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«BeerislivingproofthatGodlovesusandwantsustobehappy»BenjaminFranklinJonØyvindBjørnstadChristianAdelerNormannBeerIndustryTuesday,9August20 11
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Agenda•HistoryofBeer..............................................................3•Historyofbeerlastdecade................................4•GlobalMacroEnvironAnalysis.............................5•GlobalBeerEn vironAnalysis.................................6•Howisbeermade.......................................................8•Overvi ewoftheglobalbeermk.........................9•Brie‼y-EUBeverages....................................13•Brie‼yAsianMarkets...................................14•Beerthenaturalchoice..........................................15•Comm odityprices&effectsonbeerprices/volumes........................................................16•ProductionMargi ns..................................................18•Porter’s5Forces........................................................20•Growt hOpportunities...........................................21•M&A.......................................................................... ........24•M&AOurthoughts......................................27•EmergingMarkets......................................................36•A sia,LatinAmericaandEasternEU•DevelopedMarkets..................................................42•EU,North America,Asia&Oceania•Social&CulturalIssue............................................46•SelfRegulation.............................................................47•Risks...............................................................

....................49•Marketing&Advertising........................................51•CorporateSocialResponsibili ty(CSR).........56•Conclusion.....................................................................57•TheBIGFOUR........... ................................................58•ABInBev.................................................................60•SABMille r..............................................................66•Heineken................................................................72• Carlsberg................................................................80•Ratios............................................................ ....................87•InvestmentRecommendation............................89Tuesday,9August2011
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HistoryofBeer•Beerisoneoftheworld’soldestbeverages,recordedbacktothe6thmillennium•Averyim portantdrinkinmanycultures•Familyandmicrobreweriesdominatedaroundtheworldupuntillthe20th century•Thehuntfortasteversusthehuntforpro※ts•ThedevelopmentofthebeerindustryintheUSA•To dayaglobaland※ercelycompetitivebusiness3Tuesday,9August2011

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•Consolidationtrendsgoingevenfurther•Thetop10andtheirmarketshare•Thetop4todaydominating• Othertrends•FinancialcrisisimpactHistoryofbeer–thelastdecade4Tuesday,9August2011

soweestimateslightlyweakerglobalgrowthsGlobalMacroEnvironmentalAnalysis5Tuesd ay.5%(2011)•IMF※guresusuallyoveroptimistic.5%co mparedto3%fromlastyear.•Developingeconomiesprojectedastronggrowth.Formatted: Font: (Default) Times New Roman.9August2011 .2.5 %(2010)to6.3%Q1)•Advancedeconomiesweakgrowth.butwilldeclinefrom7. 12 pt •Emergingmarketsalmost50%ofglobalgrowth(4.

2%).GlobalBeerEnvironmentalAnalysis6Tuesday.9August2011 .000barrels). 12 pt •2010-Beerbrewerssalesincreaseof2.-Overallbeersalesremain‼atUSbeersalesdown1%(onlygrowthseenincraftbeers)USbrewers81%ofUSmarketshare(importsgraduallyincreasingshare)ConsumerstillremaintasteconsciousBeerindustryperformancecorrelatedwitheconomy•Lawandethics:Stricterlaws=drunkdrivingandsmokingban-USFederalbeertax=40%ofretailcostofbeer$18/gallonbarrel(ifproduce<2million->discount$7for※rst60.6%(2009-9.Formatted: Font: (Default) Times New Roman.

12 pt •Diversity&GlobalTrends:-2011globalpopulation7bn-->in20509.5bn(majoritygrowthindevelopingcountries)WealthshiftingtoEast&Southcountries(Globalization)Changesinpreferencesandattitudestowardbeerconsumption•Technology:•Advances->necessarytomaintaincompetitiveadvantage&ef※ciencyGlobalBeerEnvironmentalAnalysis7Tues day.9August2011 .Formatted: Font: (Default) Times New Roman.

Formatted: Font: (Default) Times New Roman.9August2011 . 12 pt Howisbeermade?8Tuesday.

measuredinbarrels•Majortrends – Consolidation–Shiftinginpreferencesinemergingmarkets– Shiftinginpreferencesindevelopedmarkets•Compoundannualgrowthrateof3. 12 pt •Thebeerindustry:–Consumernon-cyclical•Outputs–Beer.4%Overviewoftheglobalbeermarket9Tuesday.Formatted: Font: (Default) Times New Roman.5%globally– twoverydifferentpictures-Emergingmarketsshowingstronggrowthwith6.8%Developedmarketsshowinganegativegrowthof3.9A ugust2011 .

Formatted: Font: (Default) Times New Roman.9August2011 . 12 pt GlobalpercapitaconsumptionheavilyskewedtowardsdevelopedcountriesGlobalpercapitaconsumptionat28layear-NorthAmerica75l-WesternEurope66l-China30lNigeria10lChanges…-Growthchangedinlightofcrisis-Whodrivesthegrowth?-DistributionchangesNewsegments-Globalbeer?Overviewoftheglobalbeermarket10Tuesday.

12 pt •Wheredoweseegrowth?–Emergingmarkets– Chinathebiggestconsumer&producer•Fastestgrowinginternationalbeerbrand:–Tuborg– Premiumsegmentsrising–Microbreweries– bigbusiness?Overviewoftheglobalbeermarket11Tuesday.9August2011 .Formatted: Font: (Default) Times New Roman.

12 pt Overviewoftheglobalbeermarket12Tuesday.9August2011 .Formatted: Font: (Default) Times New Roman.

9August2011 .1mnjobs•17%ofproductionisexported•10%ofconsumptionisimportsBri e‼y–EuropeanBeverages13Tuesday. 12 pt •Outperformedindex–doesthatcount?– OutperformedtheMorganStanleyCapitalInternationalEuropeIndex(MSCI)by16%butunderperformedthemarket–Sectorisestimatedtotradearound30%premiumtotheindex– Strongrelativeperformancethelastyears–Top-lineprospectsaccelerating– Earningsgrowthaffectedbygrainprices–Decreaseinconsumptionfrom374– SalesinEurope:•€110bn•2.Formatted: Font: (Default) Times New Roman.

7%ofglobal consumptionin2010Brie‼y–AsianMarkets14Tuesday.9August2011 . 12 pt •Stronggrowth•DoubledigitforallmajorAsianemergingmarkets•Numberoneconsumerofbeer•Accountedfor37.Formatted: Font: (Default) Times New Roman.

antioxidantsandminerals-siliconLowinsodium(salt)andhighinpotassium15Tuesday. 12 pt •95%ofbeeriswater•3rdmostpopulardrink(afterwater&tea)•Easytomake.Formatted: Font: (Default) Times New Roman.butstandardsarehighBeert henaturalchoice?•Oneofthehealthiestdrinks0fats&cholesterol-94calories(asinotherdrinks)Containsvitamins(barleywhenmalted-->vitaminB)-Fibre.9August2011 .

Agri.Formatted: Font: (Default) Times New Roman.RawMaterialIndex*CF&BICommod. 12 pt -Forecasttoraisenextdecade(40%by2020-globalcerealstockinlowest)-Guilty:Unfavourableweather-CatastropheinJapan-PoliticaluncertaintyAfrica&NearEastStrongincreaseoilpricesUncertainty※nancialmksandglobaleconomy0%22%43%65%87%108%130%CARMICF&BIBarl eyMaize(corn)WheatAluminiumRice9%34%125%102%46%35%27%YoY%changeofmaincom moditiesaffectingbeercompanies*CARMI-Commod.Food&BeverageIndexCommodityprices&effectsonbeerprices/volumes16Tuesday.9Au gust2011 .

9August2011 .Formatted: Font: (Default) Times New Roman. 12 pt •Corporateresponses/strategies:-Consumerpriceincreasesneedofstrongconsumerloyaltytoensuresales-Cost-cutting-absorbingcosts=cost-cuttingSupplychainM&Aandstrategicalliances-※xpricepurchasingwithcommodityderivatives-forwardbuying->tominimizevalueatriskCommodityprices&effectsonbeerprices/volumes17Tuesday.

12 pt Risk&ConclusionProductionMargins1%2%4%8%15%17%25%28%CostsBreakdownLargeBrew eryPackagingTaxSales&MarketingProductionMaltMinoringredientsAdjuntsHops18Tuesday.Formatted: Font: (Default) Times New Roman.9Au gust2011 .

12 pt Risk&ConclusionProductionMargins25%50%75%100%ABInBevCarlsbergHeinekenSABMiller 24%37%46%44%76%63%54%56%GrossPro※t&COGSMarginsas%ofRevenuesGrossPro※tMar ginCOGSMargin19Average38%Tuesday.Formatted: Font: (Default) Times New Roman.9August2011 .

Formatted: Font: (Default) Times New Roman.distributionconnectedtoretailersThreatofEntryHighcapitalrequirements.closeddistributionchannels.9August2011 .highinnovation0Su bstitutesGrowingsubstituteindustry. 12 pt ForceKeyDriversEffectonIndustryPro※tIntensityofRivalryHighconcentration.lowswitchingcostBargainingpowerofSuppliersSmallsuppliersrelativetobrewers+BargainingpowerofBuyersConsoli dationofindustry.economiesofscale.highgovern mentregulation+Overallmarket0PORTER’s5Forces20Tuesday.

105. 3%4.0020.60BeerConsu mptionincrementalgrowth(2010-2015F)inmhlForecastcontributiontoindustrygrowth(20112015)GrowthOpportunities21Plato-March2011Tuesday.9August2011 «‹›» 1 /90 Related More   .304. 12 pt •Expansionintoemergingmarkets(Chinaworld’snextbigconsumer)020406080100ChinaBrazilRuss iaVietnamUSAMexicoIndiaThailandUkraineNigeria0%8%16%24%32%40%39.9012.209.Formatted: Font: (Default) Times New Roman.3%7.5%2.2017.606.3012.2%2.7%8.1%5.408.3%3.9%96.2%1.9%4.

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 Boston Beer Company Valuation  Boston Beer Company PPT  Samuel Adams %281%29 Formatted: Font: (Default) Times New Roman. study of Big Four companies in the industry (ABInBev.tw ?? Thank u very much! And thank to share the slide for us ^^ 1 day ago Giuseppe Valenti at Eni very nice job. SABMiller. 12 pt.519 views Beer Industry global analysis. 2011  6. would be possible to receive copy of the presentation?  . Font color: Blue + Follow Beer industry by Christian Adeler on Aug 14. could u please sent me the download link to shiuanpyng@yahoo. Heineken & Carlsberg) More…  17 comments 1–10 of 17 comments next Post a comment  HP Yang . student Hi~it's really nice presentation! If it possible .com.

This is really helpful. i would like to engage with you on an assignmetn that i am doing on SABMILLER 1 month ago    MJRENAUD Thank you so much Marie 1 month ago milind_raikar Well made presentation. 2 weeks ago Minh Nhat Nguyen at Minh Nhat Nguyen What a wow presentation! Please send me the download link to minhnhatc5@gmail. Thank you very much! 2 months ago Elisa Magnani great work! Could you please send me the presentation to insane_0@hotmail.hinet. Please send me the download link to chbycc@ms9.com.com 4 days ago  Austine Imoukhuede Amazing wok.com. please send the link to my email as well addyfy2001@yahoo. If possible forward the download link to milindraikarjd@gmail.fr. Please send me the download link to kokoro. Thank you very much! 1 month ago MJRENAUD Great .com? thanks a lot Elisa 2 months ago     Subscribe to comments Post Comment  24 Favorites . Thank you very much! 1 month ago sabermanjoo hi please send me your email address.My address is the following gsppvl@gmail.san@neuf.com 1 month ago 繼忠 楊 Great .net.

.............................................................................................EU ..... Strategy & Marketing Director at Arena.........3 • Emerging Markets........................... Havas media Group Tags beer industry 2 months ago Best Linh . 9 August 2011 2........36 • History of beer ..................42 • Global Beer Environ Analysis................... student 1 day ago Giuseppe Valenti at Eni 4 days ago Edward Brown 1 week ago Austine Imoukhuede 2 weeks ago Bob King . CEO at Show Co........................ Asia & Oceania • How is beer made..................................... Latin America and Eastern EU • Global Macro Environ Analysis....8 • Social & Cultural Issue.......4 • Asia................... General Manager at Emerson Brewing Co Ltd 1 month ago Irina Khamzina 1 month ago Николай Гавриленко 2 months ago Aleksey Bezugly ...5 • Developed Markets............ North America..... Agenda • History of Beer......................................................46 • Overview of the global beer mk.......last decade......... Beer Industry «Beer is living proof that God loves us and wants us to be happy» Benjamin Franklin Jon Øyvind Bjørnstad Christian Adeler NormannTuesday.........................47 • Brie‼y ...................... Ltd Tags beer 2 months ago          More… Beer industry — Presentation Transcript   1............................6 • EU............... Head of Marketing at Obolon CJSC 2 months ago Amelie Roujou de Boubee ..9 • Self-Regulation... HP Yang .....

... 2........51 • Beer the natural choice........Our thoughts...........................................................Asian Markets.................................16 • The BIG FOUR................13 • Risks.. History of Beer • Beer is one of the world’s oldest beverages...........Consumer still remain taste conscious .......56 • Commodity prices & effects on beer • Conclusion............................. 9 August 2011 ............Beer industry performance correlated with economy • Law and ethics: ..........................US brewers 81% of US market share (imports gradually increasing share) ...................5% (2010) to 6............. • Developing economies projected a strong growth........................................ 9 August 2011 6.6% (2009 ..Wealth shifting to East&South countries (Globalization) ............................2011 global population 7bn --> in 2050 ..57 prices/volumes...........18 • AB InBev.. Global Macro Environmental Analysis • Emerging markets almost 50% of global growth (4....................49 • Brie‼y ....................      Beverages...............3% Q1) • Advanced economies weak growth......Overall beer sales remain ‼at ....... Global Beer Environmental Analysis • 2010 .....$18/gallon barrel (if produce <2million --> discount $7 for ※rst 60...................................................27 • Ratios... so we estimate slightly weaker global growths 5Tuesday... ................................................20 • SAB Miller................................................Beer brewers sales increase of 2....................72 • M&A..........................5% (2011) • IMF ※gures usually over........ recorded back to the 6th millennium • A very important drink in many cultures • Family and microbreweries dominated around the world up untill the 20th century • The hunt for taste versus the hunt for pro※ts • The development of the beer industry in the USA • Today a global and ※ercely competitive business 3Tuesday...........9............................................... History of beer – the last decade • Consolidation trends going even further • The top 10 and their market share • The top 4 today dominating • Other trends • Financial crisis impact 4Tuesday.............. How is beer made? 8Tuesday.... 9 August 2011 4............Stricter laws = drunk driving and smoking ban ........66 • Growth Opportunities........58 • Production Margins......... 9 August 2011 3..............................................................000barrels).21 • Heineken........................................5% compared to 3% from last year................ 9 August 2011 5............... 6Tuesday..60 • Porter’s 5 Forces............. 9 August 2011 7....................................15 • Corporate Social Responsibility (CSR).....................9..... 9 August 2011 8.......5bn (majority growth in developing countries) .......2%)................14 • Marketing & Advertising.....................US beer sales down 1% (only growth seen in craft beers) ....24 • Carlsberg..........................80 • M&A .....optimistic.......................US Federal beer tax = 40% of retail cost of beer ..............87 • Investment Recommendation..... but will decline from 7........................89Tuesday... Global Beer Environmental Analysis • Diversity & Global Trends: ........Changes in preferences and attitudes toward beer consumption • Technology: • Advances --> necessary to maintain competitive advantage & ef※ciency 7Tuesday........

Fibre.Nigeria 10 l Changes… . antioxidants and minerals .※x price purchasing with commodity derivatives .8% .silicon .global cereal 102% stock in lowest) 87% .New segments .7% of global consumption in 2010 14Tuesday. 9 August 2011 . measured in barrels • Major trends – Consolidation – Shifting in preferences in emerging markets – Shifting in preferences in developed markets • Compound annual growth rate of 3. 9 August 2011 14. 9 August 2011 12.Contains vitamins (barley when malted --> vitamin B) . Food&Beverage Index 16Tuesday.Growth changed in light of crisis .Distribution changes .Western Europe 66 l .need of strong consumer loyalty to ensure sales -Cost-cutting .Who drives the growth? .Emerging markets showing strong growth with 6.North America 75 l .Forecast to raise next decade108% (40% by 2020 . Overview of the global beer market 12Tuesday.1 mn jobs • 17% of production is exported • 10% of consumption is imports 13Tuesday. Commodity prices & effects on beer prices/volumes • Corporate responses/strategies: -Consumer price increases .4% 9Tuesday.         9. Brie‼y – Asian Markets • Strong growth • Double-digit for all major Asian emerging markets • Number one consumer of beer • Accounted for 37.5% globally – two very different pictures .94 calories (as in other drinks) . Overview of the global beer market • The beer industry: – Consumer non-cyclical • Outputs – Beer. 9 August 2011 17. Agri.absorbing costs = cost-cutting -Supply chain M&A and strategic alliances .China 30 l .forward-buying --> to minimize value at risk 17Tuesday.Low in sodium(salt) and high in potassium 15Tuesday. 9 August 2011 11.Guilty: -Unfavourable weather 65% -Catastrophe in Japan -Political uncertainty Africa & 46% Near East 43% 27% 35% 34% -Strong increase oil prices 22% -Uncertainty ※nancial mks 9% and global economy 0% CARMI CF&BI Barley Maize (corn) Wheat Aluminium Rice * CARMI Commod. 9 August 2011 13.Commod.Developed markets showing a negative growth of 3.Global per capita consumption at 28l a year . but standards are high •One of the healthiest drinks 0 fats & cholesterol . Overview of the global beer market • Where do we see growth? – Emerging markets – China the biggest consumer & producer • Fastest growing international beer brand: – Tuborg – Premium segments rising – Microbreweries – big business? 11Tuesday. Overview of the global beer market Global per capita consumption heavily skewed towards developed countries . Brie‼y – European Beverages • Outperformed index – does that count? – Outperformed the Morgan Stanley Capital International Europe Index (MSCI) by 16% but underperformed the market – Sector is estimated to trade around 30% premium to the index – Strong relative performance the last years – Top-line prospects accelerating – Earnings growth affected by grain prices – Decrease in consumption from 374 – Sales in Europe: • €110 bn • 2. 9 August 2011 16. Beer the natural choice? • 95% of beer is water • 3rd most popular drink (after water&tea) • Easy to make. 9 August 2011 15. Commodity prices & effects on beer prices/volumes YoY % change of main commodities affecting beer companies130% 125% .Global beer? 10Tuesday.Raw Material Index * CF&BI . 9 August 2011 10.

3% 4. 25% of world beer sales 25Tuesday.3% 3.20 17.creates bigger market + additional competition • Consumer Preferences bigger portfolio of products • Regulations . 9 August 2011 20.March 2011Tuesday. Risk & Conclusion Production Margins Costs Breakdown Large Brewery 2% Packaging 4%1% Tax 8% Sales&Marketing 28% Production Malt 15% Minor ingredients Adjunts Hops 17% 25% 18Tuesday.20 9.40 8.$5.2 for 57% stake in Ambev (stock&debt deal) .SABMiller #2 Brewer (Miller needed it to remain competitive) Sharper focus on selling beer .Top companies pro※t increases of 7-12% Buying companies “out of their main scope” 24Tuesday. PORTER’s 5 Forces Force Key Drivers Effect on Industry Pro※t Intensity of Rivalry High concentration. Risk & Conclusion Production Margins COGS Margin Gross Pro※t Margin Gross Pro※t & COGS Margins as % of Revenues 100% 24% 44% 37% 75% 46% Average 38% 50% 76% 56% 63% 25% 54% AB InBev Carlsberg Heineken SABMiller 19Tuesday.control and reduce manufacturing costs 22Tuesday. M&A • Main aims = . high government regulation Overall market 0 20Tuesday. Growth Opportunities • Expansion into emerging markets (China world’s next big consumer) 100 96. Growth Opportunities • Forces with strong in‼uence over next 3-5 years: • Globalization .Deal was giving InBev approx.3% 6. + economies of scale.2% 2. 9 August 2011 23.relationships with distributors .1% 5. 9 August 2011 19.SAB #4 world and brands in Africa.Miller #2 in US and #6 in world .60 7.30 4.6bn in stock --> 64% stake of Miller .Buyers distribution connected to retailers Threat of Entry High capital requirements.programs to reduce.00 40% Beer Consumption incremental growth (2010-2015F) in mhl Forecast contribution to industry growth (2011-2015) 80 32% 60 24% 39.30 20 12. Boston Beer is 1% 2000 2010 of InBev --> minimal effects if acquired • “Too big to need ※nancing” to expand.60 8. China and East EU. high 0 innovation Substitutes Growing substitute industry.90 8% 12. reuse and recycle materials (environmental friendly) 23Tuesday. 9 August 2011 24. .2% 1.variety (only 10% men loyal to a speci※c brand) .Phillip Morris will keep 36%) .Interbrew was #3 in world by volume and Ambev #5 .“Big four” . 9 August 2011 . 9 August 2011 25. 9 August 2011 21. 9 August 2011 22.9% 0 0% China Brazil Russia Vietnam USA Mexico India Thailand Ukraine Nigeria 21 Plato . M&A • 2002: SAB PLC combined with Miller Brewing --> SABMiller . closed distribution channels. .        18.9% 4.6bn deal ($2bn in assumed debt and $3.consumption heavily regulated • Sustainability .innovative marketing&advertising strategies to build brand .in size.50% all global 18% beer consumed 0% • “Big four” . Growth Opportunities • Saturation of traditional markets --> growth = strategic M&A • reorganised industry and strengthened the big players • Consumer preferring lighter and “healthier” beers --> new trend (40% of all beer sold) • Innovative product formats --> new trend = large packages • Sales = ALL about strong branding & marketing • Companies to be successful must focus on: .2004: InBev created from merger Interbrew and AmBev Interbrew paid €9.10 5. low switching cost Bargaining power of Small suppliers relative to + Suppliers brewers Bargaining power of Consolidation of industry.7% 40 16% 20.increase product portfolio --> 70% 63% international interest 53% 37% • High consolidation 35% .develop economies of scale Top 10 companies as a % of market share .5% 2. .

best targets acquired already – Acquiring craft brewers • Pros • Cons 30Tuesday.Our thoughts • Craft beer outlook • Predictions in the future – China – Emerging markets – Developed markets • M&As 27Tuesday. 9 August 2011 31.leader in top 5 world markets . M&A Predictions • Potential buyer: Asahi – Leading brewer and soft-drink company out of Tokyo.          26. there were meetings in 2007. M&A Predictions • Opportunities in Africa – Plenty of room for growth – Heineken recently bought into the Ethiopian market – Nigeria and increased minimum wage – SABMiller entering discount beer market 35Tuesday. Predictions • China – Slowdown in consolidation • Top 3 brands market share of 52. acquired in 1990 – Cadbury Schweppes Australia acquired in 2009 – Moving into new markets – Tsingtao stake acquired from ABInBev in 2009 – Is looking to expand in Asia and Oceania. M&A Predictions • Foster’s – SABMiller’s June 21st bid on Foster’s Group Limited – Bid valued Fosters at USD 10 billion – Market reactions to the bid and rejection – What happens now? • Foster’s is an attractive target • Could trade at values of 5. 3) SAB is on a slightly higher multiple than BUD and 4) the execution risks are much higher. changes causing divesting. – Conclusion: We don’t see the bene※ts of a merger outweighing the downsides. M&A Predictions • Megabrew – potential merger between ABInBev and SABMiller – A merger would have positive and negative sides • Pros: amazing growth. pricing it as high as USD 11 billion. 34Tuesday. but InBev were unwilling to pay a signi※cant premium. M&A M&A • 2008: Anheuser-Busch and InBev merger to create AB InBev • $52bn deal • Created Global Beer Leader and Top 5 consumer companies • Access to new local markets (geo diversity) . 33Tuesday. 9 August 2011 32. Japan – 40% of Japanese beer market – Stake in Foster’s Group already. but what now? • Recent growth in craft beer segment • The three-tiered future? – Macro – Regional – Micro 28Tuesday. 9 August 2011 .40-50 per share. M&A Predictions • Molson Coors moving into India – Joint Venture with Cobra India – “beginning of a long-term commitment” – Follows a 2009 deal between Molson Coors UK and Cobra Beer covering sales outside south Asia. one corporate HQ • Cons: culture clash. 31Tuesday. 9 August 2011 29. 9 August 2011 34. 2) SAB’s emerging market cash ‼ow makes it harder to lever. US beer category. 9 August 2011 27. not much geographic overlap. Predictions • Emerging markets – Same as China in other markets? – “hotshots” slowing down M&A pace – M&A booms in “younger” emerging markets like a lot of the African countries • Developed markets – Market division settled. 9 August 2011 30. Craft Beer Outlook • Prohibition killed off diversity.no geo overlap • 40% revenues from the US • Coors acquires Molson in 2004 • Heineken purchased FEMSA (Early 2010) 26Tuesday. M&A . 9 August 2011 33. 9 August 2011 35. an acquisition of Foster’s would place them as a leading player in the area. cultural risk – Numbers don’t add up: • High leverage deal meeting currency issues • A huge amount of equity required • Net-net it is harder to pull off than BUD because: 1) SAB offers lower synergies. • Discussions of a merger are not new. 32Tuesday.5% • Over 80 M&As in the last decade • Fewer good acquisition targets • Opening new plants instead of acquiring businesses 29Tuesday. 9 August 2011 28.

and it’s still extremely low at 4 l per capita a year. 9 August 2011 43. and much lower than its neighbouring countries • Economic progress in the country • Double digit growth rates projected and experienced in the recent years • Heineken and BGI Ethiopia • Risks – famine 40Tuesday. Emerging Markets • Potential emerging markets – Asia – Latin-America – Africa – Eastern Europe • Main trends: – Rising disposable incomes – Economic growth – ”Westernizing” • Areas and countries in detail: 36Tuesday. 9 August 2011 40. Africa AFRICA • Mostly lager is produced here • Re-usage of bottles delivered in store • A lot of people. 9 August 2011 47. 9 August 2011 48.              36. Asia ASIA • Steady economic growth for some time • China the main contributor • More developed countries stalling or declining • Two promising markets: – China – India 37Tuesday. Social and Cultural Issues Social & Cultural Issues • History of opposition – Alcohol always had enemies • Sin taxes – Affecting the end-customer – Seen as a regressive form of taxation • Religion – Islam the only one with a non-alcohol policy – Some extremist churches • Science and medicine – Long term use linked to cancer. 9 August 2011 44. Eastern Europe EASTERN EUROPE • Growth is expected to continue • Driven by Russia • Some growth in developed markets as well • Interesting markets: – Czech Republic – Russia 41Tuesday. RISKS Risks • Beer excise duty: • Highly taxable product --> increase in tax = increase sale price • price-sensitive consumption • Russia 200% increase implemented in . and Code of Beverages • UK – International Code of advertising • South Africa – Self-regulatory code set up in 1989 by ARA 48Tuesday. Latin-America LATIN AMERICA • In the long run we see tax bene※ts in markets like Panama.. 9 August 2011 45. but a declining consumption trend • Netherlands – Heineken domination • France – wine… and beer? • Germany – beer a major part of the culture. review. 9 August 2011 38. 9 August 2011 49. but a lot of uncertainty • Some promising countries: – South Africa – Nigeria – Ethiopia 39Tuesday. Peru and Colombia • Markets are concentrated with high entry-barriers • Especially premium segments look promising • Two promising markets: – Mexico – Brazil 38Tuesday. Self-regulation Self-Regulation • A code of practice or set of guiding principles governing the content of advertisements. Asia & OCEANIA ASIA & Oceania • Japan – New products with lower tax • South Korea – High entry barriers – Microbreweries • Australia – High consumption per capita – Dominated by Foster’s 45Tuesday. Developed MARKETS DEVELOPED markets • Trends: – Declining consumption – Increased health awareness • Changes in: – Tastes – Alcoholic beverages – Drinking patterns 42Tuesday. Self-Regulationexamples. • A process for the establishment. Europe EUROPE • UK – big business. diabetes and liver failure 46Tuesday.Growth Opportunity • Beer consumption rising. Ethiopia . and application of the code or principles. • Why do this? • Is it working? 47Tuesday. North America NORTH AMERICA • USA – Few players dominate – Three-tier system • Canada – International in‼uence – Microbrewers 44Tuesday. Self-regulation Examples • Australia – Minimal legislation and requirements. 9 August 2011 42. 9 August 2011 39. • Poland – a big consumer 43Tuesday. 9 August 2011 46. heart disease. 9 August 2011 37. 9 August 2011 41. self-regulatory code organized in 1998 • Netherlands – Some legislation.

communication • Marketing-driven business --> adds not necessarily to increase demand. 9 August 2011 52.0 764 1. 9 August 2011 55. interesting and comfortable 54Tuesday. Creating brand image 4.5 4. 9 August 2011 53.8 760 0 InBev Carlsberg Heineken SABMiller 650 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: Company Annual Reports • Successful brands --> balance of “push” and “pull” strategies • “push” .+20% # people seeing you & probability of been chosen “GOLDEN ZONE”: . image.relationships with distributor .place brand on the shelf • “pull” . availability and advertising regulation • Pressure from authorities&stakeholders to reduce alcohol consumption --> impacting consumer behavior • Economic environment: • Global recession with weak GDP growth projected for 2011 • Poor/raising unemployment --> weak consumer demand 49Tuesday. but to increase brand awareness --> develop brand image! Sales & Mk Expenses (in Billion $) 2009 .# “Facings”/chances increased --> chances being bought = +28% --> chances low mk share brands = 67% • Strategies to claim space: • multiple packaging --> billboard effect • maximising types of beers to sell 52Tuesday. Consumer ownership --> distinctive atmosphere 7. 9 August 2011 . Consistent quality 5. MARKETING & ADVERTISING MARKETING & ADVERTISING • Compete on POSITIONING: target.9 1083 3.marketing directly to consumer 51Tuesday. no interpretations • Advertised at college campuses or events only when permitted • Applied also to “product placement” of beer • not portray sexually explicit activity as result of consuming beer • no graphic nudity 53Tuesday.literally!! • Shelf placement: (picture) “TOP AREAS”: .2010 Beer Industry Advertising Expenditures ($ in millions) 1170 1175 1175 5 1200 4.75 1090 1027 985 979 2009 980 910 2. Brand recognition--> get share shelf for their products 6. Brand message: clear & appealing 3.25 2.presence on the same playing ※eld • speci※c campaigns & promotions • closely monitor customers and instant feedback • SMM -> all in the same battle※eld --> the one with most strategical power --> will survive the battle 55Tuesday. RISKS Risks • Commodity price volatility • Input costs skyrocketing --> sales prices increasing • Change in consumer preferences: • Strong portfolios to meet consumer needs • Critical to anticipate quickly to market needs • Management capability impairment • “Unstable” emerging markets • Customary risk • Political.      2010 --> increase prices --> russian mk share under pressure • Legal/Regulatory restrictions & changes: • Several mks have restrictions on sales.7 2010 2. MARKETING & ADVERTISING MARKETING & ADVERTISING • “Fight for space” (shelf placement): • “Visual equity” is more important than “memory equity” • product must be in consumer’s face . 9 August 2011 54. MARKETING & ADVERTISING MARKETING & ADVERTISING • “Basic” steps for building successful beer brand: 1. Identify target group 2. economic and regulatory uncertainty • Competition •“eat or be eaten” 50Tuesday.1 1. 9 August 2011 51. MARKETING & ADVERTISING MARKETING & ADVERTISING • Advertising & marketing code: (follow certain ethical standards) • Portray beer in a socially responsible way • Communicating solely to adult consumers of legal drinking age • 70% audience --> to be over drinking age • Should not undervalue other competing beers • only be factual.3 870 800 1.7 2. Packaging: compelling. MARKETING & ADVERTISING MARKETING & ADVERTISING • Social Media Marketing (SMM): • Rise of social networks --> changed way people interact with brands • “one-one” interaction with customers . 9 August 2011 50.1 2.

1% • Results in North America – Slow but steady improvement • Brazil was weak as expected – margins expanded on the back of strong gross pro※t and cost savings 62Tuesday. 9 August 2011 57. Benjamin Rush. effectively managing needs of governments • Technological dimension 57Tuesday. Regulatory issues. 9 August 2011 60. Regional Breakdown • Western Europe – Organic trends remain weak – Strong bottom-line margin expansion – Minor growth expected for 2011 • Central & Eastern Europe – Modest growth partly offsetting the decline last year – Price-mix up 16. Regional Breakdown • North America – Continued suffering from unemployment – Top-line weakness offset by organic expansion and reduciton in barley costs • Latin America North – New brewery in Brazil online in Q3 2011 Asia Paci※c – Volume growth in Brazil slowing down due to 13% • Heavy rain & ‼ooding C&E EU • Deliberate volume/ share management 7% North America • Modest slowdown in GDP growth 35% • General in‼ation nearing minimum wage increases Western EU 8% • Latin America South – Volumes showing continued sequential improvement Latin America driven by beer 37% – Revenue growth remained strong 63Tuesday. Highlights Highlights • Q1 2011 results broadly in line with consensus • Price-mix better than expected at 6.. American physician 58Tuesday.. Corporate Social Responsibility Corporate Social Responsability • Promote responsibility of the brand • Sustainable priorities: • Discourage irresponsible drinking • Making more beer using less water • Reducing energy and carbon footprint • Packaging reuse and recycling • Working towards zero-waste operations • Encouraging enterprise development in value chains • Bene※ting communities • Respecting human rights • Transparency and ethics 56Tuesday.it abounds with nourishment. 9 August 2011 63. Legal. 9 August 2011 59.” Dr. • The leading global brewer • Top-5 consumer products • 114 000 employees worldwide • Operations in 23 countries • Strives to be the “best beer company in the world” • 36. “Conclusion” Conclusion • Seek growth in Emerging markets --> critical role in global beer • Rise in purchasing power of middle class and investment in food&drink supply chain infrastructure • Developed markets: • Reinvest themselves.5% – Projected growth of around 9% in 2011 • Asia – Trends driven by BUD’s Chinese operation – Almost 10% organic revenue growth – Expected revenue growth (Bern) of around 10% along with margin expansion of about 110 bps 64Tuesday. RiskRisks & Conclusion & Conclusions • Risks – QE in the US leading to high in‼ation and dollar value falling – Intensi※cation of competition in the US and Brazilian . 9 August 2011 64. 9 August 2011 61. 60Tuesday. 9 August 2011 58.. The BIG FOUR! “Beer is a wholesome liquor. 9 August 2011 62. 9 August 2011 65. Regional Breakdown Comparison Asia Paci※c 13% C&E EU Western EU Americas North America 31% 29% 7%Western EU 35% 8% C&E EU Africa Latin America 14% 21% 37% Asia Paci※c 5% South Africa Asia 22% Latin America 31% 16% Asia North&West EU 2%Africa 43% 12% Eastern EU EU North America 41% 14% 19% 59Tuesday.3 billion USD in revenue in 2010 • Number one or two position in 19 countries • Committed to responsible drinking with programs operating in each market • Committed to achieving 99% recycle & reuse rate by 2012 61Tuesday. attracting younger generations • Strong branding & marketing with diverse portfolio • Areas of concern for success in the industry: • Unpredictable commodity prices • Changing tastes • Consolidation (M&A in emerging mks) • Political.          56.

9 August 2011 68.improvement top-line growth as Colombia recovers from last years tax hike. energy & glass in particular. Heineken Highlights • Last 10 years it has gone from trading at a 130% premium to peers in 2000 to a current 10% discount (over-exposure to low growth W Europe and over reliance in the US market) • Acquisition of FEMSA --> exposure to high-growth EM (Mexico&Brazil. 9 August 2011 69. 9 August 2011 74. with ‼at organic volume ( Colombia 50% of region . and C&E Euro beer markets pick up •Hedged 50% their input costs. 66Tuesday. 9 August 2011 73. but well below SABMiller) • Development of premium segment -> top-line growth • Improving margins (cost saving & synergies from FEMSA deal) 74Tuesday. SABMiller Regional Breakdown • Latin America: • 2% revenue growth. SABMiller Risks • The south-african governm. Birra Moretti. 9 August 2011 66. 72Tuesday. Heineken Regional Breakdown • Western EU • Challenging trading conditions (leader in UK. 71Tuesday. Peroni. Peru or Polan. co-leader but loosing territory in Spain) • Offset by cost . Murphy’s. Tiger Beer. Ochota. Star and of course Heineken Pilsener). Starobrno. 73Tuesday. radically changes duty regime • A global crisis in the supply of oil could further put pressure on commodities in general and alu. Heineken • Owns over 125 breweries in more than 70 countries • 3rd largest brewer in the world • Employs approx. 68Tuesday.000 people • More than 170 international brands (including Cruzcampo. SABMiller • Basic Facts: • Covers 75 countries on 6 continents South Africa 22% Latin America 31% Asia • Employs over 70. 9 August 2011 72. SABMiller Regional Breakdown • Africa: • Strong top-line and improvement in capacity utilisation • 24% volume growth • Asia: • Very strong top-line performance • 14% org revenue growth (drivers China & India) • Increased marketing support behind key brands • South Africa: • 8% revenue growth • Market share stabilised (after loosing Amstel brand) 70Tuesday. 9 August 2011 70. 9 August 2011 67. Miller and Grolsch • 20% market share in China 67Tuesday. 9 August 2011 75. SABMiller Highlights • 6% EBITA growth • Strong FCF generation (reduction 200m in CapEx) • +80% EBITA coming from high growth emerging markets (plus MillerCoors synergies) • Positive growth prospects in emerging markets (Asia & Africa) • Strong momentum into F12 . 54.          markets – Disposal process failing – FX risks – ZBB-cost reduction program failing to meet targets – Global crisis in oil supply could put pressure on commodities • Conclusion – Underperformed peers and MSCI Europe for the ※rst months of 2011 – Closed the gap in April – Management has a great track record – Currently at a 4% premium to peers.000 people 2% Africa 12% North America EU • Well balanced portfolio (developed and 14% 19% emerging mks) • Over 200 different brands • International premium brands: Pilsner Urquell. Colombia. • Signi※cant FX movements • Intensi※cation of market battles with AmBev in South American • Further consumption slowdown in major economies such as South Africa. Żywiec. we expect 10% – Rating: OUTPERFORM 65Tuesday. Netherlands. Zagorka.impacted by VAT increase) • North America • Flat organic revenue growth (declining volumes) • Impact of economy uncertainty and unemployment • Bene※ting from MillerCoors strong synergies/cost savings • Central&Eastern Europe: • Flat sales growth • Challenging trading conditions 69Tuesday. 9 August 2011 71.

9 August 2011 84. 9 August 2011 76. Heineken Regional Breakdown • Americas • 29% of groups pro※ts • FEMSA deal improves prospects (45% of Mexican market) • Opportunity to develop further the premium segment in Mexico&Brazil •Africa & Middle east: • 21% of group pro※ts • Strong growth (notable Nigeria.5% of pro※ts • Favorable GDP growth --> earnings growth 76Tuesday. Risks • Timing and execution of cost saving programme slower than expected • Breakdown in three-tier distribution system in the USA would expose producers of beverage alcohol to greater margin pressure from retailers • Signi※cant FX movement such as a decline in the dollar • Global crisis in supply of oil could put further upward pressure on commodities in general and especially aluminum. Regional Breakdown • Eastern Europe – Organic volumes declined by 9%. – Overall a high singledigit percentage growth in operating pro※t in 2011 • Adjusting EPS estimates to account for weaker than expected recovery from increased input costs in Eastern Europe 82Tuesday. outside Copenhagen • World’s 4th largest brewery group • Employing 41 000 people • Characterized by great diversity in: – Brands – Markets – Cultures • Ambition of becoming the fastest growing global beer company • Main regions of operation – Eastern Europe – Northern & Western Europe – Asia 81Tuesday. 9 August 2011 83. 9 August 2011 82. • YTD in line with market and outperforming peers (2010 . • Founded in 1847 in Denmark.5bn) changed growth pro※le and TCM programme (total cost management) gives triumph of hope.: • FEMSA acquisition (2. 9 August 2011 77. 9 August 2011 81. Highlights • 2011 a rollercoaster in terms of quarters. we expect 2012 to be more even • 2010 performance a bit light • Net pro※t (pre-exceptionals) in-line with expectations • Guidance: 2-4% market volume growth in Russia. Heineken Relevant Info. glass & energy • Price of oil weakening signi※cantly could put Nigerian and Russian under pressure and be signi※cant drag on group pro※ts 79Tuesday. but revenue increased by 11% organically – Negative price mix of 2% as a response to the excise hike – Operating margins contracted 1280 bps in Q4. Heineken Near Future • Expect moderate pressure on input costs • Signi※cantly improved FCF generation • approx. 9 August 2011 80. a total of 80bps contraction .outperformed MSCI EU by 4% & underperf. 9 August 2011 78.         savings • Largest revenue & pro※t pool (42% & 31%) Western EU Americas 31% 29% • C&E EU • 20% & 14% in volume and pro※t C&E EU Africa • Improvement primarily on the back of 14% Asia Paci※c 21% economic recovery 5% • Russia stabile after 27% drop in 2010 (market 6% down) • 33% market share in Romania&Poland (attractive mks) 75Tuesday. 80Tuesday. Heineken #1 leader) • Strong driver for pro※ts and huge potential consumption increase • Asia Paci※c: (operating mainly through JV’s) . 9 August 2011 79. peers by 6%) • Px way below 90s levels (driven by high US growth) • 230% premium to peers in 2000 to 10% discount today • Paying expensive prices for acquisitions • Solid export ※gures to the USA 77Tuesday. Guidance & Outlook • Operating margin targets – Northern & Western Europe at 1517% – Eastern Europe at 26-29% – Asia at 15-20% – Carlsberg Group at around 20% 83Tuesday. 3x in the last 2-3 years • 5 year pro※t expectations • Strong deliverance mainly from FEMSA synergies and ongoing savings from CM • All regions to deliver strong growth • Lower costs 78Tuesday.

All areas to deliver strong growth C&E EU Africa 14% 21% Asia Paci※c 5% 89Tuesday.Strong position in emerging markets (Americas & Africa) Western EU Americas 31% 29% .21x 20 15 23 25 10 16 15 5 0 P/E Bloomberg 87Tuesday. Risk & Conclusion Ratios ABInbev SABMiller Heineken Carlsberg 20 15 10 18 12 11 5 8 9 10 8 6 6 4 3 0 0 ROE ROA ROIC Capital Ratios (%) 88Tuesday. 90Tuesday. reducing value – Slips in management’s ability to deliver • Conclusion – Share price rallied in 2010. Investment& Conclusion Risk Recommendation! .Solid Ratios . 9 August 2011 86. 9 August 2011 87. 9 August 2011             SlideShare on mobile Follow us on Twitter Find us on Facebook Connect on LinkedIn Learn About Us About Careers Our Blog Press Contact us Help & Support Using SlideShare .Regional breakdown . 9 August 2011 88. but has halted as input cost headwinds were announced – Believe that it should be traded at a discount to its peers 86Tuesday.Femsa acquisition synergies .      in 2010 – Net volume expected to grow 5% in 2010 – Expect signi※cant price increase to recover from the 1 extra RUB in excise and higher input costs – Positive results from Ukraine Asia 16% North&West EU 43% Eastern EU 41% 84Tuesday. 9 August 2011 89. RisksRisk & Conclusion & Conclusion • Upside risks – Geopolitical and macroeconomic factors causing FX appreciation – Faster West European recovery – Exceeding cost-cutting expectations in N&W Europe – In‼ation decreasing – Recent surge in raw material prices quick return • Downside risks – Russian government putting pressure on alcohol consumption – Geopolitical and macroeconomic factors causing FX depreciation – In‼ation increasing – Prolonged recession in Western Europe – Altering strategy for group. 9 August 2011 90. Risk & Conclusion Ratios ABInbev SABMiller Heineken Carlsberg 25 Breweries Average . Regional Breakdown • Northern& Western Europe – Weak top-line offset by strong margin expansion – Volumes ‼at during 2010 – Signi※cant improvement in UK – Expect a 1% decrease in volume in 2011 • Asia – Strong growth in volume 14% and revenue 17% – Contraction in Q4 2010 – Margin expansion of 280bps in FY10 vs FY09 – Expected regional strength to continue with 10% organic volume growth and 13% organic revenue growth 85Tuesday. 9 August 2011 85.Share price with room to grow .

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closeddistributionchannels. 12 pt ForceKeyDriversEffectonIndustryPro※tIntensityofRivalryHighconcentration.lowswitchingcostBargainingpowerofSuppliersSmallsuppliersrelativetobrewers+BargainingpowerofBuyersConsoli dationofindustry.9August2011 .highgovern mentregulation+Overallmarket0PORTER’s5Forces20Tuesday.Formatted: Font: (Default) Times New Roman.economiesofscale.highinnovation0Su bstitutesGrowingsubstituteindustry.distributionconnectedtoretailersThreatofEntryHighcapitalrequirements.

105.1%5.7%8.9012.3012.9August2011 «‹›» 1 /90 .3%7.3%3.304.2%2.408. 12 pt •Expansionintoemergingmarkets(Chinaworld’snextbigconsumer)020406080100ChinaBrazilRuss iaVietnamUSAMexicoIndiaThailandUkraineNigeria0%8%16%24%32%40%39.5%2.2%1.Formatted: Font: (Default) Times New Roman. 3%4.606.2017.9%96.0020.209.9%4.60BeerConsu mptionincrementalgrowth(2010-2015F)inmhlForecastcontributiontoindustrygrowth(20112015)GrowthOpportunities21Plato-March2011Tuesday.

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