24
REGIONAL REVIEW - WESTERN EUROPE
CIDER: GROWTH
THROUGH INNOVATION
REPORT OF THE EXECUTIVE BOARD
HEINEKEN N.V. ANNUAL REPORT 2008
Whilst the UK cider market
represents over 50 per cent of
all cider sold in the EU, cider is
less than 10 per cent of total
alcohol consumed in the UK.
It is an important part of our
UK portfolio as it creates a
point of difference versus our
competitors and, in 2008, grew
by 5.5 per cent. This makes it
the fastest-growing category
in the UK alcohol market.
Cider has a rich history in the UK,
(Bulmers was founded in 1887)
and ciders sit alongside beer and
are seen as part of the traditional
UK pub offering.
In 2002, the UK cider industry
had been struggling for around
10 years. Increased competition
from alcopops and premium-
packaged lagers had impacted
sales and consumption. Reduced
investment in the category by
cider makers compounded the
problem, resulting in a poor
image and accelerating the
category's decline.
However, in 2002, successful
discussions between the cider
industry and the UK government
resulted in a fairer duty burden
for cider, improving confidence
amongst cider makers and
customers. This decision reflected
the government's recognition of
the commitment to sustainability
and the rural economy made by
UK cider makers.
In 2003, S&N acquired Bulmers,
the world's largest cider maker.
This resulted in an immediate
increase in marketing investment
for the major brand, Strongbow,
driving improved consumer
awareness and a much stronger
brand performance.
With the improved environment
for cider in the UK, the arrival of
a number of imported cider
brands created greater advertising
and, in turn, consumer interest.
One of the most obvious and
popular changes was introducing
the concept of drinking cider 'over
ice'. Together, these elements
enabled the emergence of a
premium cider segment.
S&N UK saw the opportunity to
drive growth in both the category
overall and in the premium
segment through increased
investment and, particularly
through innovation. In just three
years, Strongbow Extra Cold,
Bulmers Original, Jacques,
Bulmers Pear and Bulmers Light
were launched. The result was
the successful recruitment of
new drinkers, with each brand
successfully targeting different
consumers in the critical 18-35
age range.
Today the UK cider market has
outperformed the long alcoholic
drinks sector consistently for the
last five years. Strongbow, the
clear market leader in the UK,
continues to grow; Bulmers ciders
have excellent distribution and
outperformed their competitors;
Jacques is positioned as a lighter
alternative to wine. All in all,
testament to the power of
investment in innovation.
SPAIN
Consolidated beer volume 10.9 million hectolitres
Market share 30.8 per cent
Market position 1
Heineken Espana reported EBIT (beia) growth mainly driven
by lower costs. Revenue was marginally higher as better
pricing across all trade channels exceeded the effect of
lower volume.
The beer market decreased by more than 2 per cent
affected by the decline in consumer confidence due to the
financial crisis and the collapse of real estate prices. In
particular, the on-trade channel came under pressure and
consumption of low-priced beers in the off-trade increased.
This had an adverse effect on beer volume of Heineken
Espana, but the company maintained its market share in the
branded beer segment. Heineken brand volume was 5.5 per
cent lower, but brand equity improved as a result of new
commercial activities and the Extra Cold beer programme
activation. Cruzcampo, our leading mainstream brand, was
impacted by the shift from mainstream to low-priced beers
whilst Buckler volume fell only slightly.
At the end of 2008, Heineken Espana announced the closure
of the brewery in Arano. The four remaining breweries will
take over the production from Arano.
FRANCE
Consolidated beer volume 5.9 million hectolitres
Market share 26.3 per cent
Market position 2
Heineken France and France Boissons, our wholesale
business, increased market share. The beer market in France
fell 1.3 per cent due to a 14 per cent decrease in on-trade
consumption. The introduction of the smoking ban, the
economy and unfavourable weather are the major drivers
of this decrease.
Volume of the Heineken brand grew 4.6 per cent, and the
brand now has a 12 per cent share of the market, and is the
market leader by value.
Revenues were stable, as organic growth was offset by the
effect of the sale of the St. Omer brewery, the private label
unit. EBIT (beia) was lower, due to higher variable costs,
which were not fully compensated by higher prices.
The streamlining of the French operations, both in wholesale
and production is well under way. The sale of the St. Omer
brewery was finalised in the summer and the Fischer Brewery
in Schiltigheim will be closed at the end of 2009.
