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