Global Expansion Strategy for Royal Grolsch N.V.

Miko Abe Yuichi Saito Mitsuhiro Matsumoto Changjing Xu

Agenda
Brand introduction Challenge & Goal Market assessment Marketing strategy Operation Finance projection

GROLSCH INTRODUCTION

Brand Summary
Fantastic premium beer from Netherland Rated higher points compare to other brands Historical beer (Grolschs iconic introduced 1897) Got Royal title on company name in 1995 Swingtop bottle is a part of Grolsh brand Brand is aware in developed countries

Grolsch products
Grolsch Premium Lager <Bottled & Canned> (Strategic product / Premium segment) Amsterdam <500ml canned> (Sold at retail stores / Non Premium segment)

*Also deal import Belgian beer but small volume

Business Performance
Grolsch's worldwide sales (Volume) & Profit
New Plant building
7 6 5 Million hl 4 3 2 1

Grolsch's Business Global split (2007)

Australia & New Zealand, 1% Canada, 2%

Net Sales Net profit 35 30 25 20 15 10 5

U.S., 4%

Others, 5%

Other Western EU, 13% Netherlands , 50%

0
2000 2001 2002 2003 2004 2005 2006 2007

UK, 25%

Comparison of business performance

Company Headquarters Global Market Share 2006 (Volume) Total Volume (hl million) 2007 5-Year Volume Growth Revenues 2007 (Euro million) Revenues/hl in Euros 5-Year Revenue Growth EBITDA 2007 (Euro million) EBITDA/hl in Euros 5-Year EBITDA Growth SABMiller Heineken Grolsch
UK Netherlands Netherland

8.90% 216 13.30% 13,608 63 17.90% 2,946 13.64 22.10%

6.30% 119.8 7.10% 12,564 104.87 6.30% 2,292 19.13 4.20%

0.28% 6.1 -7.60% 333 54.6 10.45% 59 9.6 -3.61%

Issues
Low profitability after 2004 Lower consumption outside Europe Quality , but Volume

Current biggest Challenge

Recognized as higher quality compare to other international brands; however selling volume is too small than others (21st in 2006) e.g., Heineken <Quality 3.17> <Volumes 20.1 hl> Budweiser <Quality 2.72> <Volumes 9.9 hl> Grolsch <Quality 3.82> <Volumes 1.4 hl> Guiness <Quality 3.93> <Volumes 8.6 hl>

Huge Gap
Data source: Exhibit 2 on Grolsch case

Key Questions
Are we choosing right market? Are we playing at right segment? Are we distributing appropriate product? Are we doing right marketing? Who are our target customers?

Business Goal
To be one of the top 10 brands in worldwide Our target volume of Grolsch is 6.0 Mil. Hl to exceed Tuborg by Carlsberg
NON-DOMESTIC(INTERNATIONAL)VOLUMES ONLY
Brand 1 2 3 4 5 6 7 8 9 10 Heineken Corona Carlsberg Budweiser Amstel Stella Guinness Fosters Brahma Tuborg Brewer Heineken Modelo Carlsberg Anheuser-Busch Heineken Artois InBev Guinness Fosters/S&N InBev Carlsberg Volume Millions of HL (2006E) 20.1 11.9 10.8 9.9 9.6 9 8.6 8.6 6.6 4.9

21 Grolsch Grolsch 1.4

MARKET ASSESSMENT

Worldwide Beer Consumption

China & USA is 2 big market Most of developed countries consumption are slightly declining
Unit: 000s hectolitres

Total consumption in countries

Data source: Exhibit 13 on Grolsch case

Pros and Cons in China

Evolution of beer market segments
Pros Worlds No.1 consumption SNOWs network Beer market will grow Good marketing strategy will expand demand If successful, this contribute to Asian market.

Cons Low profitability - Price competition is fierce - Chinese brewers offers premium beers at 20-25% cheaper. Premium beer is only 5% in beer market. Urban people are interested, but not rural people. [ cultural aspects ] Alcohol should be strong. Beer is like juice.

Pros and Cons of USA

Worlds No.2 consumption Pros SABMillers network Craft beer consumption increases If successful, this contribute to brand establishment to markets all over the world

Beer market slightly declines [ Cultural aspects ] Import beer should be imported.

Cons

Source: BREWERS ASSOCIATION

 Worlds No.2 consumption SABMillers network Craft beer consumption increases If successful, this contribute to brand establishment to markets all over the world

Pros

Worlds No.1 consumption SNOWs network Beer market will grow Good marketing strategy will expand demand If successful, this contribute to Asian market.
SNOW should focus on mainstream beer

Beer market slightly declines [ Cultural aspects ] Import beer should be imported.

Cons Low profitability - Price competition is fierce - Chinese brewers offers premium beers at 20-25% cheaper. Premium beer is only 5% in beer market. Urban people are interested, but not rural people. [ cultural aspects ] Alcohol should be strong. Beer is like juice.

MARKETING STRATEGY

Re-launch Grolsch in US market Strategy by Segment

Premium Segment Distribute import product Swingtop Bottle only Selling at Restaurant, BAR, & Club etc. (no retail) Face to face promotion by serving staff of restaurant, BAR, & Club Premium Pricing
Retail Price USD 7.00 per L

Consumer Segment
Local Licensing Brewing (use Miller plant in US) Crown cap bottle Use same bottle shape of Miller; however color is green Not iconic sealed bottle, Use Labeling Distribute thru retail stores Selling Millars sales networks Reasonable Pricing
Retail Price USD 3.00 per L

Increase Brand Awareness Increase Selling Volume

Product Positioning in US
Grolsch Dry & Bitter Taste Local Brew Targeting Targeting

Grolsch Premium Swingtop

Slightly Growing
National Brand

Expanding
Craft Beer

Shrinking

Flat

US Market Outlook (2005 VS 2012) U.S. Non-Craft Budwiser etc.) Imports (Heineken etc.) Craft

Light Taste

2005 84.57% 12.50% 2.92%

2012 79.63% 13.85% 6.52%

Marketing Objective
Get incremental from expanding segment by Grolschs Craft beer looks alike features

Premium Segment

Earn Share from Heineken & Carlsberg

Consumer Segment

Data source: Beer Marketers Insights, Brewers Association, Nielsen Company, and Demeter Group estimates.

PROMOTIONS

Promotion in U.S. Market

Face to face promotion in restaurant or exhibition, BAR, & Club

Grolsch Girls

Grolsch beer assistance

Direct Speech Special Occasion

* Direct Speech 91.7% Special Occasion 85.7% The Influence of Culture on American and British Advertising: An Exploratory Comparison of Beer Advertising

Promotion in U.S. Market

Sale the culture and Brand image of beer lover

Sponsor events for Grolsch culture

No-elite advertisement

Grolsch is beer lovers partner

Individualism Achievement

Individualism 70.8% Achievement70.8% The Influence of Culture on American and British Advertising: An Exploratory Comparison of Beer Advertising

OPERATIONS

Improvement of operation
To improve the operation rate of the new plant in Netherland by expanding premium segment in U.S.
For reducing logistic cost, by shift operation of consumer segment to Miller plant in U.S

Contribution to Financial statement

Marketing Strategy
Grolsch premium (Swingtop Bottle) 0.5hl 1.0hl (2012) Grolsch Consumer 2.3hl 5.0hl (2012) Sales 332 Mil. (2007) 507 Mil. (2012) Advertisement 5% of sales (2007) 10% of sales (2012)

Operation Improvement
Operation rate of factory 50% (2007) 100% (2012) Reduction of shipment cost 35 Mil. as of 2012 (license fee + 5)

10.00 9.00 8.00

Sales Projection
0.24

70% 60%

7.00
Volumes (Mil hl) 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2007 2008 2009 2010

0.24

1.04

1.84

2.64

3.44

50%

40%
30% 20%

3.05

3.1

3.1

3.1

3.1
2011

3.1
2012

10% 0%

Others AUS CAN US Other EU UK NL % of Grolsch brand % of Amsterdam etc.

% of sales (volume : 2007)

Others CAN AUS US 1% 5% 4% 2%

% of sales (volume : 2012)

CAN AUS Others 1% 1% 3%

Grolsch Our target is 6 hl

Brand
Grolsch (Premium) Grolsch (Consumer) Amsterdam etc.

Other EU 13%

6.1 hl
(WW share 2%)

NL 33%

Vol. (hl)
1 5 3.3

NL 50%

US 37%

9.3 hl
(WW share 2.8%)

UK 25%

Other EU 8%

UK 17%

Financial Projection
As it is

Our Strategy

NPV
600 500 Net Sales (Mil 400 300 200 100

153Mil.
(growth rate = 0 %)

822Mil.
(2007-2012: CAGR 8.8%) Growth rate = 7%
12% 10% 8% 6% 4% 2% ROS

Net Sales Net profit ROS

0 2007 2008 2009 2010 2011 2012

0%
*WACC=10%, including Terminal value

Summery
Our business goal will be achieved by renewed marketing and operation strategy. Acquisition of Grolsch will contribute to portfolio expansion and branding of SABMiller.

APPENDIX
Market Share (Volume)
InBev Belgium, 12.70%

SABMiller UK, 8.90%

AnheuserBusch US, 8.80% Heineken Netherlands, 6.30% Carlsberg Molson Denmark, Coors Modelo 5.20% Mexico, US/Canada, 2.70% 2.90%

Others, 52.50%

Grolsch Netherland, 0.28%

Australia & New Zealand, 1% Canada, 2% U.S., 4%

Grolsch's Business Global spilit (2007)

Others, 5%

SABMiller (2007)

Other Western EU, 13% Netherlands , 50%

South Africa, 21%

Europe, 22%

Africa and Asia, 8%

UK, 25%

North America, 26%

APPENDIX

Reuter news
Chinese brewers are offering premium beers at 20-25 percent cheaper than foreign brands and utilizing their extensive sales network, undercutting foreign brands. Premium beer 45% (foreign brands), 55%(national brands), domestic brands have more advantage of cost-cutting.