WORLD TELEVISION
Heineken
Financial Markets Conference Lagos Nigeria
Day Two
Heineken - Financial Markets Conference, Lagos Nigeria Day 2
Introduction
George Toulantas, Director Investor Relations
I hope you enjoyed the market visit last night and had an opportunity to see first-hand
how Nigerian Breweries is executing on its brand of commercial strategy in the market
and also saw how they're activating strongly, particularly in the high ends as well as the
beer parlour channels.
This morning we have three presentations, followed by the brewery visit. We will hear
from Lieven Van der Borght, he is the Regional Commerce Director for Africa and The
Middle East region, followed by Samson Aigbedo, Head of Brewery Operations, and then
René will provide us with some concluding remarks as we wrap up the conference.
So let me introduce to you Lieven, Lieven joined Heineken in 1993 as Commercial
Director of Heineken's operations in the Democratic Republic of Congo, he subsequently
also held the position of international marketing manager for the Amstel brand for three
years and from 2002 he was General Manager of Heineken's operations across a number
of countries, and since 2010 he's been a Senior Regional Commerce Director for Africa
and the Middle East, based in Amsterdam. So Lieven, I welcome you to the stage.
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
Good morning everybody, I see that you all have survived the deep dive in the Nigerian
beer market so that's positive news. I'm happy to see you all again this morning fresh
and full of attention for this presentation.
So today we will talk about the commercial strategy that we have for the Africa, Middle
East region, so far we have not talked about the Middle East but it's good for you to
realise that we are not only operating Africa but we have some operations also in the
Middle East, like Lebanon and we have a joint venture in Sirrocco and also today, most
of the presentation is about Africa but most of the things that I talk about we apply as
well in the other regions so the Middle East.
So, the global Heineken commercial strategy is axed around 3 pillars; we want to be
consumer inspired, we want to be brand led and we want to be customer orientated, so
it's obvious that in our region, we follow the same principles. And what I'd like to do
today is in each of the pillars go a little bit deeper, give you nice examples of how we do
these things in our region in a slightly different way most probably than what is
happening in the rest of the regions of the world, in the Heineken NV.
So first of all, if we talk about consumer inspired, we need to know what the consumer is
thinking, we need to know what is the preference of the consumer, what is he looking for
when he drinks alcohol, when he drinks beer. And in order to get these insights we have
a lot of tools and research systems that we have in place in the region to make sure that
we have all this information up to date for all the markets that we operate in. So the
first one I will briefly talk about is the fundamental meaning of beer.
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This is a qualitative study where people sit together in focus groups and they're being
asked what is your perception of alcohol in general, what is the perception of beer, what
do you think of wine, why would you consume wine, why don't you consume alcohol, and
we put it in the framework of the mind of the consumer without going into the
quantitative analysis. Also, our brands are discussed and a competitive brand to see
where they fit in the consumer mind map of the people that we are working with. This
gives us very insightful information because it's changing over time.
So it's not that we do this study every year because that would be too much work but
we do that every 3 years in most of the markets and we see a gradual shift of what
people are perceiving as beer market, as our brands, competitive brand. And maybe
one of the major changes that we see over time is that more and more people are
looking for more diversity in consumption, not only of alcohol but also in brands. And
then later on you will see that also in the brand portfolio that we have in the different
African countries, we try to accommodate that by having broader portfolios than what
we used to have in the past
The second study we do every 3 years in all the markets is usage and attitude study,
this is quantitative so there you really interview a sample of probably 1,500 people and
you ask again, on their consumption habits, on what they drink, which alcohol they
consume, it's with age brackets, it's with social stages, Class A people, Class B people.
So they have quantitative insight in the consumption pattern of our consumers
throughout the region.
The third one is brand health tracking and that's a nice one because of course, we spend
a lot of money in doing marketing activities in all the countries that we operate in and
we'd like to know on a regular basis, what the effect is of all the investments that we
have done on the consumer perception of our brands, so what do they think the brand
stands for, and that's why we do the brand health tracking on nearly a quarterly basis in
the biggest in the biggest Op Co, half year in the semi big companies and the small
companies like Lebanon, it would only be once a year.
In such a brand health tracking, we are going to follow all the brands that we carry in
our portfolio, all the brands of our competitors and we're going to look at different scores
and the main score that we derive at the end of the research is the equity score, and
that's a very simple one, so people just have to score on 1 to 10. If you had to give a
score point on a scale of 1 to 10 to this brand, how would you rate it? And then people,
for instance, Heineken scores, in a lot of countries 8 out of 10, which is a very high
score. So 8 we are really very satisfied with the work we have done.
And later on we can see to the different pillars that determine this equity score and the
main pillars of authority, it's about credibility, how credible are you as a brand, what
about the quality of your product, do they appreciate the liquid that's in the bottle, it can
be about approval, how well do they know how their brand is positioned, is it really
answering their aspirations in their lives.
Like Heineken is Be a Man of the World, if people really feel that that is a brand that is
giving them what they're looking for in beer consumption, the score of approval would
be very high. And close to this, how do you relate to this brand, is there any
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engagement with the brand in daily life, and that is something, when you do not have
sponsoring, the score will be very high on closeness.
So these are the 4 parameters that we measure every quarter, for instance, in Nigeria
we do that. When we see that something is wrong with the score, it's easier for us to
take more active action during the year because we know exactly which levers to pull to
get higher scores on every parameter that we talk about. And also for the 3 year
planning, we use this as a base of information for where we start to do the 3 year
planning for all our brand plans.
Another one is an affordability study, affordability we have talked about a lot - so it's one
of our key issues in the African market, so that whatever we do with pricing, we have to
make sure that we balance, say short term profitability with long term sustainability and
volume, say requirements of our breweries. We are here to sell a lot of beer, of course,
so we have to be careful with pricing. And in order to take the right pricing decisions,
we interview consumers again in 25 of our markets in Africa and the outcome of the
research tells us, for instance, how many hours does an average brewery worker have to
work to be able to buy one bottle of beer.
Yesterday in the presentation of Boudewijn from Consolidated, it was mentioned already
that for Africa, a normal worker in Nigeria has to work 2 hours to be able to buy a bottle
of beer. So that means clearly that beer is, and we call it often an affordable luxury, so
it's not an everyday product that people can just go and buy so they really have to work
hard for it and so we have to make sure that our brands are aspirational so that they
feel good consuming our brands.
The next one is what you see here, it's a more complicated way of looking at the market,
it's what we call consumer mapping and segmentation and that's something that we will
not do every year because it is very time consuming, it's very expensive, for instance, in
Nigeria we interviewed 6,000 people in the market to get to the final result.
What we do here is on the Y axis, we have consumer typologies, so young urban guys
can be people who are unemployed but they get around by doing little jobs, that's the
typologies I want to aid here on the slide, and we cross them with need state, so when
do you want to drink alcohol, when do you want to drink beer. Going out with your
friends or having a wild night in a discothèque, for instance, when we cross all these
consumption occasions with consumer typologies, we can determine super segments,
and super segments are a combination of different typologies, different need states that
have similarities.
We can quantify because of the very extensive research we have done, we can quantify
how high is the percentage of beer consumption in these super segments and what
you're then going to do is put our portfolio against these results and see that the brands
that we have in the portfolio are really positioned in one of the segments, yes or no, do
they really fit well? Or is it still a wide spot on the map so that we are probably forced to
go and look, can we not launch a new brand to really satisfy the needs of this super
segment?
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So this is a very powerful tool that we use more and more in Africa in order to really
broaden our portfolio and make sure that we can respond to all the needs that are
emerging in our different markets on the African continent.
Consumer insights in the next one, consumer insights is something that is really
important for all the marketeers in Africa and it will come, not as a surprise to you that
all the marketeers that are working out of Africa have to go through a consumer insights
course where they learn how to get consumer insights. And it's a very systematic
approach where you can find out what are people really looking for when they buy a
certain brand, so what do you want to show, which benefits are they looking for. And
based on these consumer insights, we make what we call a brand in a bottle for all the
brands that we have in our region.
So the brand in a bottle, so it's a pictorial way of depicting, so it's looking at the bottle
from the top to the ground and in the middle and the different segments are first you
start with the consumer insight, then we're going to look at what is the role the brand
plays to satisfy the consumer insight that we have found after this deep research, which
are the benefits that the consumer is looking for, so it can be emotional because he feels
good when he can show he is drinking Heineken because people respect him. It can be
social because he wants to belong to a group of friends as they all drink the same beer.
It can only be functional, it just has to be a refreshing beer and we don't care too much
about the brand, as such.
So these are the 3 benefits that people are looking for when they drink beer. What are
the reasons to believe, so that is intrinsic in the product, in the brand, in the DNA, it can
be it's brewed with 100% malt, it is brewed with European ingredients.
The personality, we found through research always the brand has a certain DNA, there
are things that you cannot change, so whatever you do with the brand it has to be in line
with the DNA, with the personality of the brand. And finally, you have to determine
which are the people that we are really addressing more in particular in order to focus
your attention and all the activities that you later will do.
This is the basis, I would say the bible or the charter for all the work that marketeers will
do in the region with their brands. So the first thing that they have to do before starting
to work and before starting to do marketing is make the brand in the bottle for every
brand you have in the portfolio because that will guide them for all the investments in
ATL, BTL, all the promotions, all the sponsorships. So everything that is done later on
has to be done in line with what they have written out in the brand in the bottle. And it
speaks for itself that these brands in a bottle are monitored by our people in Amsterdam,
so there's a high quality and it's right on spot to become good marketeers.
Then - innovation. Innovation is, as in all the beer markets, an important thing to do
because you have to keep surprising your consumers. And if you talk about innovation
in Africa, it means different things than what you would expect in Western Europe. Like
the first example that you have seen over the last days is the Star bottle with the neck
foil, normally you would say ah neck foil, we have seen it in Europe over the last 50
years so what's new about it? But in Africa these little things can really mean
innovation.
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So no brand in the mainstream market in Nigeria has ever a neck foil, so when Star does
it, it's real innovation for the consumer and it really builds brand equity again. We see
also in the volumes that there is again a take-off of the Star brand once we have
introduced this neck foil. So simple things which are known for a long time in Western
Europe, can really constitute innovation in Nigeria
Another example that was mentioned yesterday is cans, so we have cans in Europe
probably for the last 40 years, in Nigeria the first beer can was only introduced 4, 5
years and that was a real innovation and it really drove the beer market again, it
increased consumption. Why? Because it creates new consumption occasions for the
consumers, before they had to go to the beer parlour, drink the beer, now the cans they
buy in the provisional stores which you see growing because of this can phenomenon
and you create new segments in the market, new beer occasion and that drives again,
the total volume and the total consumption in the Nigerian markets. So these little
things can be very important in driving beer growth in Africa, Middle East.
The second example that I want to show is again, something that is not new for you, it's
a light beer. Almaza is our market leader in the Lebanese market, that's over 50%
market share. But we see that a lot of Lebanese and particularly women, think the beer
is too bitter, it has too much alcohol and it maybe has a bit of fattening image so it's
better not to drink beer.
So this is a simple one we launched this summer, Almaza Light in the market with 33%
less calories, it has less alcohol and less bitterness and it has been a huge success from
the first season, so we have market share of Light of over 5%. And the beauty about
doing innovations is that when you have a successful innovation, it radiates also onto
your mother brand. So it's not only increasing the volume of Almaza Light but people
get another view on the mother brand, oh this brand, my brand, it's really innovative
and they have a more positive perception of the brand than it had before. So these are
nice examples of little things that we can do in the market to change.
Another big innovation that we did 4 years ago in Lubumbashi where we built a new
brewery is beer PET, and also there so in Eastern Europe it is something that has been
done for a long time, in Africa this was the first place beer PET was being sold. Again,
what does it create? It creates new consumer occasions, so again, the consumer can
buy the beer PET bottle and take it with him when he's travelling, he can reclose it so he
doesn't have to drink the one litre in one go, he can close it again and drink it again later
on when he's thirsty again.
Also for us, most of the operations in Africa are operations with returnable packaging.
Now, if you have a country like DRC, which is a huge country, it's much bigger than
Nigeria, sometimes beer has to travel 2,000 km and there's no more or hardly any roads
left in DRC. So in order to get the beer to these remote places, it's much better to work
with PET bottles because you don't have to get the returnable packaging back, so it's
much more cost efficient to just have PET, send it out and you don't have to care about
getting the bottles back.
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And for the environment, I can assure you that these bottles are reused by the local
people to put any substance in because they love to have bottles that are re-closable for
their household.
Also for exporting, so from Lubumbashi we export beer into Zambia and even lower into
Zimbabwe, it's all done with the PET, because also for export operations, a PET bottle is
the best thing you can imagine.
Next to it you see the Fayrouz bottles that you also have seen in the glass bottle during
the market visit yesterday. For Fayrouz, also we introduced a PET bottle and that's 2
years ago and it has been a tremendous success, and why again, because it creates new
consumer occasions, it's really for on the go. People buy it, it's 50cl, they don't have to
consume it immediately, they can take it with them in the car and when you're stuck in a
traffic jam you can slowly drink your Fayrouz. So it's a perfect product innovation for
the Nigerian market on Fayrouz. So we are confident that this will help to grow and
boost the sales of Fayrouz in the coming years.
Now, these are little things, new packaging, line extension that you can do and the
ultimate innovation of course, in a market is when you really start with a totally new
brand. And this is an example of a brand that was launched 4 months ago in
Lubumbashi, it's called N'Tay, now why did we have to launch a new brand to
Lubumbashi? It's a very interesting story because we had already 5 breweries in the
DRC region, we decided to build a brewery also in the south east, so in Lubumbashi, the
capital of Katanga and the obvious choice for us for the portfolio was okay, let's copy our
successful portfolio in Kinshasa, we launch it in Lubumbashi and we will get our 60%,
70% market share as a fair share immediately.
Now, this was not true. Why? Because the people in Katanga are people that don't feel
very DRC like and whatever comes from Kinshasa, to them it's far away, it's the capital
and they don't really like it. So we ended up with people drinking the Primus which is
marketed all over Kinshasa, all over DRC, the only people who were drinking Primus
were the ones that had come from Kinshasa, which is a very small percent of the local
population, so we had to start from scratch and come with a new brand.
This marketing thinking behind, there is a lot of little cues that we will go through, we'll
go through some of them. First of all, the name, so N'Tay means Eagle in Swahili, so
the name that we were looking for had to be local connotation, so you could not come
with an English name or a French name, so we really had to show the people this beer is
your beer, we have put it in your own language because the language in Kinshasa is
Lingala, it's different in East Congo, it's Swahili, so that's why the first decision we took
is okay, the brand name has to be in Swahili.
Then we took different elements that are characteristic for the region, so for instance, on
the label you see that we map out the Katanga region as a province, also the colour
codes of the whole bottle is white and red, the colours of Katanga and there are some,
what we call, copper crosses that you see everywhere, it's also a symbol of Katanga
because it's the money that they used to pay with 100 years ago before the Belgians
arrived in the Belgian Congo. So all these elements together give the message to the
people hey guys, this is a beer inspired by you, for you, specially brewed for you.
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And last but not least is the animal, so why did you take an animal as a symbol and the
name of the brand, and that's also a very nice story because our competitor in
Lubumbashi is Simba and you all know Simba, what it means, it's a lion. So the other
brand that was there was a tembo, it's an elephant, so we had a hard time looking for
which animal can be stronger than an elephant and a lion. So we tested different
propositions like kiboko which means a hippopotamus, yes that's nice, it can be strong
but it's a bit too fat for us so it's not really aspirational.
So we went through the whole series of animals, like a crocodile we did and then said
ah, but we don't have a lot of crocodiles in Lubumbashi so it's not an animal from our
region, so we ended up with, and it's a proposal by the consumers, they said why don't
you make it an eagle because the eagle flies all over the rest of the animal kingdom and
nobody can touch him. And so that's why we came with N'Tay and the eagle on the
label and it has been a tremendous success.
So it looks like basic simple marketing, there's a lot of thought behind it and it really
pays off because after 3 months we already have 5% of the market in Lubumbashi and
we aim for 10% in the coming year already. So it has been extremely successful.
A little thing that you don't see is also behind it is what we call a back distortion,
because the market leader in Lubumbashi is Simba and it has a 73cl bottle, now this
bottle is 65cl but the consumer would not at first sight see that it's not a 73cl bottle
because their height is exactly the same and so it's just another shape of bottle and it's
not that we don't mention it, it's mentioned on the bottle 65cl. But by having less beer
in the bottle you can really position it slightly below the market leader without the
consumer being suspicious, he will just buy it. And so, all these elements together have
made it a real success in the south of DRC.
So that's the last big innovation that I'd like to talk about, so really coming with new
brands. So it still happens today. So yesterday somebody asked me can you still launch
new products and the answer is yes. So you have to do it carefully and it's something of
a last resort but we know how to do it and we know how to do it successfully.
Brand health tracking, I told you this is an example of the affordability studies, and so
with the bars meaning how many hours the worker has to work to get to one bottle of
beer.
So, consumer inspired, the next chapter we talked about is the brand led, and I gave
you an overview of all the brands that we carry in our main markets in Africa, and you
immediately see that it's a lot of brands. So as I told you before, we are no longer
operating in markets where you have one brand, if you go back 30 years ago you would
go to Rwanda, there was only Primus and maybe Mutzig as a second brand, now today if
you go to Rwanda you will find also Turbo King, you will find Mutzig and you will find
imported Heineken. So it's really necessary over time to really offer choice to the
consumers because that's what they're looking for, that's what they're aspiring for.
The nice thing about the Heineken brand is that we have different categories that we
play in and we really have real strong brands in every category. So on top we have the
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IPS, we talked about it yesterday, in the IPS Heineken, you will find it in any country in
Africa.
Also the markets where we don't have operations, our export people have made sure
that in every country that you go in Africa you will find Heineken in the premium outlets,
so that's nice. But next to Heineken we have Amstel, we talked about it, so it's also
nearly 3 million hectolitres on the African continent, a really strong brand in Africa,
Middle East, but also other brands like Desperados, we do it in Congo, we do it on Ile de
la Reunion, we do Sol in United Arab Emirates. So all these brands, when there is
opportunity to sell them we will introduce them in the market.
Then we have the mainstream, we've seen examples of that yesterday a lot with the
Star brand in Nigeria. If you put the mainstream at price index 100 you will see that IPS
often, because these brands are often important, they are at index 200, even sometimes
250, which means that you create the big gap between the mainstream and the real
international premium segment.
So how did we solve that problem in our region? It's by launching regional premium
brands and the best example is Mutzig and I'll talk to you on that later. So these brands
are positioned at 125, 140 index and they play the role of really covering the whole price
ladder for the consumer in between the mainstream brand which is really the ceiling
where we want all the people to start. And then we try to pick them up and take them
up in the premium segment, first by regional premium brands and maybe later on from
there they can move onto the international premium segment.
We have not talked about all the local brands we have really some blockbuster brands
also locally, Almaz I mentioned in the Lebanon, market share over 50%. There is also
Bourbon which is called Dodo on Ile de la Reunion 70% market share. We have Tango in
Algeria, very successful. W
We also have the regional brands that we bought in acquisition of the Ethiopian
operation, Harar and Bedele which are strong local or regional brands with 70% market
share in the region where the brewery is located. Another one, a nice one is Stella in
Egypt, it's not the Stella product that we know from our competitor but it is our own
Stella with a completely different look and feel than the international brand and also
there, Stella is the market leader in Egypt and is the synonym for beer in Egypt it's
Stella. So 70% of the beer that is drunk in Egypt is Stella.
Then all the brands that we've seen locally in Nigeria, so I will skip this.
So, that brings me to the international premium segment or first the governance of
these brands which is important as well. So as I told you, we have global brands, we
have regional brands and we have local brands, the governance is different per brand
type. As for the global brands, the ultimate responsibility for global brands lies at the
global commerce brand teams. So the Heineken brand team will develop all the
programmes for Heineken, we roll out these plans often with local spin off in the markets
in Africa. So I've a regional marketing manager doing just the local brands for all the
countries that we operate in.
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The second category is the regional brands, these are the brands like Mutzig, Primus,
that you'll find in more than one country in Africa, the end responsibility for these brands
lie with me and my regional team and we are the ultimate decision makers on that, on
communication, packaging, line extensions, pricing, etc.
And the last category is the local branch which I mentioned, they are the ultimate
responsibility of the local Op Co, so they can do with the brand what they think is
necessary to be successful but we, as a region, will always closely monitor what they do
and if need to be, we intervene and have a veto also for some things that they will do
and say well maybe you're destroying the assets and the long term value for the brand
so it's better not to do it and then we intervene. But ultimately, all the initiatives will
come from the local operating company themselves.
That brings me to the IPS, I will go a bit quicker over it because also Siep has talked
about it, he has talked about it in the presentation of Nigeria. The major slide for you to
remember is this one. If you look back the last 6 years, the IPS segment worldwide has
outgrown the beer growth in the whole world. And inside IPS, Heineken has performed
better than the IPS so we have brands market share in the IPS.
Now, this same phenomenon you've seen Africa, but to a much larger extent, so it's
much more visible these trends in Africa through back to the last 5 years. So the beer is
growing on a CAGR 6.4%, IPS nearly 10 so 8% and the Heineken brand has been
growing 21% over the last 6 years. So we have had a tremendous success with the
Heineken brand in Africa over the last 6 years and we expect for the coming years this
strength will continue.
So this is the forecast of the Plato for the period to 2010 and you'll see again, that
there's 2 regions, we know that the IPS will continue to outperform the beer market, it's
Asia Pacific but also Africa, Middle East. So we have beautiful opportunity for our IPS
portfolio which is well staffed in well stocked in nice brands in Africa, Middle East region
and of course the main player in that will be the Heineken brand.
And also if you look back a bit, how Heineken performed, this has been shown before, so
we have tripled the Heineken volume over the last 6 years, our market share within the
IPS has gone up to 30% in 2011. And nice to know is that the second most important
brand in the IPS is our own Amstel, so Amstel also has close to 30% so if you combine
these brands we're well above 50% in the IPS segment in Africa. And it's a very nice
tradition that we want to strengthen in the years to come, with these brands but also
with the other brands in our portfolio like Sol, Desperados, we will find the markets
where we can operate them in the months and years to come.
So, the question that people often ask about - how can Heineken as a brand be so
successful on the African continent, I think there's 4 major reasons that we can mention.
The first, and it was also mentioned yesterday in the presentation of Nigeria is Heineken
has the first mover advantage in a lot of African countries. So we have been exporting
the Heineken brand to Africa already from the beginning of the 20th century.
Like yesterday, it was mentioned in Nigeria the first import of Heineken was 1950, so
long before any other brand in the world ever thought of exporting beer or the brand,
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Heineken has been present in most of the African countries, we have had our are sales
managers for a long, long period in Africa and even some of our board members have
had a position of selling Heineken in some parts of the Africa region. So it's something
that we are very good at and we continue to do.
So, for instance, last year our volumes just pure export were more than 30% up again
and also this year we're doing very well in all our export operations as well. So the
brand, first move advantage, it's also leaving the premium category. So no other brand
that you have had in your hands yesterday, this new fantastic bottle of Heineken with
the embossed and clear plastic label, there is no premium brand in the world that has
such a nice state of the art top notch leading packaging as Heineken has.
And also the African consumer is very sensitive to that and we've seen it again when we
launched a brand in Nigeria, there is a lot of interest in it from customers, from
consumers because it's really something that they aspire to just have in their hands.
And I have some stories also when we did research in Ethiopia before we entered,
people talk about Heineken and then people know about Heineken but in the far remote
areas of Ethiopia they've never seen the Heineken brand. And then you put on the table
a bottle of Heineken and their eyes go wide open and they all want to touch the bottle
and take it in their hand. So it's something magical, the Heineken brand, just the
packaging alone is very aspirational alone for all consumers on the African continent.
And it's the most aspirational brand again, so it's a nice brand. So if you're successful in
Africa and you want to show that to your colleagues, of course you can buy a fake Rolex
but the best way and the cheapest way to do it is just to drink Heineken and people will
see immediately oh this man, he's a man of the world, he's successful, he can buy
Heineken, he knows what he has to drink in order to be successful. So that is the role
that Heineken plays often in the market, it's a bit of a badge to show that you're a
successful person in your environment.
Also what I mentioned before, the equity scores of the Heineken brand in some of our
markets are really sky high and the highest in the world. And just to name a few in
Algeria is close to 9, in the Gulf it's above 8 and also Nigeria has very high scores on
equity. I'd like to show you a little video on the new packaging.
...............................................................
Video Shown
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
That is just to show you that being an international global brand, it makes things easy.
So this commercial was developed for Chile and we just have to send it to the Nigerian
marketing people, they will adapt it locally, so they don't have to go through very
expensive reshooting of all these things.
That's the beauty about global brands in the first place, but also the brands that I will
show later, the regional brands, so most of the advertising that we do, we just do
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
centrally and we just divide the costs so that people have more money to spend with
media which is really important to hit your consumer. And so, that is something we do
more and more all over Africa, use more and more of our means and we separate it over
different countries because we like to have more global and regional brands in our
portfolio.
The last one is, and it was shown yesterday in the Nigerian presentation, we do have
extremely powerful global brand platforms for the Heineken brand, all the
communications that you know, The Entrance, The Date - it's shown all over Africa, so
whenever we put a commercial on television, there is no more African commercial. So
we just use what is developed by the centre and we put it on air in all the African
countries and again, it permits us to have higher media budgets because we don't have
to spend money anymore on advertising development.
Football is really big in Africa, so in a lot of countries that I talked about export, the only
way that we support a brand is just beautiful packaging and for the rest we exploit the
UEFA Championship sponsorship and people know it, people have seen Heineken from
television, they watch the games because a lot of African players are playing in the
Champions League, for them it's very aspirational. The Heineken brand it's guaranteed
success in all of the places that we export our beer.
The next one is engagement, it's James Bond, also a question that people ask me, James
Bond, is that really relevant for the African consumer? And I can say yes. So for James
Bond, we have been doing premier VIP viewings in nearly 10 countries. So what we did
is the first showing of the picture was done for our customers, for our relationships, it
was done in Kenya, Tanzania, Uganda, we did it in Algeria where they don't even have
cinemas anymore, we did it in the Lebanon, we did it in Nigeria and we will do it in South
Africa as well.
So it is a beautiful way of engaging with your customers, a way of engaging with your
consumers and it's really very aspirational for all African consumers as well, James Bond.
We leverage the same in special packaging in our export markets as well.
Innovation I talked to you about, for instance, again, to show the importance of the
UEFA Champions League, last year we did what we call a trophy tour, which means that
we have a Champions League trophy, we bring it into an African country and people can
just stand next to it and take a picture. We have queues waiting, lining up for 4 hours
just to take that picture, like we did in Nairobi, we will get phone calls from the president
of Nairobi, Tanzania, they also want a picture with the cup. So it is an extremely
powerful platform for us for the Heineken brand in Africa and it gets nice pictures as
well.
So, that brings us to the second brand. So Amstel, Siep talked a bit about it yesterday,
he's shown the new Amstel commercial, The Boxer. And I must say that Amstel had a
bit of a bumpy ride over the years because you know we obtained back the distribution
rights for the Amstel brand in 2007 in South Africa and because the next day
immediately, all supply was stopped by South African Breweries.
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
So this means that we had to go into an import mode as quickly as possible, so it took
us less than 6 months, actually 5 to get the first beer brewed in Amsterdam or in
Zoeterwoude into the South African market, so that was the first step.
Meanwhile, we had decided to go for building a Greenfield operation, a Greenfield
brewery in Sedibeng in Johannesburg, so that was in less than 2 years later our brewery
was operational. So then finally we could start delivering, supplying the market again
with the Amstel brand. And then we had some changes in the packaging because we
went to a returnable bottle after a one way bottle, we reduced the size of the bottle.
So there were a lot of elements that hampered a bit the growth of the Amstel brand in
South Africa. Now we have come to a point that we say okay guys, now the time has
come to really take things seriously, go over the whole positioning of the brand, go
revamping the packaging which we did 2 weeks ago, we launched a new bottle with the
clear plastic label with the new neck foil with the new bottle size for the one way bottle.
And we see that these elements together now have put Amstel back on track to be
successful in South Africa. So the first signs are extremely positive in South Africa, we
strongly believe that Amstel is back where it should be in South Africa, so the preferred
brand in the premium segment.
Then the next slide, for that one I'd like to show you a video that puts you in the mood
immediately.
...............................................................
Video Shown
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
Léopoldville, the capital of Belgian Congo at that time and now it has grown in a real
super power brand in Central Africa because you will find it in the markets of Burundi,
Rwanda, Congo, Brazzaville and DRC and it's the market leader everywhere.
So that's unique, I think you can go and look around the world everywhere, where you
can find markets where this very same brand is market leader in 4 markets, adjacent
markets as is the case in Central Africa. So with Primus, we have really a unique brand
in our portfolio, a power brand for the region.
And it was there in 1923 and it has been evolving a bit over the years in the different
countries and each country went their own way. So we had a bit of diverging brand
elements in Rwanda, Burundi and so 3 years ago we decided it's time now to bring them
altogether, make sure that we have one feel and look for Primus in all the countries that
we operate from so that we can finally benefit from all the synergies in advertising POS
materials. And that happened over the last 3 years, so if you now go to Burundi, go to
Rwanda and drink your Primus you will have exactly the same label with the blue, yellow
and red as you find in the DRC. That means that from now on we can make
commercials for the brand that can be shown on television in the 4 countries.
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
I will show you a film, some of the communications for the Primus brand that we have
developed, it's for the DRC. The first one is to show you how creative we can play
around with nice notions like ultimate refreshment. So the idea of the first commercial is
how can we show people that the ultimate refreshment, when nothing else can really
refresh you, it's so hot outside, Primus will do it, Primus is the ultimate refreshment
beer.
The second one that I will show is in a series of new positioning for the Primus brand in
the DRC and the idea behind it is that life is very hard for the Congolese people again
and again because things happen, they have to work hard, they don't have the money.
And so the only joy often in their lives is at the end of the day and the evening, they can
drink their Primus together with their friends. And so what we say, okay, life is very
hard, there is a lot of bad things happening, sometimes we have bad luck because things
happen like it starts raining when we sit outside so we all have to flee inside, there is no
electricity so what do we have to do, or we want to go home and suddenly there is a
traffic jam.
So we show these elements of the hard daily life and then suddenly, thanks to Primus
you can still enjoy your moment because nothing can stop your rhythm with Primus. So
let's watch the videos.
...............................................................
Video Shown
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
So, our other blockbuster brands in the region is, example, Star, we have seen it
yesterday, I will not talk too much about it. But it is important for you to know again,
Star is not only market leader in Nigeria, so if you go to Ghana, the beer you will
probably drink is Star again because Star is marketed in Ghana as well. If you happen
to venture one day into Sierra Leone in Free Town, the beer you will drink is Star. So
Star is market leader in Sierra Leone, in Ghana but also in Nigeria. And again, a lot of
the elements that we use in the marketing mix in Nigeria, we can simply use in Ghana,
we can simply use in the Sierra Leone market as well.
Then we move to the more premium brands, so Mutzig is the one that was launched in
Cameroon in 1984, later on it was launched in Rwanda, DRC, Burundi. So again, it's a
brand that's present in 5 countries and it's the leading premium regional brand of the
region, so it's a brand more than a million hectolitre and the positioning is the taste of
success.
So again, the idea behind it is if you're a successful person you want to show that by
showing that you care for quality, so you only want the best products. So Mutzig will
show the people around you that you know what quality is and that you appreciate
quality. So let's take a look at the video
...............................................................
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
Video Shown
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
The next power brand is Turbo King, also we have seen the commercial yesterday for
Consolidated Breweries so I will not dwell on that but again, it is the leading brown beer
in the market in Rwanda, in DRC, in Congo, Brazzaville so it is an important player on
the market in Nigeria.
So, that brings me to the next chapter. So we have seen that we have been consumer
inspired, we have the nicest brand portfolio on the continent that we can imagine. But
now our problem is, so we know the consumers, we know that they like and they prefer
our brands but how can we make sure that our brands get to the consumer in time, at
the right place. And that's the chapter about being customer orientated, so it is the
route to market, so how are we going to make sure that we get our beer to the places
where the beer is consumed when the consumer needs a good cold beer, are we sure
that it will be our beer and not the beer of the competitor?
So in order to introduce you a bit to the world of selling beer in Africa, I made a nice
little video for you to give you the experience of what it means to be a seller of beer in
Africa.
...............................................................
Video Shown
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
So, that's what selling beer in Africa is all about, it's a lot of fun and we have very
dedicated and motivated people all over the place.
So, next I'm going to go deeper in all of the elements that were shown in the little video.
So the first question that we ask ourselves always when we talk about channel, sales
and distribution strategies, where do we want to play and in Africa it's a lot about finding
the consumer, finding the customer. If you would work in Western Europe and you
launch a new product, it's easy, you go in the Yellow Pages, you find all the restaurants
and you start working. Or you Google and you find the outlets that you want to go.
In Africa we don't have that, so we have no idea when you start working where the
outlets are, how many outlets there are, what are they selling, which are big outlets,
which are small outlets? So that's why we had to come up with a system in order to
know all the information and it's what we call the trade census. So while the trade
census will fly over Nigeria, I will talk a bit about what it is exactly.
So we start here, where we are today in Nigeria and I will go over the Google Map with
all the places where we have done the trade census and all the outlet points that we
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have gathered over the last 2 years. And so it's around one million points of sales that
we have in our database.
So when we started the trade census in 2000 it was all paper based, we just sent people
on the road with a map and a bit of paper and they had to interview all the people and
say which brands do you sell, how much do you sell, to locate the name of the outlet,
the owner of the outlet and that was of course, very time consuming and not very
perfect at all. So there were a lot of mistakes in it.
So 2 years ago we decided to make a step to go into mobile technology. So now, today
if we do a trade census, it's simple, you set the people on the roads with a mobile device
and all the information that is captured at the point of sale goes immediately to a server
in Canada to the situation room in the country and even in Amsterdam we can, on a
daily basis, follow all the outlets that we are censusing in the different markets.
And so what information do we get out of the trade census? Of course the outlet itself,
the brand name but also the GPS coordinate, so we know exactly where the outlet is,
when the guy sees and outlet he has to take a picture so you also can visualise where
the outlet is so you don't have to look to far where it is situated. We know which brands
they are selling, we know whether they have fridges, we know who is distributing there,
does he buy it from a distributor, does he buy from a supermarket, we know how many
times the sales rep comes by of competition of ourselves, we know the market shares in
that place. If the competition is strong in the outlet it helps us to determine let's go and
fight competition there because our competition is strong, is Heineken present, yes or
no, not present, ok that's where we concentrate on to increase the distribution of the
Heineken brand.
So it's a mine of information and Heineken is the only company in the world that has
now a database of over a million outlets on the African continent from where beer is
sold, with all this increasing and interesting data that makes you really in the driver seat
to have the right Channel strategy for the brands that you want to sell. I think we will
end again where we are in the Civic Centre in Nigeria, so this is Lagos and we are back
home in the Civic Centre. So there we are.
So the trade census is a powerful tool and it's our own invention, so nobody else has this
tool in the beverage world for Africa and we know it is a necessity in order to be
successful in the market. What can you do with the trade census? First of all you know
where to go and not where to go. T
This is Kinshasa, Kinshasa has 50,000 outlets, or 50,000 little red balls on the map but
of course, it's not everywhere where there is a lot of outlets that is interesting for you to
go. So where it's most interesting to go for you is where most of the beer is consumed
and these are the light yellow places because that's where people gather and where a lot
of beer is consumed.
So if you have to decide for the priority where to send my sales force, you will go to
places that are high yellow and not the scattered dots that you find everywhere because
this dot can be a place where they only sale 2 crates per week, so why should you
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
bother to let your sales reps go there. So you concentrate on there where the volume is
being sold.
Secondly, the trade census that we developed has to have a methodology that can be
used in any market. Why is that? We can have a huge operation like Nigeria, we cover
500,000 outlets with the trade census but if, for instance, we start our operations in
Kenya, Uganda, Tanzania, we all are only interested in the cities where we know that
people are probably eager to drink Heineken. It doesn't make sense to cover the whole
territory of Tanzania, let's stick to the big towns Dar es Salaam and.
So this methodology that we have, we can simply adapt it the way we want it to be in
the market because we own it, we have developed it ourselves.
The next one, it allows you to allocate your resources strategically. Why is that
important? Because, and that's the magic of the figures and as Mr Peretti (?) who found
that out. So if once you have your 500,000 outlets in Nigeria, you're going to take the
top or the top 10 outlets and what you see always in all African markets, these top 10
outlets account for 40% of the beer volume sold. That means that if you just
concentrate on the 10% of outlets that you find in your database, you will already cover
40% of the volume that's being consumed in the market. If you then add the tier 2
outlets, 20% you cover 70%.
So we are very efficient because we don't bother too much about this 30% and 40% of
the outlets because we know they sell not a lot of beer. So it allows you to focus your
attention and your resources there where it really matters.
Lastly, the actual outputs. So even the day after the trade census is done, a lot of
illustrations come out of it where people can take immediate action, and I'll show you 2
which are important, for instance, the bottom graph shows a t… we call it and on the X
axis, you have the market share that we have in outlets, so in the right hand line, that's
exclusive outlets, only our brands. On the left hand line it's only brands of the
competitors, so exclusive outlets of the competition.
Below this line it doesn't be bothered too much because the volume is too low really to
pay attention to it, so we're interested in the green dots, those are the ones where we
have a high market share, so we want to defend our market share there against
competition. And you do different things when you defend, because the red dots are the
dots that are occupied by competition, they have a higher share than we have or a
higher share than average, so that's where we concentrate our commercial activities on,
for instance, we can say let's try to convert the exclusive outlets in mixed outlets or
even exclusive now to us, then this dot will move from there to there.
It now shows only dots but if you work with it on a computer, if you hit the dot you will
get the outlet, you will get the name of the outlet, the brands he's selling, where is he
located? So you immediately can put your sales reps on this way to try to convert this
outlet of competition in your own outlet.
The other graph is below which we call a Push/Pull graph. On the X axis you have the
numerical distribution of the brand, for instance, the blue ball is Primus in Kinshasa, it
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has close to 90% distribution. Another ball could be this, it is Mutzig, it has only 50%
distribution but you see that wherever it is present it sells nearly as much as Primus. So
for us, what is the obvious thing to do if you have a higher margin of Mutzig than of
Primus, make sure that your Mutzig ball moves to the right side, that it gets a higher
distribution and we will make more profit.
So these are very simple tables that really help your sales team quickly to take active
action to change and to improve the situation in the markets.
So we have done where to play, the second is how to win. How to win is all about
channels, yesterday Hubert in Nigeria, they talked about strategic channels that they
want to focus on because we have a lot of channels and again, you have to choose the
channels that you think is most appropriate for your brands. In Nigeria, the choice was
the 2 major brands, the 2 major channels beer parlour that we saw and provision
source.
We do that in every country so we are going to look which are the channels that we
really want to focus on and once we have done that we see what drives success in these
channels, what does the customer really want from you if you want to be successful with
your brands. Maybe he wants a fridge, so he wants cold availability, he wants good
conditions, so nice margins and all these elements we research first per channel, so that
we can really determine what will be our activations in these channels that we will do in
order to be successful.
Once we have done the channel activation or the channel strategy, we will come up with
activation plans that our sales rep will have to execute in these chosen strategic outlets.
So it is a whole system with 10 steps that we go through after every trade census. So
everybody knows about it. Our team in Amsterdam comes over to the operating
company, we sit together in workshops, we go through the whole exercise and as an
outcome in the end we have an action plan for that operating company to be successful
and to win in a market.
How to win is not only that you have to have the channel strategy but also you have to
get your product to the outlets in an efficient and an effective way, so that's about route
to market. Route to market, also we have a system where we do route to market scans
where we go into the Op Co and we go through their current route to market. And we
do that every 3 years to see if it is still the right route to market for their current
situation because things can have changed, you can have more competition in the
market and probably it's better to do some of the distribution yourself direct instead of
going through distributors.
Other examples are here, for instance, strategic sales depots in Burundi, Burundi is a
tiny country but in the rural areas, people live far away from the towns and where all the
action is, still these people they like to drink beer, a lot of beer. You have seen the slide
yesterday for Burundi where you seen that for 50% of beer consumption in Burundi is
still home brews and why is that? Because our beers are not present everywhere
because sometimes we just don't get to the rural areas because no distributor wants to
go there, for us it's not cost effective to let a truck drive from the capital to there.
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
So what we decided to do was build strategic sales depots, it's a very simple thing. So
you have two empty containers, you put them on the left, you put the beer in it, one
right you put the soft drinks because you have Coca Cola offered in Burundi, in the
middle you have the empties, you put a fence around it and your depot is created.
We don't run them ourselves, we go and select a local entrepreneur who is willing to
work with us and he gets the franchise of what we call this strategic sales depot. From
then on, beer is always present, it's at the right price, because when beer is scarce in
Africa the price will move up immediately. By having this in place in the rural areas in
Burundi, we make sure that our recommended selling price is respected, we make sure
that there's no out of stock, we drive people from their home brews into industrial beer.
So it's a fantastic tool that we have developed in Burundi.
And again, we do this for Burundi but we have other problems maybe in other countries,
so we have not one solution for all of Africa. So each country is specific, each has its
own challenges, each country will have its own solution for the route to market.
This one is about professionalising the traditional landscape. You of course think that we
have given the car to the distributor, it's not true, what you see here is the pushcart in
front, so normally distributors in Africa are very, let's call it, lazy people, they wait in
their outlet or their little warehouse and people come and buy the beer. Instead of
going themselves and trying to sell the beer, they'd rather sit at home and wait for the
people to come.
So we advised them okay, if you really don't want to move yourself, why don't you ask
some young people, unemployed, create this little cart which probably cost 50 US dollars
to produce and ask them to take 10 crates in a push cart and go around and visit your
customers on a daily basis with a fixed routing.
So this system we tested in Brazzaville very successfully, so there was a plus 30%
volume growth for all distributors. So they're happy with it and it works very well and
we create little entrepreneurs. So these people also were unemployed before, now they
have a fixed job and they can earn some money by distributing our beer.
Another thing that we explained to distributors in Panama, also Congo, Brazzaville is, we
have in a trade census, the telephone numbers of all the owners of the outlets, why
don't we give you all these telephone numbers and on a daily basis you just do telesales,
so you don't want to move from your depot, no problem. But at least make a telephone
to all the outlets and ask do you need a crate of Heineken today, how is your beer stock,
do you have stock? And that's something that we delivered that we also tested out in
Panama and it has been very successful. So we help all the time, the distributors to
grow with us and to become more performing, because in the end, they will make more
money as well if they sell more of our beers.
The next one, this is investing in the right distributors. So we have also distributor
workshops where we have a way of scanning the distributors, is this the right distributor,
is the man ready to invest in say, van materials, or buying new trucks, is he willing to
invest in computers, is he willing to grow with us, does he have enough working capital,
is he ready to invest in packaging material? So all these questions, we also go through
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that with distribution, people from the Op Cos and see whether our distribution
management is right and how can we improve it.
For your information, so 90% of the beer that we sell in Africa is done through
distributors. So for us, it's the main route to market, so it's only a few countries where
we have direct distribution for the rest, we work through distributors. And we try to do
it in the best way, so strategically we're trying to reach the African consumer and
customer in the most efficient and effective way. These are examples, I will go quickly,
you can read them in your binder.
So the last and it's the cherry on the cake, it's what to do, why is that important?
Hubert mentioned that there is around 1,000 sales reps in Nigeria, if you extrapolate
that to the rest of Africa, we have 3,000 sales reps on the streets everyday in Africa,
they make on average, 15 calls. So it's close to 50,000 sales calls that we do every day.
Now, it's important that the man who does that does the right things. So of course, if
you let him go he goes to where he likes to go because he knows the woman who runs
the bar is a nice women, so what we have to make sure is that he's going to the right
outlet, that he does the right thing and that he does the promotions that we want him to
carry out in the outlets.
And that's why we developed a new system in the African region and we call it a perfect
execution. A perfect execution is again, based on a trade census, you have all the
information of the trade census, all the outlets, we have our channel strategy, we have
our channel activation and then out of our sales automation tool rolls the list of the daily
visits that the sales rep has to do, with the right address, the routing he has to follow
and what he has to do in the outlet. He has to check is the fridge still there, which is
very important, so we place a lot of fridges, sometimes they disappear, so the first thing
is, is the fridge there. Then is there electricity because if not, the fridge is nice but it
doesn't serve to get your beer cold, is there beer in it because sometimes the vegetables
of the morning market are in there, is it the right beer and is the beer positioned in the
right place.
So that's the things that the sales rep has to do on a continuous basis in the outlets and
this little system helps him with that because he has to make little ticks - every time he
has done the right thing, that we know he did the right thing.
Until 2 years ago, all this system was on paper base. So people had huge binders and
they walked in the shops, started using with the paper, now everything is on tablets. So
Hubert was showing that yesterday in Nigeria. We did the first test only 12 months ago
in Rwanda and it has been really successful, so that's why we decided now to do it in
Nigeria.
Nigeria has 1,000 reps so if it works in Nigeria, it will work anywhere. So this is a
system that in the coming few years will be rolled out all over Africa and so all our sales
reps will be walking around with tablets. So it's also something that we, as Heineken are
the only ones to do that for the moment in Africa and even Rwanda was the first
Heineken Company to do it worldwide in the Heineken world.
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
So with the technology that is now available in Africa, we got chances to make really
huge leaps forward to be the best in class and to be more successful in the market and
again, this perfect execution is a nice example of that.
And so, if you're a sales manager and you have an area, you can on a daily basis, see
what your sales rep has been doing, so you can follow did he go to the right outlets, did
he do what was required? Because each end of the day you've got to get all the reports
from your people on your screen and you can check whether they have done the right
things. And also the KPI, so Hubert told yesterday that 30% is fixed salary, 70% is
variable, so all this variable salary is determined by what the guy is doing, does he doing
the right thing and when he does exactly what he was told to do, he will get his variable
pay, and if not, he will not get it.
And we have a little secret as well, so these things are extremely powerful, so you can
imagine that the guy can say that he has been there and he just fills in that night at
home that he has done all the things that he has to do. But he cannot because there is
a system in it that you have to fill the things in, in a radius of 300 metre around the GPS
co-ordinate of the outlet. And we can even, during the day, follow where the guy is, so
in Amsterdam I can follow what the sales rep is doing in Lagos at that very moment
because there is a little red dot and you can just put it on the screen. It's magical.
Yesterday there was a question saying can you do more with all this information from
the trade census and yes you can, if you have the information where the richer people
live in a country, in which area, which neighbourhood, you overlay that with your trade
census and you know these outlets, we make sure that Heineken is prominently present
in these outlets because we know the people there have higher purchasing power.
So it has endless possibilities and we're looking forward to all the new things that we can
invent with it. Even ordering on the tablet will be possible in the future as well, so the
sales rep can do the sales order as well just by typing in the tablet and he gives the
instruction to the distributor who will deliver the next day to the outlet.
The system works, it's recognised also by our partners of Coca Cola because last year
Bralirwa won the Bottler Excellence Award for being the best bottler in the market in
Africa which means best performing on the point of sales because that's where Coca Cola
always puts the emphasis as well, a cold coke is a sold coke. So with our system we are
able to convince also Coca Cola, with results, that we are the best in class for the
moment. This was shown as well today, we are active in 8, we will go to 15 countries in
the years to come.
And then the last is, we have great systems, we have great brands but in the end it's all
about the people, so do we have the right people that can do all these nice things in an
effective, in a winning move, in a motivated way? So we are very busy always to
develop the local balance in the markets that we operate in and the way we do that is on
different levels and the first level that I want to show is what we do on the Heineken NV
level.
So there is the whole say, holistic programme in Heineken which is called the One
Heineken that all over the world we have the same systems, the same way of doing
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
marketing, the same way of doing sales and of course, as an Africa country, Africa,
Middle East region, we follow all these courses as well. All our senior managers have
gone through this marketing capability programme, Global Commerce University in
Amsterdam. They are following Global Sales Capability Programme as well.
And important for you to know is that we simply cannot send everybody to Amsterdam
because that's hundreds of people that we have to send out and that costs a lot of
money. So what we have done in Africa is we have created our own regional training
centre, one of it is in Lagos, the other one in Kinshasa for the French speaking countries
and in Dubai for the North Africa and Middle East, where all these courses that are
developed centrally by the Heineken NV people, are given to the local people by our local
people in order that everybody is as quickly as possible, up to date with the newest
thinking inside Heineken.
We also have our own particularity and it's called the AME Sales Academy and that's
something that we developed ourselves for Africa. Why? Because a lot of tools that are
developed centrally by Heineken can be very sophisticated and in a lot of that we don't
need too sophisticated tools as well, so we want to keep it simple. We have a lot of
names and you see there, essential selling skills, essential merchandising skills, so it's
not very complicated.
But for instance, essential selling skills, when a guy is on board in the company, he
follows that course for 2 days, we are sure at the end of it he will be successful in selling
our brands at the point of sale. So this essential selling skills is something that
everybody who is a sales rep has to go through in the countries.
Last year we developed a new system of doing it because also there we have 3,000 reps,
we can simply not do that from the centre anymore, so what we did is a new system
where we have Train the Trainer sessions, we have 2 in Nairobi, 1 in Lagos where we
select 5 trainers out of the operating companies, we tell them how to give these courses
and they in their turn, will give the courses to the sales reps in the country. That means
that we train 55 people and they in the coming months and that's what they have done,
meanwhile they have trained thousands of sales reps already in the countries. And that
is a system we want to apply for all the courses that we do, we have trainers trained per
Op Co and they will do the local training to their sales rep in the months thereafter.
We still follow up on the quality that is there because people have to fill out
questionnaires afterwards, did you like the course, was the content good, so that we're
sure that they are not deviating again from the standards that we have set ourselves.
The last slide is a nice one. So then we operate in countries, we give all the courses, we
do the distributor scan, we meet a lot of young people that are there in the company and
often we say oh, this guy is really bright, he's really helpful and he's smart so we think
that's a real local talent. And so for us then, what we say to the local Human Resource
Manager is hey, this guy really made a nice impression on us, we think he has talent and
we think he has a bright future or he can be a senior manager for us in the future in
Heineken. Can we not take him out for 6 months and have him work with us in
Amsterdam in a centre and then when he comes back you can give him a higher job,
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
more responsibility and he will be impregnated by all the Heineken thinking, all the
knowhow that we have in the company.
And that's what we call our Talent Exchange Programme and it's working very well. So
the example here is Thierry Nshuti from Rwanda and he's doing a great job but we have
tens of Thierry's waiting to do the same thing in our African operations.
That brings me to the end of my presentation. So you have seen whatever we do, we
put the consumers, the brands and the customers in the centre of what we are
developing.
Secondly, we are best in class, so our portfolio is unmatched by any competitor in the
region, we have a strong portfolio of international premium brands, a strong portfolio of
regional brands which are market leader in several markets, we fill up the gaps with
premium brands that are between the IPS and the local brands. And in the local brands
we have real blockbuster brands in most of the operations we work on, with equity
scores high about 8 with the right marketing, with the right communication. And we
know how to do it. And we have the capabilities to distribute the beer, to get the beer
where we want it to be so that the consumers can find it, cold, at the right price where
they will consume it and we have the ability to sell these brands because we have a
motivated and well trained sales force.
And what you see as well is that it's not static. So we try to innovate all the time, we
use the latest technologies available in order to make staff changes year after year in
the way we do business in Africa. And last but not least, we keep up our investments in
our brands and in the people to get to a higher level all the time. So that is our success
story in Africa, Middle East and so Africa is on the move and we are moving with it and
we are winning all the time. Thank you very much for your attention.
Applause
...............................................................
Questions and Answers
Robert, … Securities
Good morning. Two questions, during the slide you mentioned Star and Gulder, but
clearly Star, not being the major brand only in Nigeria and also in South Africa. Is there
any export link between South Africa and Nigeria in terms of beer products?
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
It's a good question because Gulder is being exported outside of Nigeria as well and
moreover, it's an important brand in Ghana as well. So the Ghana portfolio is really
mirroring what we do in Nigeria, so Star is the leading brand but our more premium
brand in Ghana is Gulder, so Gulder is more than just a Nigerian brand as well, so you're
right with your remark.
...............................................................
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
Robert, … Securities
Secondly, about the trade census, how often do you update the database? Such that
new outlets spring up every day, some outlets go under, some change the major
branding?
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
You're absolutely right, so a lot of outlets close and open all the time in Africa, so the
way to keep it updated again, with our tablet, it's a lot easier to do that than before
because there's information you can also capture in your daily sales routing of the sales
rep; so that you have a database that is updated nearly on a daily basis by the visits.
This being said, that will be done during the, I would say 3, 4 years after the first trade
census. But I'm convinced that we still have to do, in a period of 4 or 5 years' time,
another trade census in our countries to really start again from scratch and make sure
that we have the updated information.
...............................................................
Ryan Floyd, Barclays Capital
Thanks for the presentation, it was really fascinating. I have 2 questions; one is the
Amstel brand seems to be an impressive global brand but it's not present in Nigeria
outside of the malt, is that an opportunity or is that maybe something that you can't do
because it would be confusing?
And I guess the other question is, in terms of opportunity for, I don't know, expansion in
the future in markets where you don't currently produce but you export from Rotterdam
or the Netherlands, could you give us a rough idea maybe of the total African and Middle
Eastern volumes or sales that are exported from Netherlands versus actually
manufactured or produced in the countries themselves? You obviously don't have to
give us the exact number but are we talking 1% or 18% or something? Anyway, thanks.
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
So after doing the mathematics first, so it's less of the Heineken volume that is being
exported into Africa is coming from Zoeterwoude, so let's say more than 80% is
produced locally. That's the first question.
And the second question, Amstel Malta is extremely successful in Nigeria and you've
seen that yesterday in the presentation, it's drawing double digits for the last years, it's
becoming a one million hectolitre brand as well and it's successful also within the Muslim
population. So that's a particularity of Nigeria, so that Muslims most of the time would
not drink alcoholic beers but they do drink other malts.
Now, if you would consider coming with an alcoholic version of Amstel in Nigeria, it will
be confusing for these people and just a connotation that it could be a beer, can be
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
enough to scare them off and say we don't want this Amstel Malta anymore, so in my
opinion, that's something that we will not do in the near future.
...............................................................
Question
Just a question on, I guess you told us that the IPS segment is 9% of the African, Middle
East volumes, I was wondering if you could give us an idea of how the rest breaks down
in terms of regional, premium, mainstream and local. And then just focusing on the
regional premium segment, could you give us an idea of how fast that's kind of been
growing over the last 5 years and what your market share is, broadly speaking.
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
The problem with the question is that to really make a definition of what is really a
regional premium and what is not, is a difficult one. So some brands could be
considered as being regional premium, others would say oh it's an international premium
brand, it's difficult to state that.
But we see in our own portfolio and I take the Mutzig brand again that has been growing
consistently over the last 5 years at rates higher than 20% and so it's not present
everywhere, so also there to really give the exact figure, it doesn't make sense at all.
So you have to go to pockets and we never look at the regional premium segment as a
whole for Africa, so we look at it for our own operations and there we see that the
growth of these brands is by far, higher than the growth of our mainstream.
So you see, really a trading up of all consumers, up the price ladder, going from the
mainstreams and trying new brands, more sophisticated brands which is great for us
because it's higher margins.
...............................................................
Question
If it's not possible to give a market share within that, could you just give us an idea of
the 4 big international players in Africa? Is everyone kind of focused on that segment or
is it more you and SABMiller?
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
Yes. It's a universal phenomenon that you try to get your people to upgrade in the beer
market. And I didn't show - perhaps for instance, what we do is we make price ladders
and for example, DRC, so your premium would be 1,000 franc another brand but most of
our competitors and ourselves we also try to do that, make sure that on every step of
the price ladder we have the right offering for the consumer, so that for every pocket,
there's something that somebody can buy.
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
So the idea is that you don't go downwards, so that would be value destructive, so we as
Heineken, we never try to go below our premium because that's the way we don't want
to go, we want our consumers to up trade all the time, so it is a strategy that it's tried
also by our competitors.
We've been doing it for a long time already and that's the good thing about being first
with strategies, that you have taken the most possible spots already and others are
trying to sneak in some.
...............................................................
David Finch, BNP Paribas
Could you just explain to us a little bit more about your relationship with the
distributors? So who decides the terms of trade that are offered to the final sales outlet?
Who takes the credit risk if they don't pay? And do you provide working capital to the
distribution chain?
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
There's a lot of questions, let's start from the back. So working capital, this can be in a
form, for instance, and that happens often, it's in the form of packaging material. So
that they have an account where they receive the empties just on an account and we
add up when they ask for more packaging, we deduct when there's less packaging, some
of it they will have to pay over time, some of it is there and we give that as a kind of
working capital. So that's how we can help them.
Sometimes we help them to acquire trucks that they get better conditions from the
supplier of the trucks or they get a bank loan and so we help them in that, but that is
nearly as far as it goes.
The credit risk that they take towards the outlets, that's the beauty of the thing, so we
don't take the credit risk, so when they sell to the outlets it's their own risk that they
take, while we only have the risk of our distributor not being able to pay us. But there
are also, the credit that we give is nearly nothing. So most of what the distributors have
to buy in our region is paid cash, even sometimes they have to deposit the money on
the account, on the bank account and then we receive the proof that it has been put on
the bank account and only then we will deliver the beer.
So there is very limited risk in distributor management, that's one thing. It can be
higher over peak periods, if it's Christmas then sometimes you would give a bit more
credit to make sure that we fill the market with our brands and then we try to recuperate
it after the peak, in January as quickly as possible to reduce the risk.
And the conditions where they sell to their customers is really recommended by us, so
we know exactly what a distributor makes for money and it's really nicely calculated that
he makes good money if he does the right things. So most of the time the system is
that he has a base discount or rate that is real margin that he always gets off every
crate, so much naira or so much franc and on top of that, if he does the right things for
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
us he stocks all the brands in our portfolio, he gets one percent extra. If he goes himself
out to sell, he has a van to do that, he gets so much percent extra. When he runs a
promotion that we ask him to do, he does that and he gets so much percent extra.
So the whole distribution management thing is a very complex system which is really a
win/win situation for both partners and so that's why we are quite happy with the
system as well, so it has advantage for us, so there's less credit risk and on the other
hand, we can really steer them by the KPIs that we set with extra discount, so make
sure that they do the things that we want them to do.
...............................................................
Robert Einstein, ISI
Two questions. How do you think about, I guess, the risk of when you're putting a foil,
sort of a super-premium cue on Star, doesn't that dilute that and mean that you can't
use that when you may want to, at other times to develop the super-premium cues and
get higher pricing. Alright, you're getting some near term volume but you know, longer
term does that really make sense? That's question number one.
And question number two, on the Primus, I was wondering if you could talk a little bit
about, you know, it's been in Africa for 80, 90 years and had become local in a number
of countries and then you're making it regional, could you talk about that transition
given the fact that the localness and the local cultures are so important for many of the
brands and when you made that transition, how did you do it and what impact did that
have on volumes?
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
Last question first. So the Primus label, when you look at it, it gives you the feel it's the
same, so the blue and the yellow but for the local consumer, if we look closely at the
label you will see that there's small details which are different from country to country.
Like the flags that you see in the middle, it's the DRC flag, it's a Rwanda flag, a Burundi
flag. Back of labels are, that's the global country, it's often the local language as well, so
it's regionalised but still with a lot of local cues.
That's one thing. A lot of the commercials that I show when it's really about the
product, it will be developed for the whole region but if it's really with local people
having fun, often we have to still do the local commercials, so the brand will never feel
lost and lose its local feel, so I don't worry about that at all.
And as far as Star is concerned, what you have to know and you have seen it yesterday
in the presentations, although Star is the leader in the mainstream brands, a lot of
activation is happening below in the economy segment. A lot of these brands, they have
come in their own proprietary bottle, they have metallised labels. So Star each time has
to reinvent itself to justify the price premium vis-à-vis the economy segment. And that's
why the neck foil was a nice thing to do.
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
And even there is some additional reason to do it, sometimes we have seen that left and
right there was even fake bottles of Star on the market which people would open and
they fill with other beer and they'd put the crown cork back on. Now with this system,
nobody can tamper with Star no more. So it gives confidence to the consumer that it is
the real Star and that it is worth paying the money for.
...............................................................
Analyst, Harding Loevner
Two questions. The first one, how long do you think is the life of a brand? I've noticed
in one of the commercials for Primus, it's been the same bottle with, I don't know, the
past how ever many years, it almost seems like never changing, I'm just curious if the
younger generations tend to not drink their father's beer. What are your thoughts?
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
Yes, that is the right remark. So Primus, though you have seen that the bottle is the
same for the last say, 8 years, we do now see an accelerating in common with new
formats with new bottles. So for instance, the bottle that you see here, in Burundi we
have moved to a next generational bottle which is a bit more slim, more attractive, a
more younger model.
We're also investigating coming with smaller pack types because this bottle is 72cl and
not everybody likes to drink 72cl, they think it's a sharing pack, it's not so it's people
drinking the whole bottle on their own. So we're investigating now to maybe we can
come with small packs with one way bottles, so we have to become more dynamic in our
packaging, also for these powerful brands like Primus. So we cannot just sit still and not
do anything, so it is something that we are working on and investigating. Brands will
never die so premiums will never die.
...............................................................
Analyst, Harding Loevner
Second question. On the global sort of advertising sort of top down approach on
marketing, I just want to get your thoughts on that. Obviously there are synergies in
cost but also the downside associated with having commercial made for one culture and
used it in different culture. I just assumed that you evaluate the trade-offs and select
them to go with the global platform. How do you evaluate the development or how
effective the ads are received in the local sort of environment, market?
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
There's a lot of testing before the commercial actually goes on air. So we call it the link
test and it's done by definition always in South Africa, that's just the most important
African market for Heineken. But we can also tell global commerce, okay, we're not sure
that this thing really fits and if we put a lot of pressure that for instance, the commercial
will also be tested in Nigeria.
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
So before putting it on air, we still have means to tell the people oh stop, let's take a
look because we are not entirely sure that it's not hurting the feelings of some people or
whether it's appropriate or not but you have to have really solid arguments to stop
something that is coming from global commerce but we still have the means to do so.
That is existing material, when they are developing new material we will also have the
possibility to have input. So they will come to me and ask - hey Lieven for Heineken
what is happening with all the communication that we have so far, do we have any
remarks or things that could help us to really make it more relevant for the African
consumer. Then we give input to them, what we would like to see for the next
commercial. It's not that we're always listened to but at least we have the opportunity
to say what we think.
But so far, we have been very pleased with the results of these locally developed or
centrally developed communications.
...............................................................
Question
My question has to do with all the marketing training and product development that you
talked about and I'm interested in how much of a two way street this is. Where I'm
coming from is that Africa has the demographics, the technology leapfrog, very quickly
growing economies and right now all the aspirations are for European or high quality
European type products. But are you seeing either innovations in Africa for a product or
a process standpoint that you can bring back out to the rest of the company? And then
do you see innovations that will be Africa led from a product standpoint, like we've seen
in China where the aspirations are much more now for Chinese products instead of
foreign products, where do you see Africa fitting in your corporate development?
...............................................................
Lieven Van der Borght, Senior Director Regional Commerce,
Region Africa & the Middle East (AME)
So far on product development it has been very, very meagre so far, so that's the first
point. But a lot of the systems that I talk about here, like the trade census, perfect
execution are things that are developed in our region and we see that they are taken up
by Global Heineken and they become the Heineken standard.
So that really makes me proud. So a lot of things that we have developed is now going
around the world and has the best practice for your sales force, the best practice to get
to know your market and trade census can be used in a market like Cambodia just like
that. We get a lot of questions from people in the whole Heineken world when they
know what we're doing - hey can you help us because in Panama we'd like to do a trade
census as well, could you send somebody with experience. So we see that a lot of the
systems that we have developed are really appreciated outside Africa.
As far as product development is concerned, I don't have any - they still have Fayrouz,
Fayrouz is developed in Europe so it's a malt based carbonated soft drink and a lot of the
trends inside Western Europe today is that people are looking for something more
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
health, more cereal based and Coca Cola is not always the preferred choice for adults
because it's more your kid drinks Coca Cola, why should I drink it.
So Fayrouz as a product, as a concept, it's something that could really work in Western
Europe or America, for that matter as well, for health conscious people that look for
something beyond the normal soft drinks. But it's not there yet but it's also something
that's being worked upon.
...............................................................
George
We'll have to stop there because we are running 30 minutes over.
...............................................................
Coffee Break
...............................................................
Introduction
George Toulantas, Director Investor Relations
Could you all be seated please so we can kick off with the next presentation. Our next
presenter is Samson Aigbedo. I think Samson is an excellent example of the talent
development and retention focus of Nigerian Breweries, which Victor was referring to
yesterday.
Samson joined Nigerian Breweries in 1982 as a management trainee; he progressed
through various roles across production, packaging and the technology areas and has
been a manager of 3 of the breweries of Nigerian Breweries in Kaduna, Lagos and Ota,
before becoming Head of Brewery Operations earlier this year. So it's my pleasure to
welcome Samson to the floor.
...............................................................
Samson Aigbedo, Head of Brewery Operations, Nigerian Breweries
Good morning, ladies and gentlemen. A lot has been said about Heineken Nigeria,
Heineken Africa and Nigerian Breweries Plc. What I am going to do today is I am going
to show you what are referred to now as the back office, we're talking about commerce,
we'll be talking about serving and that in market. Nobody is saying much about the
breweries, the supply chain which we know is also the backbone of the business.
I have introduced - these are the building blocks of my presentation, I will talk about our
structure, our footprints in the Nigerian market. Then I will talk about our capabilities
and our supply chain in Nigeria. I will show you our performance indicators and after
that, I will also tell you a story about our involvement in the development and use of
local grains. I don't have films so it's going to be all figures and graphs.
This is Nigerian Breweries supply chain, as you can see from the chart, we have 8
breweries and some of these breweries are about 1,000km by route from Lagos, from
our head office and the question may arise, how do you manage these breweries from a
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
distance? It is so simple, each of the breweries is manned by a brewery manager who is
an associated manager in Nigerian Breweries, that it is responsible for running the
breweries efficiently.
How do we guarantee that? It is so simple also. Like Victor said yesterday we are a
target driven organisation, there are no schematics. At the beginning of the year there's
a letter for the president eventually cascaded to a letter from our MDC, Nico and then
our big boss, our boss in technical will also come. We distil it down to figures, because
when you see the letter from the president, it's qualitative, but in technical in a supply
chain that likes to deal with figures because that is where you can communicate, so we
drill it down to figure.
And then when you drill that information to figures, we agree on set targets, on the
various KPIs and on those targets, every brewery manager sign on behalf of his
breweries, he takes the figure back to his breweries and then also cascading that to his
team in the universal format that's been designed among all our eight breweries.
After that, every week for the large part of the KPI like volume development, challenges
that have to be sent to head office, sent the Supply Chain Director, as well as myself as
the Head of Brewery Operations. And then we review the performance of breweries and
ask relevant questions.
Every month again, a more detailed report is sent again to head office, to myself, to my
boss, the Technical Director and then we check again performance against result. If
there is a need to ask a question again, we'll ask the questions, if there is a need to
applaud we applaud the individual brewery managers and their teams.
Once in every 3 months we carry out what's called the quarterly performance review.
Myself, our control teams, we travel round the breweries, in some of the breweries along
with my boss, we go round the breweries, we put the facts and figures on the screen, we
the brewery brings in all local brewing management team, they are a part of it, you look
at our results, if there are gaps to fill we play the gap to fill back to them, we make sure
that action points are put on ground, that will enable us to close that gap for the
following quarter.
So you can see that right from our head office we have an effective way of monitoring
the performance of the breweries to ensure that everyone aligns with the aspirations and
ambitions of the business.
Currently in all our operational sites we have more than 1,900 employees, all of them like Victor spoke about yesterday, have gone through our technical training, which I will
talk about later.
In all our breweries, we produce a total of 11 brands and 28 SKUs in all our 8 breweries,
although all the brands are not produced in all the locations, but some - like for
example, our Lagos brewery, our Enugu breweries produce Heineken among the 8,
therefore Star and Gulder and Maltina, 5 of our breweries produce it. For the new
brewery we acquired last year, they already started producing some of the Amstel Malta,
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
some of the Legend. So we are covered in all our breweries to ensure we deliver these
28 SKUs of the business.
Of course, last year, Nigerian Breweries, all our breweries combined together, we have
able to produce about 10 million hectolitres in one year, last year. And I will tell you
that we are also involved in ensuring that we - researching and at the same time, using
local raw materials where necessary, where it is advantageous to us and we will talk
about those details later.
Here is our footprint and our capacity distribution. Everybody I have shown this graph,
this map of Nigeria in practically all the presentations by Nico our MCO, by Hubert also
yesterday. Now you will see that out of the 8 breweries we have, six of them are in the
south. When Hubert was making his presentation yesterday he spoke to the effect that
certain of our sales volume is actually in the south. And it should not surprise you why
almost 84% of our breweries are located in the south of the country.
However, we also have 2 breweries up north, that is a beauty for us, we are excited
about it because there is no competition of ours now that have any brewery, any
footprint up north, so we are well positioned in that part of the country.
I know your question was - after Hubert yesterday about our cost of distribution, this
should speak for itself. If all your infrastructures, your production for products are
located where it's certain percent, if 84% of your production infrastructures located
where a certain percent of your volume is sold, it tell a story about this distribution cost.
It means you are closer to your customer, you can't deliver to them.
You are going to visit Lagos brewery today, Moses said yesterday that 20% of our sales
volume is Lagos national. So you are going to visit Lagos brewery that is inside the
market that doesn't deliver its products outside Lagos. And what you see in terms of
distribution, because of this close knit footprint is that we are able, some of us trucks are
able to able to make two trips, two and a half trips a day. So we have turnaround, a
very fast turnaround of time. So, if you have that kind of advantage, your cost of
distribution without adding fuel - you will know it will be cheaper than the competition,
so it is a competitive advantage for us as a business.
And Siep telling the story, if you look at this chart, 16% of our capacity is up north and
then it's 84% in the south, again, where our market is. Capacity wise, all of our eight
breweries combined, you have an approximate 15 million hectolitres after the acquisition
last year. In might interest you to also know that we have 2 malting plants, linked to
what I said earlier on that we are interested in investing in the developing local raw
materials, we have 2 malting plants, an average of approximately 37 metric tonnes
capacity, these malting plants malt sorghum - to …. We run malt barley in Nigeria.
Last year we acquired the SONA Systems, 3 breweries. Myself and my colleagues said
that when the MD announced that we had acquired these three we said we went to bed
with 5 breweries, we woke up the following morning, we have 8 breweries.
You will know from a technical point of view the challenge that will pose on those of us
who were assigned to mentor those breweries and align them with the rest of the
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business. The strategy about this is that this acquisition actually helped to strengthen
our position in the market, it strengthens our footprint. We used to have 5 breweries; 4
in the south, 1 in the north but by this acquisition, we now have 6 in the south, 5 in the
north re-enforcing our print foots, re-enforcing our proximity to our customer and
making life easy in terms of our distribution.
And capacity wise, of course we will quickly acquire available capacity, approximately to
3 million hectolitres by acquiring those 3 breweries, that is what took our capacity, like I
said earlier on, to approximately 15 million now pan-Nigeria breweries.
Of course, we also talk about delivery cost advantage, where you are closer to your
customer, where you are brewing closer your customer, you have a delivery cost
advantage, that is what the acquisition of SONA Breweries have done for us.
Of course, the acquisition process was excellent it was done as times, it was done
professionally and at this moment, I am proud to say because I was a major player in
the process, I'm proud to say that it's gone perfectly well. The upgrade of the breweries
is still going on and it is going perfectly well. And by the time we are done, we are
again, strengthened in terms of production capacity in this country.
I will now take you to what I call our capabilities; we'll call it our world class capabilities,
what is this that is making us tick, what is giving all the strength, what is our strength as
a supply chain in the Nigerian Breweries within the Heineken world? I summarise it by
saying that we have basically three building blocks, the first of which is our human
capital development, represented by our Technical Learning Centre; I will talk more in
detail about that.
The Technical Learning Centre, you know take people - Victor said yesterday that we are
probably the only one in this market that does not require people to have experience
before they come to Nigerian Breweries, before you are employed. So when you are
employed green what happens is this Technical Learning Centre imparts knowledge on
you, changes your culture and creates that DNA that Nigerian Breweries is known for,
that enables Nigerian Breweries to drive performance, to move forward - our expansion
of them.
And after that, we have the Brewery Comparison System which is a Heineken tool for
making sure that everybody - it is like you in a glass house, you put your performance
there, the whole world can see it, it's also a competitive advantage, that I will also talk
about in detail.
There we have the Total Productive Management, the TPM system which we have been
implementing since 2005 in Nigerian Breweries, and the advantage of that is that TPM
brought structure to what we do, not only that, like I was talking about it later, we make
sure that when we say we will make an improvement, that improvement sticks.
Overall, if you look at this three unit, it has given us an advantage because it has helped
us to improve our efficiencies, our losses are reduced, we are gradually continuing to
reduce our losses and we are able to create high performance organisation in the
process. Through this we have had internal competition among ourselves, among our
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peers, within the Heineken world. We are able to help to provide a 'stick with us' value;
of course our employees are happy because they have to pass through this process.
And then the ambition of Nigerian Breweries to be market and cost leader is fully
supported by this programme.
I start with the Technical Learning Centre, one of our biggest capabilities because we
know if you want technology you can buy it, if you want stainless steel you can buy it
and weld that together, but one of the most difficult resource for an organisation to buy
and weld together is the human resource. So the existence of a technical training school
in Nigerian Breweries dates back more than 40 years ago, I went through it and I am
already 30 years in this business and I know what it is all about. What is even more for
me as a person, I'm attached to it because I have also been a teacher in this training
school and we know for the past 40 years it can never be wrong.
We are - just like we upgrade our production infrastructures, the training school also got
a lot of transformation. It is fully equipped to train new hands and to constantly retrain
the old hands. If you go to our Technical Training Learning Centre you will also see
modern equipment that we use to train our people on modern installations.
Before we bring in new technology, this is where it starts so that as you are upgrading,
when you go to Lagos brewery later today I am sure you will be taken aback to see this
kind of installation exists in this part of the world. And I'm always proud to say, like
Victor said yesterday, the Lagos Brewery is manned by our people and from day one,
that we executed the upgrade, our people have manned it and we've got the synergy
that we want, we desire from it and it is there to speak for itself. When you get to the
brewery today, you will see it.
This learning centre reinforces the human resource angle to bring you the best
worldwide. And we're bringing the best Nigerians who are green, who just left
university, therefore they are not encumbered, they have no handbag, that's the
advantage.
Here, you are transformed, in our Technical Learning Centre you are transformed, you
are made a real Nigerian Breweries person. You are you know that you are, the required
technical knowledge is connected into you. The competency required for you to work on
your own when you get to the plant, is incorporated into you and that DNA - it can be
done, if it has to be done, it has to be me, they never say that attitude, they're never
giving up, they're a very ambitious team of Nigerian Breweries that has created in this
training school. And when you are out of this place, like we always say, you will never
be the same again.
One thing is clear, the recruitment process for Nigerian Breweries for which also have
been evolved on behalf of the technical division, is very, very tight, it's a big fun a lot of
people go to the fun day at the beginning then you are sieved out. If you pass through
the recruitment exercise and you're now asked to go to the training school, it is not a
guarantee that you will continue. Because during our training process, you are in the
classroom, you are also in the plant at the end of every module, because it is modular
training, if you fail your core module you are exited from the system. Because this
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school does not allow mediocre to sneak through into Nigerian Breweries operational
system.
So what you see when you leave this school, why the commitment level is there, why
the attention rate is very, very minimised and simple, in your first one and half years of
working for Nigerian Breweries as a technical employee, we keep you in a hotel or
accommodation, we feed you, we impart knowledge into you, that is why if you fail your
major module we exit you, because as far as we are concerned you not easy to fail, so if
you fail you will not go to the plant. And when you leave this place and go to the plant,
we are 99% sure that you will be successful. And that is why this school is very crucial
to the strength of Nigerian Breweries.
Now we talk about, I always want to quote Nico, our MD, he says nobody can sell bad
beer, when we are talking about the quality we are known for, it all starts from here.
I will now talk about the Brewery Comparison System, which is a Heineken Global tool
with which we compare ourselves to all the breweries, of our 170 brewers worldwide.
It's so interesting because we are able to speak the same language because we have our definition is the same of our key performance indicators. And when you choose your
key performance indicators, you put it into the business, when you put it business you
put it in the glass house, everybody will see it all over the world.
And if you look at this, when you get to Lagos brewery today you are going to see so
many graphs like this, what we also learn at Nigerian Breweries is that we make all of
our BCS conspicuous, you will see it on the wall, you will see it pasted on the wall, if you
ask them to open their computer, they will show you.
So with the aim of BCS we are able to compare our performance like for like, with other
breweries all over the world and then if we see a brewery doing better than us in any
KPI, we will ask questions, how are they doing it? You make a phone call to the guy who
is responsible in that brewery, one of my brewery managers in the North, I need to talk
about Mongolia, when he come to me and he said - I want to beat Mongolia in the OPI, I
want to make sure I beat Mongolia. He is thinking the same with it because he goes to
BCS, he checks who is doing better than I am, oh it's Mongolia, so what are they doing
that I'm not doing? And by the time you go into the other tools, the hi - high quest he
comes up with a lot of ideas. He works towards it, he makes the result conspicuous for
all of his team members to see, also for head office to see and wherever he needs help,
wherever he needs the assistance and then is simple to achieve his ambition, I will show
you when we go for that.
So, this has become a very hard internal competition too among the Heineken operation
companies all over the world. So we are able to - we are able to compare what each
other are doing and make improvements. Sometimes we go there physically, I have
been to Vietnam, I have been to Singapore just to see what they are doing better than
us because it came from this BCS. Looking at the fact that Vietnam have been doing
well over the years, I have to go there to see what they are doing and bring it back to
Nigeria to ensure that we copy some of the things that they are doing and we call it copy without shape to be able to move up in our KPIs and our performance indicators.
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This is the TPM, the Total Productive Management System that we started in Nigerian
Breweries in 2005. This is what we call the TPM tempo, it has 9 pillars, out of the 9
pillars we already are very active in 6 of them. The beauty of TPM is that it brings
structure to the way we work. And therefore if you make an improvement you - you can
produce that improvement, it is sustainable, it is not because we just tell ourselves
before the TPM, you can make any improvement. And what we find at that time is that
if you make an improvement last year, the chances of sustaining that improvement is
very, very slim.
With TPM we are able to make sure that we sustain that performance and it is so simple
because it brings focus. Like for example, training and education, we've been talking
about the training school, now doing retraining within the brewery, we made life easy by
the training and education pillar of TPM, where retraining people - you become more
focused. Not only that we are able to identify the subject matter as part - within the
brewery, send it to the training school to be educated on Train the Trainer and then they
come back and roll it out to all their colleagues.
So, we are able to train a lot of people. Like I said before, in the Technical Training
Centre, we are able to train about 2,000 human beings, most of them as recruited here.
Safety, of course we want our people to be safe, a safe working environment is very,
very crucial, the second pillar of TPM help to focus in the very, very minute way, we call
in micromanaging, TPM will help you to micromanage a lot of the things that you would
otherwise overlooked in the operations. We talk about progressive quality, focusing on
quality, quality of our brands, quality of our people, the way we work.
And then, planned maintenance, we have our plant and equipment, that is the highest
investment of this company and how do we ensure that equipment is available, how do
we ensure that the availability of those machines is guaranteed, the plant maintenance
pillar focuses on it.
There we talk about the autonomous maintenance, that is a really constant change of
our people, of our operators. They are trained through that pillar to take full ownership
of the machine that they operate. In the past the operators' job used to be to push a
button to start and stop; gone are those days. I'll tell you - through training in the
training school, autonomous maintenance is a pillar of TPM to teach you to do things you
are supposed to do step by step, produce a one point lesson and it is done by
everybody. Even if this operator has left - the next operator would know this is the way
to do it. It has helped to take appropriate care of our assets and in the process also, it
has helped to sweat the asset and usage and increase the lifespan of the asset to the
benefit of the business.
Of course the focused improvement is what we called the health quota pillar; it's looking
at where our loss is coming from. TPM is all about zero losses, you look at where the
losses are coming from and pass it to the appropriate pillar and then set up your team to
work on it.
So in summary, the TPM programme has helped us to reduce our losses, it has also
helped us to increase our professional efficiencies. I remember in 2005 when we started
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TPM, the OPI overall performance - the ….. for Lagos Brewery was just at 5 and when
you go there today, already it is close to 70% lie and that is thanks to TPM.
So, overall our TPM has played a major role in our quality improvement, safety of the
environment and changing the culture of our people towards their machines.
Now, I'm going to show you the performance indicators, you will see all this story - what
it's all about, that is why I said I don't have pictures, I will show you a graph of how we
have been performing in the last 4 years; from 2009 to date.
These are the various performance indicators that we measure in the breweries and all
these performance indicators are geared towards the business ambition, to build the cost
leadership, all these are cost related. The first one I am showing you here is what you
call the extract loss. And you can see in 2009 we are building a downward trend on the
compounded average of about 8% since 2009 in our extract loss.
What is extract loss? I will just try to explain that because I know most of us here are
market financial guys. It's simple, if I will have 100 crates and I say from that 100
crates, I'm going to make by design, by the ….. and I'm going to make 100 bottles, that
is 100% of the yield, but if by the end of making 90 bottles, I've lost 10 bottles, that's
10 bottles I've lost, you've lost 10% extract - that just summarises it's the easiest way I
can explain it.
Every year our losses are coming down and this impacts positively or otherwise, on our
variable costs. The higher your extract loss, the higher your variable costs. So the
reason why we work on it through TPM and all the training is to bring it down. And I'm
proud to say that the level we're at is comparable to any of our colleagues in the
Heineken world. Of course, we are not yet there, we can always come down to 4, I think
the best now within the group is about 4.5, and that is our destination.
We also talk about productivity. In the past 4 years we have been on a compounded
average growth increase of 6.7% in our productivity. And again, via our TPM
programmes, I dig in deep on our efficiencies by producing more with the same number
of people that you see that our productivity is going up. This one - the higher the
better, this one, the lower the better. So this is talking about the number of HL
produced by one full time employee.
Water consumption, this also impacts on our cost, the higher you consume, the more
you spend. What you see here, we are just talking about the number of hectolitres of
water you use to produce one hectolitre of beer, again, the lower the better. We are on
a downward trend by a compounded average of 9.3% in the past 4 years.
The same is true with electricity consumption; we are also on a downward trend, with an
average of 1.1%. Yes, you may ask me a question here, we come here to it was steep,
but here there was a problem here with one of our breweries which is already resolved
and the difficulties started in July, the change we are seeing in August and September
show that this will come down at the end of the year.
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Energy consumption, in Nigeria has become very important because as our MD said
today, we are self-sufficient on energy generation, electricity, we are self-sufficient and
we use diesel to run our generators and that is where the costs come in. We use diesel
to fire our boilers so the higher the energy you consume, the more you pay for that
resource and the lower you use, the better. So again, we are on a downward trend.
Talking about OPI NONA, which is overall a performance indicator of our breweries, of
our packaging line, how are we faring, you can see we are an upward trend. I told you
earlier on that when we started TPM in 2005 with the Lagos brewery, the OPI for Lagos
was below 50, at about 35%, so if you go to Lagos today you will see that we have
grown as a business, as at the end of July this year, over 70% of our OPI NONA, and
that for me, I am proud to be a part of it.
I said earlier on that we are comparable to all of our colleagues in the Heineken world,
we beat our chests, we sing our praises also because we work hard. If you will look at
the OPI for about 24 breweries, the best 24 breweries in Heineken worldwide, two of our
breweries, one of our breweries is in the second position, the other one is in the fourth
position. If you compare like for like that is what you get in TPM. You can go for peer
measurement, peer comparison, for any Heineken brewery in the world that has a
capacity of more than 1.5 million hectolitres. So, we are already here, we are already among, among the 24 best brewers in the whole of the Heineken ward, more than 170
breweries worldwide.
If you compare breweries of capacity of 750,000 hectolitres to 1.5 million hectolitres at
capacity, one of our breweries is leading in terms of overall performance indicator for our
packaging line. So we are proud to say we are marching on, we say again Africa is if
you look at - our point of reference when we are competing in terms of performance, we
are looking at the whole of the Heineken world.
When I was talking about TMP, I was talking about the safety pillar, our accident rate
should be zero, that is our target but in practice, it's actually not a very, it's difficult to
actually get that. But if you see over the years, in 2009 where the number of accidents
per 100 FTE was around 0.3% but now we are below 0.1% year to date 2012.
Our taste test, this is a taste test for Heineken worldwide, we are also performing
relatively well when you compare our taste, per session of taste of our brand with other
brands all over the world. This is done by you know a standard taste testers based in
Amsterdam, every month we send a sample of our brand for a taste test and they rate it
and come back to us, so we are doing well.
Now we will talk about capacity, you know during the break you have asked questions
and I know when the MD, when Nico was talking a question about building capacity, has
already been asked. If you will look at this in 2005, we have been growing in our
production volume, a comparative range of 12% - that is enormous. So for the past 6
years our volume has been growing by the rate of 12%.
How have we been able to match up with this volume growth? It is simple. We have
optimised our operations against two TPM. I showed you how our extract losses is
coming down which means we can produce more beer from a unit quantity of grain. And
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our professional performance have been going up which means again per unit time we
can run the line and produce more.
So that is how we have been able to maintain this. Of course we have also invested in
capacity of grains where necessary and last year we acquired the SONA breweries and
that automatically boosted our capacity by about 3 million hectolitres.
So it’s so simple. For Nigeria the market is growing. And we are always there, we
watch the market, we have method of monitoring the target and the growth of the
market and we are capable of investing just ahead of the curve just before you turn the
corner we’re already there to provide the volume. And the acquisition of the SONA
system for last year is a very big boost to our capacity and damn near we are ready.
Now I will now talk about the use of local grains. For the past 15 years or more Nigerian
Breweries have been - we have done a lot of things to use local grains. And you will
know that production of beer is basically all of the world it’s about barley, malted barley
- that's what everybody take as the raw materials.
But in Nigeria we have a lot of other grains, we have rice, we have maize, we have
sorghum, we have cassava, we have all sorts of extracts, sorts of carbohydrates, sorts of
starch that you can use and convert. But for us we have to zero in on sorghum. The
question you may ask why sorghum.
I have said here we focus on sorghum because of the fact that Nigeria is the highest
producer of food sorghum in the whole world. And beautiful to that is that sorghum
among all the grains is the one that has a very good malting quality. You know we talk
about malting on barley but in Nigeria I'm proud to say that we also malt sorghum. And
when you malt sorghum the difference between sorghum and barley, malted sorghum
and malted barley, is narrowed. It terms of quality, it terms of process ability.
However you may want to ask me about malting, I want to quickly say that malting is
simple, it’s a natural process. When you take a grain you stimulate the natural process
of a normal grain growing. If you plant grain in the soil it grows. And that growing
process - there is something taking place you know inside the grain. And almost 90% of
every grain you have is starch and that is what the brewers need to produce what you
now ferment into a beer or you process into malt drinks.
And so we stimulate it, malting is natural, it’s stimulation of growth of the grain and in
the process there are enzymes inherent in the grain that is triggered by that process of
growth, of germination. And when you get to a particular level you stop the
germination, you dry it off and at that point the enzymes have already to - a major state
broken down the starch to what you can call fermentable sugars that we can now use in
our fermentation to produce your beer or you don’t ferment it, it becomes a malt drink,
a non-alcoholic malt drink. So that is why we choose sorghum. One, it’s available, two,
just a very high malting quality.
And we have a less select capability. Okay imagine we are producing all these grains for
the past for more than 50 years so we have developed technological knowhow to be
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good, to use sorghum grains as part of our raw materials to produce excellent products
for our consumers.
Because of this Nigerian Breweries is investing on development of an improved sorghum
grain. You know when we started this journey we just buy from the market. We came
to realise that the farmers who plant a lot of hectares and harvest small. So what we
have done over the years is to form partnerships with the appropriate agency and came
up with new strains of sorghum grains, one of higher malting quality, two where the
farmer can harvest more from one hectare.
If you plant one hectare, in the past before we started this programme, there was
roughly about one metric tonne per hectare. That has doubled with the hybrid which we
have also helped to develop - which Nigerian Breweries have helped to develop. And if
you use sorghum, at least for the past one or two years, you have a cost advantage.
It’s a little bit cheaper.
This is what I call from farm to farm, to show this sorghum value chain which we have
been involved in. Like I said earlier on this is the farmer who grows the sorghum. We
buy it from him; we take it to our malting plant. It is malted and then sent to the
breweries. We use it to produce our products and there's a by-product of our brewing
process called spent grain. That spent grain is sold to a local company called Earthcare
and Earthcare produces a compost fertiliser manure from spent grain. And they will
make that spent grain available to the farmers. And make that compost manure
available to the farmers. They use it now as fertiliser and then they grow more
sorghum, the circle continues.
We have started this now as a pilot with our Lagos brewery that the capacity is high, it
generates spent grain for the process of brewing and then it’s sent to the farmer. The
company Earthcare is not very far from Lagos, they come to the brewery to collect it and
then they’re able to use it, into this circle. Of course we will now expand it to other
breweries. As we perfect this circle we expand to all of our breweries and produce more
of this compost fertiliser and then the circle continues.
We have a deliberate policy to increase our local grains, our local grain usage to 60%
and then reduce our imported grains to 40%. As our total is on a level, we’re already at
43% local grains, still at 57% imported grains. That's where we are at this moment.
In summary I would like to say that Nigerian Breweries we have an extensive footprint in
this country that will enable us to continuously win the marketplace. Our supply chain
structure is such that it cannot go wrong; it cannot fail because everybody is geared
towards the same destination, perfect performance, perfect results all the time.
And our investment in training is so that we are sure of bringing new talent and of
developing talents that will carry on in this company even after this current generation
have gone and make it more profitable than it is today.
And of course we are focused on continuous improvement of our key performance
indicators, leveraging on the knowhow of our parent company Heineken to ensure that
we are continuous improvement chart - we’re continuously improving business and also
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a learning organisation. On this note I want to thank you for listening and I am ready
for questions.
Applause
...............................................................
Questions and Answers
Question
Thank you for that. Like you said we’re not brewing experts so I want to take you back
to your last slide which showed that you use only 43% of your raw materials locally. But
I thought most of the raw materials in beer was sorghum and you've got all of that
locally. So what’s the other 57%?
...............................................................
Samson Aigbedo, Head of Brewery Operations, Nigerian Breweries
Most of the raw material for beer is not sorghum. As I said during my presentation that
traditionally everybody believes and it’s true that you make beer from malted barley
which is imported from Europe. For us in Nigerian Breweries our research and
development have shown that you can substitute a certain percentage of barley with
malted sorghum. So we have two grains now in Nigeria that both can be used for beer;
malted sorghum and malted barley. But malted barley is still the choice raw materials
for beer for now.
...............................................................
Question
That's a 57 now?
...............................................................
Samson Aigbedo, Head of Brewery Operations, Nigerian Breweries
For now, but our target is 40.
...............................................................
Question
I’d just like to find out if you made any beer that's totally sorghum because malted
barley still has some traces of gluten in it. So for the consumers that are interested in
gluten free beer do you have any? And do you export your sorghum outside to your
European factories?
...............................................................
Samson Aigbedo, Head of Brewery Operations, Nigerian Breweries
Do we export the sorghum? No.
...............................................................
Trevor Sterling, Bernstein
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A few questions. The first one, what percentage of your malting requirements do you
supply internally and how much do you rely on external malsters?
...............................................................
Samson Aigbedo, Head of Brewery Operations, Nigerian Breweries
For now we are about 70% self-sufficient because we have two malting plants. Our
biggest brewery in the east and the second W… they’re 100% dependent on our local
sorghum. And then also one of the breweries up north. But we also have our own
malting plant in the north that is almost self-sufficient for those two breweries that you
have two breweries there in the north. We have a malting plant in one of the breweries
we acquired. And for now we say 70% we are able to produce ourselves, 30% we’re
able to source from third parties.
...............................................................
Trevor Sterling, Bernstein
Second question Samson. With SONA you got a lot of underutilised capacity which
obviously means you don’t need as much new capex short term, but all being well
eventually you are going to need to add more capex once you've exhausted the benefits
of SONA. How do you think about the trade-off between new Greenfield breweries in
Nigeria which might reduce your transportation costs versus the efficiency of bolt on
capacity onto existing breweries?
...............................................................
Samson Aigbedo, Head of Brewery Operations, Nigerian Breweries
Yeah it’s a balancing act. You have to - talking about a Greenfield you have totally
assessed where is it needed. We are keeping our eyes on the market and once we
notice you know we are getting to that limit in our capacity, we are there, we always
invest ahead of the curve. We have various options like I said earlier on. We will
optimise our operations. If I increase my OPI, we have now 28 bottle lines. If I will
increase the OPI of those 28 bottle lines by 30% each the packaging capacity will go up.
If I will increase my brewing OPI by1% also the volume capacity of all our breweries
goes up.
So we will - we have to have a look at those options and confirm that okay can we get
this volume by mainly optimisation. If we think that we focus on it and we optimise our
current infrastructures. Of course we have the option to expand the existing breweries
and therefore we can go for the option of building the Greenfield. Because building the
Greenfield takes you a longer time whether you like it or not. So optimising the existing
facilities you have it’s faster. So we keep our eyes on the market growth and we
respond as we notice these trends.
...............................................................
Trevor Sterling, Bernstein
Final question Samson. In Europe traditionally spent grain are used for animal feed but
here in Nigeria you’re using it as compost. What is it that’s different about Nigeria that
makes composting the interesting use rather than animal feed?
...............................................................
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Samson Aigbedo, Head of Brewery Operations, Nigerian Breweries
If you see - that slide that I presented, I call it from farm to farm. It is just to show the
value chain bringing that - get yourself linked up, make sure what’s coming out from
your breweries also benefits the farmers.
However there are still some small percentage of people that buy the spent grain and
use it for animal feed, piggery, poultry, but they are small now. But our focus now is
make sure to keep that sorghum value chain running so that - fertiliser is not cheap in
Nigeria. Imported fertiliser is not cheap. Our fertiliser plants are not working very well
so if we will perfect this, if we will create the apple from this we serve the farmer better
and then by extension we guarantee our source of quality sorghum. It’s a choice.
...............................................................
Trevor Sterling, Bernstein
Thank you very much Samson.
...............................................................
Melissa Cook, African Sunrise Partners
I'm interested in this farm to farm. There is a lot of capital and technical assistance and
logistics support that's needed to scale this up to help you use more locally processed
grains. Are there other partners that you’re working with or other banks or other
companies that are coming in and really investing here to help scale this up faster?
...............................................................
Samson Aigbedo, Head of Brewery Operations, Nigerian Breweries
For now there is an organisation called Eco... in Nigeria, they are involved in local grains
development. We are in partnership with them right. But when you talk about funding,
of course I have not - I'm probably not going to talk about how much we spent to
develop the grains, but I will just say we are in partnership with relevant government
agency to ensure that we keep the development of grain, of sorghum grain, on track.
...............................................................
Analyst, Standard Bank
My question is how much can you play around with the gravity of the beer if you’re
looking to reduce your input costs, obviously to enhance earnings and that. How much
do you play around with that?
...............................................................
Samson Aigbedo, Head of Brewery Operations, Nigerian Breweries
We have a recipe and don’t forget we are proud about our quality. Brewing is more or
less a little bit conservative, it’s not something we are going to wake up one morning
and start changing our recipe. The recipe that has given our good quality beer that the
consumer likes, the consumer enjoy, we’ll stick to it.
To play with gravity also has a lot of low sides and I can tell you if you play with gravity
to some extent the consumer will taste this and notice, that I can assure you that. So
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we are not going to do things to our recipe that will jeopardise the possession of our
quality by the consumers.
...............................................................
Analyst, Standard Bank
[Inaudible no microphone] … you could argue that consumers down here are not
discerning and so I think you could probably cut that significantly and just a few number
of your consumers will notice.
...............................................................
Samson Aigbedo, Head of Brewery Operations, Nigerian Breweries
No you’re underrating the Nigerian consumer. I'm telling you, because if you change
anything the Lagos consumer, the Onitsha consumer will pick it. Even packaging, when
we changed a supplier, I'm talking about - it had not to do with the product. With K…..
they cooked the beer and the supplier put his trademark on it. In Nigeria of course saw
now this K… this is not real. So when they test it they will pick it just like this. I mean if
you try what you are talking about you will surprise the rest for trade. So we’re not
going to again mucking around with our process.
...............................................................
Question
Three main questions. The first one on your capacity. What’s your average capacity
utilisation for the entire - the eight breweries? This is the first question. The ones that
you have currently? And second the following one, do you think that given the current
business environment you can reach capacity utilisation above 90%?
The second main question is related to the chart on the slide 22. You mentioned the
target of 60% 40% but you don’t mention the timeframe. Is it one year, two years,
three years? And I was wondering why don’t you have a target of 70 versus 30 or 80
versus 20? Is that because of the availability of sorghum in the industry or for technical
reasons meaning that you can’t exceed a certain level of sorghum, you need a minimum
level of barley to have let's say a standard of quality?
And the last question is related to the breweries that you acquired the SONA breweries.
They were obviously less efficient that that you were running before, when do you think
that they will reach the level of efficiency that you had for the former Nigerian Breweries
breweries? And second point …
...............................................................
Samson Aigbedo, Head of Brewery Operations, Nigerian Breweries
Okay so that we don’t lose track. The first question you asked about our capacity
utilisation. What I would like to tell you is this. We are there. We have the capacity
now. As the market is growing we’ll respond, we’ll scale.
So I'm not going to tell you we are 90% or 100% now, but I will tell you that as long as
the market is growing we have the capacity to respond to the market growth. We have
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
the capacity to produce beer for our - to respond fast to market demand. That is the
one for capacity utilisation.
And then you talk about the sorghum percentage. We're looking at why we cannot go to
70%, why we say 40% or whatever, again don’t forget we have quality, in our head.
And if you - there is a level you can’t play, can’t tweak. If you are not careful you will
change the characteristics of your product dramatically. You have to be very careful.
Of course it’s a developmental thing. I told you for the past 15 years we’ve been
working on this. As we make progress the target we set is not the sort of thing we say
we have cast in stone. As we are making progress in our breakthrough, in our research,
then we can decide what to do. But bearing in mind the characteristics of our beer
which we don’t want to tamper with.
...............................................................
Question
And the timeframe for these targets?
...............................................................
Samson Aigbedo, Head of Brewery Operations, Nigerian Breweries
The timeframe for the target? Before 2020 we’re there.
...............................................................
Question
Okay so on the acquired breweries.
...............................................................
Samson Aigbedo, Head of Brewery Operations, Nigerian Breweries
Okay the acquired breweries, I am very proud to tell you because when we acquired
those breweries they measured nothing. If I am to talk about the one that I was - I am
involved in all of three breweries now, all the brewery managers report to me, I can tell
you there is none of them now that is operating less than 50% OPI. In fact Ota is
running at 57% OPI. Kundana is at 53% OPI. And Onitsha, which is the very low part
of it, has current 45% OPI. So we are happy now. And the bit you have hinted at, the
….. that is required, the technical that is required we are putting everything on ground.
And in a very short while, before the end of next year, they will all …
...............................................................
Question
Just the last one sorry about that. 3.3 million hectolitres, how much of it are you using
to brew Nigerian Breweries former brands i.e. Star and everything, and how much is
used for the acquired brands? Thank you.
...............................................................
Samson Aigbedo, Head of Brewery Operations, Nigerian Breweries
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
Yeah basically the - that these acquired brands have their market all right. They have
their market, we needed to put you know some marketing behind them to scale. I can
tell you today that the demand for Goldberg has gone up so we have to produce more,
demand for Life has gone up, we have to produce more. Of course they also produce
Malta Gold, which is also the major volume for those breweries, they’re occupied, they
are busy producing those plants. We’re already producing Legend. Legend starts for
practically all the three breweries and then we are making progress.
...............................................................
George Toulantas, Director Investor Relations
Okay we’ll have to stop it there I'm afraid. I know there's a few more questions but we
really are running over. So I’d like to thank Samson for a great presentation.
Applause
...............................................................
Closing Remarks
René Hooft Graafland, Member of the Executive Board and CFO
First thing I would like to say is thank you for being here with so many people. When we
floated the idea to go to Lagos we got a lot of mixed reactions, I cannot pass that
through at my central office, they will never allow me to come. But looking at the
interest of all of you coming here, that is very encouraging and I hope that after two
days being here in Nigeria that you've felt how welcoming the country is, but also what
an opportunity lies here in the country. So thank you for being for two days here with
us.
I as usual will not present new slides to you. I picked out of all the presentations a
couple of slides of the points we really want to stress once you go back to your home
country again. And the first thing is that in the last decade the footprint of Heineken has
changed dramatically. We are much more exposed to emerging markets, over 60% of
the consolidated volume, 55% of the consolidated EBIT, is coming from high growth
markets. And clearly Africa is one of the key elements there we have.
But we have an absolute good spread over growing markets across the globe and I must
say each time when I go on a road show the time we spent on Western Europe is
disproportionate when you look at what the real footprint of the company is. So please
in the future let's discuss much more about Africa and hopefully this helps you - to
inspire you to think deeper about all the opportunities of Africa.
Second message is that in these high growth areas you operate differently than in the
developed markets. In the developed markets which are not growing it’s all about
increasing your value share of the market. So it is about segmenting the market, it is
about premiumising the market, it is about innovation. When you look at the high
growth markets it is building the category, driving the growth of the category, and you
do that via strong brands, you do that via a strong route to market, but of course it is
about winning market share. But it is more importantly to create and further build the
market.
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To do that and to cater for that you have to invest ahead of the curve. You have heard
that a lot, you have seen our investment levels which are stepped up with the past and
that is exactly because we would like to be ready for the demand of these markets. That
doesn’t mean that international premium segment is not here as well, but it is different.
We are here at the phase that you still create, that the big drive is behind your local
brands but you have to see it and you have to gradually build that international premium
segment.
Now of these high growth markets Africa and the Middle East is very important for us. If
you have seen the last four years 40% of our growth, EBIT growth, was coming out of
this area and also going forward we strongly believe in the potential of Africa and the
Middle East. And that will be and continue to be a strong driver of our future profit
growth. And that's built on the fact that you have population growth, very young
populations here in Africa. There is good economic growth. You see a strong
urbanisation. I think Siep mentioned 52 cities of over 1 million people and that
urbanisation changes consumer habits. Homebrews you cannot do when you live in a
city so there you see the switch into packaged beers and the more aspirational
propositions we put in the market.
You see an increasing middle class in Africa and we benefit from that. Because one
thing is very clear of Africa, beer is their drink of choice. If they make a choice to go
into alcoholic products beer is their drink of choice.
So we are very bullish on Africa. We discussed the outlooks and the figures we put in
the presentations, they are all based on Plato because we wanted to have an objective
source. And secondly we don’t want to share fully our internal projections obviously.
Well we talked a lot about it, last five years we grow 10%, Plato is forecasting a growth
of 4%, take it for what it is but maybe Plato is Heineken quadrupled in its conservatism.
Then looking at Africa and Middle East we have very strong platforms across the whole
region. We have a deep knowledge of the countries, we have been here for many, many
years, since the '30s of the last century we have been in Africa so we have experience
and we have fantastic positions across the continent. Obviously Nigeria is one of them
and we have seen that extensively but markets like the DRC, markets like Ethiopia could
be the future Nigerias in the coming decades.
But also a market we didn’t talk a lot about like Egypt which is almost back to where it
was in 2010, is a major contributor to the profitability of this region. But within the
region obviously Nigeria is our biggest and most profitable operation. It is the big driver
of our results here in Africa. We had some misunderstanding on the market shares but
the combined market share of Nigerian Breweries and Consolidated Breweries is over
two thirds of the total volume in the country.
And then I got last night quite some people saying yes but that's very vulnerable
because the malts and the starch are growing faster than the lager beers which is true
and you saw that somewhere in the deck. But let me reassure you, yes we have three
quarters of the lager market but we also have three quarters of the malt market. So
that growth we benefit from it. We have a third of the stout market but the growth of
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
the stout market is very much fuelled by the success of Legend or the add on of Legend
to the market. So these movements in the market are certainly not denting our market
share. On the contrary we are still winning market share in this country.
And the combination of these two breweries, I say the combination, I think we explained
very well why we keep the two companies apart. I think it is very valuable for
Consolidated Breweries to have that single minded focus on the economy segment, to
have that single minded focus to keep their cost structure linked to the position they
have in the market and not dilute the two companies.
Yes they have different shareholders so there are a lot of technical things, but from an
operational point of view we believe that model is the right model here for in the market.
And the two separate are stronger than when you put them together. So you talk
always about synergies, putting them together. We strongly believe that we would get
these synergies if we put the two companies together.
But together they are a real powerhouse here in Nigeria, 13 breweries with a very well
spread footprint, three malting plants. But what is more important, a very strong grip
on the outlets and the 550,000 outlets which are here in Nigeria. And I think the
presentation of Hubert on how we use that outlet census, how we have the knowledge
on the market is very powerful and that makes that with the share and the brands we
have here in the market we can further grow our position and grab the opportunities
which Nigeria present.
As said, in Africa it is about building the category, you need to have very strong
blockbuster brands for that and the good thing for Africa is that most of our blockbuster
brands are regional brands, operate in more than one market. So you can benefit from
the ideas which are put behind the brand in one country and export that to other
countries. It's different from what we see in many other parts of the world, where the
mainstream blockbuster brands are really national brands of one country. We have here
the benefit of that the big brands like Star and Primus are operating in more than one
country.
So it is about these strong blockbuster brand who should build the category, but that
doesn't mean that the international premium segment, the premium segment is not
important. And you see that even in a region like Africa, premium is growing fast, it's
outgrowing the total market and with the Heineken brand and the Amstel brand we play
a very important role in that. And the two brands together have more than half of the
premium segment in Africa and we expect that to further grow.
I think we said you can have the best positions, you can have great brands, you can
have fantastic systems, but ultimately it is the people who drive the businesses. I think
you have seen a number of very good examples of strong local talent. I think the
presentation of Victor, of Hubert, of Moses and this morning Samson were impressive
and you see business leaders who really know their business.
We have more of them, but we need much more and as a company we put a major
effort in training and growing local talent because we think, going forward with the
growth we see in this continent that we need many, many more of them.
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Heineken - Financial Markets Conference, Lagos Nigeria Day 2
So to summarise we believe strongly in Africa, we invest heavily in Africa, we have
invested in the last five years 1.7 billion and we will continue to invest in this continent.
It's not only invest in breweries, capacities, etc, no it is always investing in local
partnership. We want to source 60% of our input costs locally and we do that in
combination with local partners and we invest in local communities. We just don't want
to be a foreign company here in the environment, no we want to blend in in the
communities and we do major efforts to achieve that.
So the conclusion is, we believe strongly in Africa, we believe in the future of Africa, we
believe in the potential of Africa and I hope that after these two days you share that
belief and that you really join us in believing that there is a great future for our business
here in Africa.
...............................................................
END
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This transcription has been derived from a recording of the event. Every
possible effort has been made to transcribe this event accurately; however,
neither World Television nor the applicable company shall be liable for any
inaccuracies, errors or omissions.
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