r Central and Eastern Euro V. 10.3 36 Poland Growth of the Heineken brand, increased operating result 48 Heineken N.V. Annual Report 2004 Report of the Executive Board Regional Review Group Volume Central and Eastern Europe in millions of hectolitres 2000 10.0 Reference to market positions 2001 11.7 and market shares in the relevant 2002 15.7 countries is based on available market information and refer ^0.6 to an estimate of market ratios. 2004 31.6 Across the region, Heineken is the market leader with a share of approximately 27% and total beer volumes which rose to 31.6 million hectolitres in 2004, from approximately 20.6 million, thanks to acquisitions and solid organic growth. Regional Review In October 2003 Heineken acquired a majority stake in BBAG, which was included in the consolidation fot the first-time since 1 October 2003. At the beginning of 2004 Heineken increased its stake in BBAG from 60.3% to 100%. The integration of BBAG activities into Heineken's existing operations has been completed and is generating significant cost and revenue synergies. In the year under review six breweries have been closed or divested. The combined brand portfolios have been optimised and rationalised. In several Central European countries the Heineken brand was launched in the distribution network of Brau Union. In 2004 the integration of Brau Union has delivered gross synergy gains of €26 million and related non-recurring restructuring costs of €10 million. Heineken expects the full synergies of €80 million before taxation to be unlocked by the end of 2007 in line with the plans published in May 2003. Brau Union is Heineken's Central European operating company and the largest brewing group in Central Europe, leading in Poland, Austria, Romania, Slovakia, Bulgaria and Macedonia. Brau Union has also strong market positions in Hungary, Croatia and the Czech Republic. The combined group made solid advancements in sales volume and operating result thanks to the performance of its top brands in the Central European market. Sales volume of the Heineken brand increased by more than 30%. Total beer sales volume of Brau Union fell by more than 5%, and overall, Brau Union experienced a slight loss in market share due to its focus on the premium end of the market. During 2004, Heineken Russia confirmed and consolidated its number three position in the market through the acquisition of three breweries, Shikhan, Volga and Sobol. These acquisitions allow us to leverage economies of scale at a regional level, provide a better spread of production facilities and will enable us to brew our national brands regionally, thus reducing overall transportation costs. Total beer sales million hectolitres Market share percent Market position position A colder summer and higher excise duties slowed the growth rate of the Polish beer market to almost 3% in 2004, down from 4.6% in 2003. Sales volume declined to 10.3 million hectolitres. Market share decreased to approximately 36%. Substantial investments were made in quality, employee training, technology and distribution. The construction of the brewhouse in Warka, which doubled the brewery's annual production capacity

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