context we focused on increasing our share of the markets through strong,
creative marketing and on ensuring that we maximised our efficiency across all of our operations.
In 2004, our cultural and structural change programme, 'Taking Heineken to the Next Level' has
given us greater clarity on how and where we should focus our energies to build the platforms on
which future growth will be built.
DRIVING THE GROWTH OF OUR BRANDS
AND IMPROVING OUR FINANCIAL PERFORMANCE
Innovation is a core part of our brands' growth strategy. It is fuelled by the needs of the consumer
and is an important driver of growth. In 2005, we will again introduce a number of innovations across
liquid, packaging and format that will serve to further endorse our leadership credentials.
Building 'next generation' sales and marketing excellence will be critical for delivering
future organic growth. We are gaining a better insight into the needs of the consumer and into which
brands will deliver the greatest value for consumers, trade partners and shareholders. In 2004,
we saw positive progress with portfolio reviews conducted in several key markets and we will continue
this approach in the coming year.
Growing the Heineken brand, the 'jewel in our crown', will always be one of our highest strategic
priorities and we are committed to extending the brand's clear leadership of the international
premium segment. Driving marketing efficiency and effectiveness and finding new, high-profile
ways to engage consumers has been a key focus in 2004. It will again be highly evident in 2005 as we
aim to put even greater distance between the Heineken brand and others trying to establish their
international credentials.
