HEINEKEN N.V. ANNUAL GENERAL MEETING, 25 April 2013
OPENING
Mr VAN LEDE opens the meeting and welcomes those present. This meeting is attended by
the notary Meppelink of Loyens & Loeff N.V., who will supervise the voting.
In connection with the discussion of the 2012 financial statements by the Executive Board,
the company auditors, Messrs Van Leeuwen and Ekkels of KPMG Accountants N.V. are also
present.
The meeting is also attended by representatives of the press. After making some general
announcements and stating the meeting formalities, he moves on to Agenda Item 1.
REPORT FOR THE FINANCIAL YEAR 2012
Mr Van Boxmeer: Thank you. Good afternoon, ladies and gentleman. I’m going to report
briefly on our results for 2012, based on a short presentation in Dutch. This first slide
conveys in a nutshell that 2012 was a good year and was very clearly dedicated to the APB
acquisition in the Far East, which improved Heineken’s presence on growth markets. Results
were good, reflecting a 7.4% rise in revenues. EBIT (beia) went up 8%, and diluted earnings
per share rose 8.9% over the course of 2012. We are proposing a dividend of € 0.89 per
share, which is 7.2% with respect to the previous year. The Heineken brand grew well, at
5.3%, and once again increased its premium segment market shares worldwide. Also worth
mentioning: our innovation ratio is up from 4.1% to 5.3%, on track to a target rate of 6% of
our revenue by 2020. We have expanded our market share in a great many markets. Overall,
our market share has grown worldwide. In large countries, such as Mexico, Nigeria, Vietnam,
France, Russia, the United Kingdom and the United States, our market share has grown
everywhere. Last but not least, in the first year of our second and actually our third threeyear cost-management programme, we achieved 196 million euros in cost savings for 2012.
The next slide shows the results by region and organically, without the effects of exchange
differences between currencies year on year and including the new acquisitions. Our group
volume, as well as our total consolidated volume, have increased there on virtually all
continents, except in Western Europe, which is still experiencing the impact of the economic
recession so familiar to us, and, more structurally, demographic growth is not very high in
Western Europe. Successive generations after the baby boomers are 20% fewer in number
than the baby boomers were. This is of course indicative of a decline of the total market in
Europe. Nonetheless, we have managed to increase revenues everywhere in our regions and
to maintain it in Europe, thanks to mix improvements and price increases. That last thin line
reflects the EBIT (beia) operating results by region, once again with fine growth in Africa and
the Middle East and in North and South America, with an impressive performance by our
Mexican operation. Central and Eastern Europe have contributed as well, despite the steep
rise in our variable costs we experienced for the year in 2012. All this resulted in a net profit
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beia (before exceptionals and amortisation) of 1.6% organic growth in our net profit. If we
consider that more broadly over the past five years, you will see on this image how our fiveyear revenue has increased, our EBIT, so the operating profit and net earnings are up. These
are impressive figures. This combination is obviously due to organic growth, as well as
several acquisitions we made over these years. The first acquisition was Scottish & Newcastle
in 2008. The second was FEMSA Cerveza in 2010. APB happened in 2012, but has not yet
appeared pro forma in these figures. I’ll talk more later about our enlarged footprint in
markets where beer is growing and is expected to grow a lot more in the years to come.
Now I’d like to walk you through the six strategic priorities that we focus on. I did that last
year as well. We do that very consistently. We have set six priorities to have our company
grow both organically and inorganically. I’ll run through these six priorities briefly and report
on them. Of course the first priority is to grow the Heineken brand. The Heineken brand is
present in 179 countries. The Heineken brand is the largest premium brand in the world.
The Heineken brand has twice the volume of competing brands, such as Carlsberg or
Budweiser, which are sold outside their country of origin. In 2012 we performed well once
again, with Heineken growing everywhere, in all geographies, including, as you can see,
Western Europe, where total beer sales actually declined. On the right section of the slide
you see clearly why we place such emphasis on and invest so much in the Heineken brand.
This is because the beer market may grow 3% while the premium segment grows a bit faster,
at nearly 5%, and Heineken is growing still faster than the premium segment and is therefore
gaining market share. Our market share in that segment is now over 20% globally, and in
2012 we improved on that.
The next slide shows how we do that. May I have the next slide? Thank you. That slide is
basically the same every year, because we take a very global approach to supporting the
Heineken brand, doing so with three main pillars. The first is communication about
sponsoring. We obviously do our international sponsoring with the Champions League every
four years at the Rugby World Cup. We also sponsor the James Bond movie every two or
three years, when a new one is released. This year was a fantastic edition, in which we finally
got James Bond connected to Heineken beer. Let me tell you, this is major progress. We also
use global campaigns everywhere in the world. We produce several commercials and
broadcast them worldwide. Finally, we also use design very actively for the Heineken brand.
Here you see a few sections of commemorative bottles, which have also been issued for the
hundred-fortieth anniversary of the Heineken brand. This year the brand is celebrating its
hundred-fortieth anniversary. To this end, we will highlight the versatility of our fine design.
These are the activities we are launching around the Heineken brand. In keeping with our
usual practice. I will wrap up here with a commercial break. Would the technicians please
broadcast the commercial for the green bottle launch in the Netherlands?
Commercial
Mr Van Boxmeer: There is also an American version of this commercial, because we have
now launched these long-neck bottles in the United States as well. The second strategic
spearhead is to derive consumer inspiration to be customer and brand-oriented. This all
seems obvious, but I would like to share with you how we carry this over to concrete actions,
and what we focus on specifically to add form and substance to this story. The first
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spearhead is of course promoting other global brands in addition to Heineken. By selling
Heineken worldwide for decades, we have set up a wonderful platform for selling premium
brands. We can use this method to promote other brands as global brands and sell them all
over the world. Look at this image: of course we have been doing this traditionally for a very
long time with Amstel, which is available on 75 markets. This year we have launched a new
Amstel Premium Pilsner brand, line extension, on the markets in Greece and Russia. We are
promoting Strongbow as our global cider brand on 14 markets. Last year we reclaimed our
distribution rights for the USA, because we want to invest in the cider category for the
future. The Desperados brand is now available in 66 countries. You should assume that we
will add 6 to 10 countries every year. The last brand is Sol, which we have brought in from
Mexico. It is now available on 32 markets, with Finland as the most recent introduction in
Europe. Together, in addition to Heineken, these are the four other large brands, in which we
aim to invest resources and money to supersede the market where we presently sell. The
second spearhead is that we decided nearly three years ago to centralise the way we
approach our large customers with cross-border operations. Just to say it works, I can be
very brief about that too. You see that in Europe, where we use this approach with customers
such as Carrefour or Tesco or Metro, customers that operate in various countries. Where the
market has barely grown 1%, that would be Western and Central Europe together, including
Russia, home consumption sales have grown 3%. Our customers that we address centrally
then reflect 8% growth. We are the first brewer to do this, because we are the only one with
so many brands in all countries, first of course is the Heineken brand. The last spearhead is
our innovation ratio. I have depicted it here from a broader perspective. Note the nice growth
from 2.6 to 5.3. For 2012, this means that the Heineken group has achieved 1 billion in
revenue from products that were not present on the market three years ago. This is what the
innovation ratio means, in very simple terms. Of course innovations are new brands, as well
as extensions of existing brands, as the small photographs at the bottom depict. One of the
most successful line extensions is the Radler product. Radler is the German name for a
panacea between beer and lemonade. We have devised a special formula for that containing
lemon juice and have rolled this out in Central and Eastern Europe. It really did go from 0 to
0.5 hectolitres in less than two years. We are now rolling out the same concept based on
existing brands here in Western Europe as an example of what innovation is about in
practice. The third spearhead is to use opportunities in emerging markets. We mean this as
our strategy of expanding where the beer market can grow faster. I have already explained
why we are no longer growing so fast in Europe, but fortunately we have the rest of the
world, where plenty of space to grow remains. Of course we consider demographic and
economic growth, as well as increasing urbanisation. Those are the three factors. And some
sunshine benefits our industry as well. If we look back over five years, this slide shows what
our footprint was in 2007, and what it is today pro forma, taking into account the acquisition
of APB. We have progressed to a situation where about 50/50 of our volumes came from
mature saturated markets and growing markets, to one in which nearly two thirds of our
volumes come from growth markets. Looking ahead, this trend is expected to continue. The
same is depicted at the right of this image. Here you see that 60% of our operating profit
came from developed markets, whereas today 40% does. So nearly 60% now comes from
those growth markets. In the future, this will only increase. We obviously invest the bulk of
our resources in emerging markets. You may expect us to continue this practice in the
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future. Now I’ll zoom in on the APB acquisition in 2012. APB was a joint venture between
Heineken and Fraser and Neave that had been active since the mid 30s, our oldest joint
venture. The battle over APB was in all the papers last summer. In the end, we managed to
purchase the APB shares we did not yet own. Yes, the price was high, but this is a wonderful
opportunity for you. APB operates in fourteen countries and is the universal market leader in
the vast majority of them. This means that we are either Number 1 or a strong Number 2.
The blue part shows where we will advance to leader in the segment, if we want to operate
only on the premium market. That is the case in Thailand and China. In all geographies
where we operate, we are a very strong player, and you also notice that APB is the market
leader in Southeast Asia and Indonesia with all breweries depicted here. On all these markets
we expect growth, in beer in general, but also in premium brands, such as Heineken, as well
as Tiger in the future.
The next slide shows the significance of APB in the entire Heineken Group. At the left you
see that in 2011 the Asia Pacific region accounted for 6% of our operating profit. In 2012,
pro forma, if we were to list APB on the books for the full year, it would account for 16% of
our operating profit. This shows how important Asia has become compared to all other
areas. At the right you also see how our revenues have progressed: from 216 million euros
to nearly 2 billion euros from Asia and the same at the far right: operating profits rose from
176 million euros to 506 million euros pro forma from Asia, to indicate just how important
this APB acquisition has been for Heineken. After these very serious dry figures, I’m going to
hand you over to another commercial break. This is the Tiger brand commercial that we
purchased with APB. We are very proud of that, because we can achieve a lot more with Tiger
internationally and outside Asia as well. Please start the video clip.
Commercial
Mr Van Boxmeer: So, Asia is on the move, so to speak. Now I will tell you about the fourth
priority, which is about leveraging economies of scale. Several of our competitors pursue a
different strategy, mostly operate in much larger countries than we do and can be market
leaders in countries such as the United States and Brazil. Of course this gives them huge
economies of scale. We are market leaders in Europe, but Europe has 27 countries with
almost as many languages and at least as many tax regulation systems and quite a few
different exchanges, even though 17 use the same currency. We will need to leverage our
economies of scale across national borders. Of course we will achieve this with brands as I
have shown before, with the Heineken brand. That is clearly an economy of scale for
Heineken to take that global. But we can also address costs to generate those economies of
scale. I will describe three different economies of scale, in which we invest a lot of time. The
first is Global Business Services, which peaked in the financial shared-service organisation
we set up in Poland, in Cracow, which will take over the record-keeping from our 22
operations in Europe. This programme will be up and running in three to four years. The
shared service centre will perform several duties for all of Europe and will be a very specific
example of how we achieve economies of scale. Last year here in the Netherlands we also set
up a global procurement organisation to source globally, which will yield economies of scale
as well. And economy of scale is obviously about money too. A different way of considering
economies of scale is how we manage the global supply chain. At Heineken, we have
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traditionally steered the supply chain fairly globally. We have a methodology of total
productive management that has been rolled out globally among our 136 breweries
worldwide. We use it as a tool to improve our productivity every year. In doing so, we of
course contribute to the TCM cost management programme. You should still assume that
half the savings we achieve comes from those attributable to the supply chain programmes.
The third example of building economies of scales is training. Two years ago we launched
the Global Course University. You see the number of participants we had, both in marketing
and in sales. Our total offering of eighteen programmes draws a few thousand people from
all over the world. We can do that in a single year. Getting everybody into best practices and
teaching them a common language, because our organisation operates in so many countries,
is a huge economy of scale for us. Those are three examples that come with leveraging our
economy of scale and therefore serve to improve our results. The fifth point is personal
leadership. We have an advantage here too. Because we are present in so many countries, we
have a wealth of diversity, with people coming from many different countries. Our senior
management comprises 64 nationalities. Senior management is a group of about 600 people
stationed all over the world. We have 64 nationalities in this group and at present 14%
women. Some will say this is not enough, but 8 years ago this share was only 5%. So we are
gradually making progress. We invest a lot in training and education and in bringing about a
culture that is still entrepreneurial. This is one of the greatest challenges for a firm that is
becoming very large. On the one hand, it needs more control, because we need to stay on
top of it all. On the other hand, because we sell Heineken in 179 countries, we need to
preserve an entrepreneurial culture in all those different cultures. People with
entrepreneurial spirit, disciplined, but with business acumen. We invest a great deal of
energy in bringing this culture about. Culture is not written in manuals but is simply
manifested every day by the corporate leadership. Another important means of promoting
leadership is by providing the right incentives, so that people, as our chairman often says,
“people who deliver the good will be rewarded.” That is another important part of our
corporate culture. The last strategic spearhead is to integrate the way we work sustainably. I
have said it before, and I will repeat again: sustainability is not a hobby for our spare time.
Sustainable entrepreneurship means taking a good look at what we will still be doing the day
after tomorrow, and then we can continue doing it. If it is not sustainable, we cannot
continue. The principle is very simple, and we want to embed this firmly in our company.
To avoid complicating things, we have four spearheads. We focus on water and on reducing
CO2 emissions. We want to apply sustainability in procurement and in our agricultural
activities. Lastly, we want to advocate responsible alcohol consumption. The first three are
common to all food and beverage companies in the world. We are advancing thanks to a lot
of teamwork. As for the fourth one, responsible consumption, of course we are achieving a
lot of progress together with other competitors in the industry, but this requires a lot of
attention specifically for our industry. What matters is how we can prevent alcohol abuse and
to do so effectively. Of course the industry can never provide all the answers, but what can
Heineken do to improve the situation? We could easily spend an hour on this topic, and that
is of course why we publish an annual sustainability report, which has just appeared. In
addition, our operating companies issue individual annual sustainability reports, where you
can track our commitments. They are also measured, and the reporting is done transparently
every year. I will wrap up the outlook for 2013 with these six spearheads. We have just
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announced our first quarterly results. The sales figures were hardly cause for jubilation. We
suffered from bad weather in many parts of Europe, as well as in parts of America. That is
always a factor. The quarter was not very big in absolute volumes. We also had to cope with
a great many governments raising excise duties. Of course we were also busy raising prices
in that quarter, which led to a decline in volumes all over the world. Looking ahead to the
entire year, we continue to assume that, considering our footprint in countries where much
room for growth remains on the market, we can still look forward to growth for the full year
2013. All other prospects we disclosed previously in February remain unchanged for us. On
this note, I will conclude my presentation and give the floor back to the chairman. Thank you
for listening.
Applause
The chairman: Mr Van Boxmeer has just explained in his usual clear way that there is far
more to a glass of beer than that first sip of foam. That is still fairly complicated. And then
to deliver an impressive result. The year has been exhilarating, exciting and exceptionally
fascinating. I can easily understand that you may have questions about it and will now give
you the floor to ask them. This item is about the annual report, which appears on pages 4
through 66 of what you received. As I always say, the fun part of the report, with pictures.
That’s pretty comprehensible. The part that follows are the financial statements, those are
the figures. You may have seen that video of Bush Junior, sitting with a thick report in front
of him, looking at it and saying: there are a lot of figures in here, that must be a budget. To
us, it’s an annual report. But first we’ll talk about our policy, as explained by Mr Van
Boxmeer and set forth in the annual report on pages 4 through 66. I repeat, please state
your name and the shareholders you represent, and approach a microphone.
Mrs Stadlander: The management had an exceptionally turbulent year. My congratulations
for the successes you have achieved. Thanks to the APB and APIPL acquisitions, 64% of the
consolidated beer volume and 59% of Heineken’s EBIT now come from emerging markets.
Can you hear me properly?
The chairman: We can’t hear you very well. That’s me. Excuse me. Now the entire auditorium
can hear you.
Mrs Stadlander: Is this better? Please allow me to thank you very much for these
achievements. The Heineken share makes me feel secure, even after yesterday. Of course the
sudden 7% drop in the share price and later on 5%, came as a shock, but there is always a
future. I have always seen Heineken’s future as promising. All over the world, your
employees have of course worked hard for their achievements. I am grateful to them as well.
The difficult market circumstances in Europe have led to 196 million in reduced costs before
taxes through your TCM2 programme. Mr Van Boxmeer has spoken about this in the
introduction, but could you tell me more about this TCM2 programme? Sales problems were
to be expected for all Heineken brands as a consequence of the overall recession in
countries such as Portugal, the United Kingdom and Spain and even in Vietnam and Taiwan.
These two countries were dream outlets for you, but they seem to have run dry. What’s
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encouraging is that instead of drinking less beer, Tiger Beer now receives preference. That
often restores the balance. Can you comment on that? I was interested to hear that you
expect the number of employees to decline organically in 2013. A large share of the world
population is unemployed, and unemployment continues to rise in Europe. Is it necessary to
make your people redundant? What is your answer to this? You have over 165 breweries. Do
you expect to increase this in the coming years?
Anheuser-Busch Inbev hopes to build breweries in China in the next three years and to
expand the market area from its present base in the coastal areas. According to AB Inbev,
the Chinese beer market is posting double-digit growth. Can you elaborate on this? The cost
of raw materials seems to figure high on the daily agenda in my view. Do you expect major
price fluctuations this year? I read with interest in the financial papers about what is known
as Heineken’s excise trick in England. The alcohol content in John Smith’s Extra Smooth beer
has been reduced from 3.8 to 3.6%. The adjustment yielded savings of 8 million euros. Do
you have another reason for this? I was delighted to hear this. Unfortunately, the 198 million
euro penalty that the European institutions imposed on Heineken is being enforced. This
concerned so-called insider agreements....
The chairman: Mrs Stadlander, unfortunately I am interrupting you, because we can’t hear
you properly here, despite my having switched off my microphone. We ordinarily have
loudspeakers behind us to confer, but they don’t work.
Mrs Stadlander: Am I impossible to hear in the auditorium as well?
The chairman: The sound is working again. Please continue.
Mrs Stadlander: May I repeat the last question? I was interested in the reports in the financial
papers about what is known as Heineken’s excise trick in England. The alcohol content of
John Smith Extra Smooth beer was reduced from 3.8% to 3.6%. The adjustment yielded
savings of 8 million euros. Do you have another reason for this? The news was wonderful to
hear. Unfortunately, the 198 million euro penalty that the European institutions imposed on
Heineken is being enforced. This concerned so-called insider agreements about the Dutch
beer market, and of course Bavaria was among them, with 21 million euros. All court
proceedings dragged on for years. These reasons were cause for reducing the penalties back
in June 2012. Are you deeply disappointed about the definitive ruling by the European Court
of Justice in Luxembourg? In January the financial papers reported that senior managers left
the company Asia Pacific Brewery, following its acquisition by Heineken. Heineken’s new
management style was said to be cause for enormous dissatisfaction. Have you been able to
find excellent managers to fill these positions?
Now for my second-last subject, which is of course America. You are once again more
excited than you were last year about the course of events in the United States of America.
On my visits to America in recent months, I notice how nicely the Americans are spending
money again. Restaurants and bars are all full. Things seem to be picking up. In addition, Mr
Dolf van der Brink has benefited from the opportunity to offer other brands from your
portfolio to bars and independent distributors and thus contribute to the profits with an
additional boost by the successful Open Your World advertising campaign, as well by the
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latest James Bond movie Skyfall in a 60 million euro media campaign. This expenditure is
apparently modest for such projects. In my view, this sounds like very expensive advertising.
Before I wrap up, I’d like to address Mr Van Lede directly. Dear Mr Van Lede, today you are
resigning as chairman of the Supervisory Board at this meeting. These must be difficult,
melancholy hours for you, after having chaired this meeting for so many years. I find
Heineken’s shareholders’ meeting to be the most pleasant one of all the meetings I attend
each year. The mood here is very special. Under your aegis, these meetings are memorable
not only for me but hopefully also for the shareholders present here. One of your hobbies is
reading, which is why I will be offering you a book written by Clay Shirky entitled Hoe
digitale netwerken onze contacten, samenwerking en organisaties veranderen. With a ‘keep
smiling’ and a round of applause, I wish you a wonderful future and good health and great
enjoyment. Thank you all for your attention. Thank you very much. ( Applause.)
(Chairman steps forward to accept the book.)
The chairman: Mrs Stadlander, once again, from here, thank you very much for your kind
words. This gives me a chance to quietly read a book, while Mr Van Boxmeer gets to answer
the tough questions that arise. At the end of the meeting, I hope to get back to this.
Mr Van Boxmeer: Would Mr Hooft Graafland please answer your question about TCM, our
programme connected to EU in Europe.
Mr Hooft Graafland: Jean-François has already spoken about the cost programme in his
presentation. This expansive programme affects the entire firm and addresses costs at all
levels. That’s what yielded the 196 million euros last year. Two thirds of it is in Europe. You
would expect that, because that’s where costs are under the greatest scrutiny, because
volumes are growing least there. In countries such as South America or on the continents
South America or Africa, we are growing very fast and are working on the costs as well, but
you invest a lot in expansions. The bulk was achieved in Europe. About half comes from the
supply chain, but we are working very hard on other elements as well. The commercial
section is doing a lot, as are logistics throughout the firm. In procurement we try to combine
sourcing to achieve additional cost savings. Of course in some cases this means letting
people go. The moment you operate more efficiently, jobs are lost. The intention, however,
is for the company to become healthier overall, so that we can continue investing and can
continue investing in growth. You also asked a question about raw materials costs. Last year
this had a serious impact, and we experienced an increase in the cost of raw materials
equalling 8% per hectolitre. It’s not so bad this year and is therefore likely to rise only
slightly for the year as a whole.
Mr Van Boxmeer: You had two questions about Asia. I believe you were concerned that
Heineken’s sales growth in Taiwan and Vietnam specifically was declining. Did I understand
you correctly? That’s true. We already have a very large market share in Taiwan and do not
want the brand to be overplayed. It needs to remain premium. In the future, we will have to
accept more moderate growth in Taiwan than we have had in the past. We have also decided
to sell Heineken Light in Taiwan to remain innovative with Heineken’s market share. Once we
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get Heineken’s market share right, what matters is to maintain it, without letting it get too
big. After all, this is a premium product. The same holds true for Vietnam, but Vietnam is a
large country, and especially in South Vietnam we are feeling some pressure. But the brand
continues to grow in North Vietnam. That is why we do not want the brand to get too big,
because then it will become a mainstream brand, which is not what we want. For the time
being, we are very optimistic about the position and the future of the Heineken brand in
both countries. You alluded to China as well. A few years ago in China, we opted to focus
exclusively on the premium end of the market. China is definitely the largest beer market in
the world, amounting to nearly a half billion hectolitres. It is also the market with the world’s
lowest beer prices. Bear in mind that a hectolitre of a Chinese mainstream brand sells for
between € 23 and € 25 per hectolitre. China is a market with a standard surplus capacity of
25%. China will start having a population problem in the next fifteen years, as a consequence
of their one-child policy, which is why we have decided not to target the mainstream market
but to focus instead on the premium market with the Heineken and Tiger brands. In volume
our approach is more modest, but our aim is to create value. The Heineken brand in China
grew by double digits last year, and we are happy with that. You also asked about the excise
increase, but I will pass that one on to Mr Hooft Graafland.
Mr Hooft Graafland: The alcohol content in John Smith.
Mr Van Boxmeer: It went down, to 3.8%. And then the question is: does it pay? The answer is
yes. And are we giving that answer? No.
The chairman: So it was confidential, you understand.
Mr Van Boxmeer: You got that right. By the way, we are now at the average alcohol content
for ales in Great Britain. You should realise that in Great Britain ale beers have a lower
alcohol content than lager beers do, but that is not really worth mentioning.
You mentioned our EU penalty. We received the final judgement. Are we disappointed? Yes,
perhaps, but we cannot do anything about it. This decision is final, and we have accepted
this. I have closed this chapter. We have strengthened all practices to comply with
competition regulations in the future, and each year our management considers ways to
reinforce this in the firm.
You referred to some kind of management exodus after we purchased APB, if I understood
you correctly. I hope to convince you that this was not the case. Of course when you acquire
a company, some of the people do not what to stay on. There were some people that we felt
could not continue working with us. This was limited to a few individuals. And quite a few
internal candidates were promoted to fill the vacancies at APB. This all happened in the first
two months following the acquisitions. Everything was handled properly. I cannot exclude
that there is always somebody who leaves the firm with regrets and sometimes with a sense
of frustration, but I can assure that this definitely did not hold true for the majority. The vast
majority was delighted that APB had become part of Heineken, because of course we greatly
value beer. That is what we aim to do, and we also aim to promote the Tiger brand outside
Asia. Our Asian employees are very happy about this. I can guarantee this.
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Your last question was about the improved trading climate in the US and our market share,
which improved slightly there last year. Yes, it performed well in the US in 2012. After five
years in which the Heineken brand was losing market share in America, we have seen growth
again for the first time. This is very encouraging. But we have achieved nice progress with
the rest of our portfolio brands in the US as well, especially with Dos Equis. Since the second
half of last year, we have also noticed that the Tecate brand is starting to grow again in the
US. Yes, consumer spending is somewhat better in the US than in Europe. That is also a
factor. But the team there is doing an excellent job with the Heineken brand and with the
rest of the portfolio. We are pleased with that. This progress is obviously very gradual. It is
not as spectacular as sales in Brazil, where we now exceed 1 million hectolitres, and where
growth rates are much higher. But we are very satisfied with the current course of events in
America. I think that I have now answered all your questions. Thank you once again for your
kind words.
The chairman: I see two dogs fighting over a bone. I don’t mean to call you a dog, but...
ladies first.
Mrs Van Lierop: Thank you. I am Carlijn van Lierop and work for MN asset management of
PME and PMT. Today I am also representing APG, PGGM, Robeco, Syntrus, Achmea, Menzis,
the pension fund for the graphic industries.
The chairman: If you speak into the microphone like that, we will all be able to hear you.
Mrs Van Lierop: Good. Thank you for the clear explanation and the report. Your story was
clear. Thank you also for elaborating on the figures released regarding Q1 of 2013. Of
course they are cause for some concern. Could you please explain what strategy you will
pursue for Europe this year, because the market share there is of course cause for concern.
Please elaborate a bit more on that. Next, of course we reviewed not only this annual report
but also read your sustainability report with great interest. Nice to hear again in the
presentation just now that this remains integral to your operations, and to how your firm is
run. I have a few questions about this. These are about your strategy Brewing a Better
Future. As institutional investors, we care deeply about your long- term commitment to
sustainability targets. This is something that we value as long-term investors. I will explain a
few of the components. The first is water. Water is obviously an essential ingredient in the
production process. Without water, we would not have beer. You have formulated a clear
objective for 2020: using 3.7 hectolitres of water to produce 1 hectolitre of beer. In the
sustainability report, we note some progress in reducing the water, but I am curious whether
you expect to achieve this target. I would also like to know whether this target applies for
Asian Pacific Breweries. I noticed different targets in their sustainability report. I’d like to
know whether you will be harmonising these, and whether the same targets will apply there.
Finally, water is such a terribly important theme, so I wanted to ask you whether you have
identified the risks sufficiently; water scarcity might be a threat to your firm, and twenty of
your firms, factories, are located in areas where water is scarce. Do you have the risks under
control?
10
My second point, after which I’ll wrap up, is about human rights. Your human rights policy is
also an important point and is addressed at length in your sustainability report. Your
objective for 2012 was to implement and audit human rights policy. You report that you
were unsuccessful there. Please tell me why you did not manage to get the operating
companies to implement this human rights policy. Which problems did you encounter in the
process, and when do you expect to have implemented this policy? Perhaps you could also
say something about the human rights risks you see with Asian Pacific Breweries. Are there
still specific aspects that have your attention, or that should be receiving consideration? And
once again: when do you expect to be able to implement human rights policy? Please
elaborate. Thank you.
The chairman: Thank you. Mr Van Boxmeer.
Mr Van Boxmeer: Your first question was about Europe. You mentioned that you thought it
was important for us to have a long-term strategy, and you responded about the first
quarter that you were concerned because we are losing market share. Let me correct that.
We have a long term for Europe. In this light, the demographics in Europe are not helping.
We do not have growth demographics. And you should not expect exuberant growth in the
beer market. We care about market share and the share we can obtain in the beverage
industry, so we are also competing with wine and spirits. We want to increase our market
share with respect to other producers, but also with respect to comparable or competitive
categories. Over the past ten years, we have done a lot to prepare production, the footprint
of our companies in Europe, for the new market reality. The new market reality is 30% less
beer over the next decade or two. Such is the reality. To this end, we have closed 46
breweries, malting plants. We have also more than doubled productivity in our supply chain,
which has become two and a half times what it was ten or twelve years ago All these fit to
fight and TCM programmes serve to keep our production in Europe as competitive as
possible. Of course this has coincided with massive restructurings. We have talked about this
before. The bulk of these restructurings for the future are now behind us. I do not expect to
shut down many more breweries in Europe in the future. We’ve crossed that bridge. We have
also modernised. Also in view of sustainability in Europe: less water, less energy, fewer
losses, better occupational safety. That is the long-term production strategy.
In the past two years we have been very busy investing far more in innovation. To make a
category attractive, producing nice commercials alone is not enough, to put it bluntly. You
need to keep investing in innovation as well. That is somewhat contradictory. Beer is always
associated with the Heineken recipe, which in fact has not changed. Little has been changed
in the past century and a half or one hundred-forty years. The production process has
improved, but the original recipe remains virtually the same. We are often regarded as
something very traditional. How can we have a very traditional product but still be innovative
and exciting at the same time? That is why we introduce all those line extensions, those new
products, new brands of the neighbours to the others. We are trying to boost our market
share that way.
I want to look beyond one bad quarter, and our long term is truly based on being very
productive, because all of us are expensive in Europe, so we had better be really productive.
On the other hand, we need to keep innovating. These innovations, which are also invented
11
in Europe, are often rolled out on many other continents. Europe remains a highly creative
unit of Heineken. Many things that we do in the world come from Europe. I may be
pessimistic about the number of beer drinkers, but I can also be optimistic about our
business. Only it requires an awful lot of effort, attention and investments and, truth be told,
we’ve had a very difficult quarter. All I need to do is look out the window: the weather wasn’t
very good, and the consumption climate is downright bad. We need to look beyond that,
toward that long-term strategy. Of course I can’t omit all innovations in the short term to
have a better quarter. I can promote the beer on the shelf, but we won’t generate revenues
that way, so that won’t help, so we’ll stick to what we need to do for Europe’s future.
The second question was about water. Very briefly. Can we get water from 4.2 to 3.7? Yes. Is
it easy? No. Will APB be included? Definitely. Yes. The delay we have is due to acquisitions.
Most companies we buy are below our average, so that may take a few years. Perhaps the
figures we report next year will reflect deterioration, but that is often due to acquisitions. So,
no, we will not be changing our water targets. Risks in areas with water scarcity? Yes, we
have identified about twenty breweries that operate in areas of water scarcity, so we are
developing a new footprint there. What is a new footprint? When you make 1 litre of beer,
you really only want to use 1 litre of water. That all sounds nice in theory. It’s very difficult,
to achieve, but you really can do it with less than 2 litres of water. We are investing in
equipment and technology, so that the water used in the process and entering the effluent
becomes reusable for where it came from. It is always based on a thorough and geological
study on how we need to adapt it, and we’ll stick with that. Three weeks ago I visited one of
our breweries in Ethiopia. We have a similar situation there and are very busy exploring
options. We are overhauling the entire water effluent treatment plant. This often involves
major investments. We make those, because we have taken on that commitment. Mr Hooft
Graafland will be happy to answer the one about human rights policy.
Mr Hooft Graafland: Very briefly, because you say that we did not achieve our targets there.
Let’s see what the targets were. They were to get the new policy implemented, as well as to
audit it in the countries. Since we haven’t done the last part, we have not achieved our
targets, because this audit has not taken place yet. You may wonder why. This is because we
think it’s more important for the countries to start by implementing and communicating this
new policy properly, before we do the audit. In 2013, we will obviously check whether there
are any deviations from the policy we adopted last year.
Mrs Van Lierop: Then you’re saying that this implementation was a bit more timeconsuming. Were there any specific reasons to allow additional time for it?
Mr Hooft Graafland: Yes, that countries take it very seriously. It’s easy to say while you’re
seated at a desk in Amsterdam: we’ll adopt this policy and roll it out. When countries take
this very seriously and say they need more time to embed it very firmly in the organisation,
this is ultimately a good sign, rather than: we will pretend we have implemented it and will
complete a survey, and we think we’re done. So the organisation really takes it very
seriously.
Mrs Van Lierop: Thank you.
12
The chairman: Thank you. Sir, the lady was first, now it’s your turn, sir.
Mr Koevoets: Mr chairman, last November, like over 2 million other Dutch people, I enjoyed
watching Skyfall in the cinema. Previews of the movie had been on television for months,
featuring a dazzling Heineken commercial with James Bond playing the lead. I expected a lot
of Heineken to be drunk throughout the movie, since rumour had it that 60 million euros
was paid to the Skyfall producers. Unfortunately, reality did not meet my expectations. I even
realised half-way through the movie that I had drunk more beer than all the actors
combined.
The chairman: Thank you, anyway. They have not been included in the quarterly figures yet,
but they will be. Next quarter.
Mr Koevoets: But that could mean two other things. Either I am a serious alkie, or in fact very
little Heineken was drunk. Unfortunately, or luckily for my liver, the latter is the case. If I am
to believe what the Executive Board writes in the annual report, 60 million euros was a
record price for two beers. After all, this appears boldly in large type in the annual report.
But in what measure has Skyfall boosted the success of the Heineken brand? What I also
noticed about Skyfall, was that the green Heineken bottle was drunk twice during the movie.
I had not seen that bottle before. This bottle has been available at our supermarkets for a
month now. A lovely bottle, if I may say so, to celebrate a greener Heineken. In addition to
the new Starbottle, however, something else was introduced last month on the Dutch
market: new prices. After having increased by 5% in restaurants and bars last year, prices
went up another 5% this month. Why are prices in restaurants and bars being raised again?
The bad weather from recent months led to a considerable drop in beer sales all over
Europe. Instead of basking in the sun at an outdoor café, I stayed indoors. Why increase
prices at restaurants and bars anyway?
Next I’d like to talk about Heineken’s activities in what are known as tax havens. Heineken
appears to own a beer brewery on the Bahamas. Why does Heineken have a brewery on the
Bahamas? Does Heineken only brew beer on the Bahamas, or does this branch also serve
entirely different purposes, such as tax evasion? Does Heineken have any other companies
besides the brewery in these tax havens, such as the Bahamas, Bermuda or the Cayman
Islands? In addition, the annual report openly states that Heineken had a more favourable tax
arrangement with the tax authorities in 2012. I’d like to know what this arrangement
entailed, and what the differences are with respect to 2013. Finally, I have a question for you
about your recent acquisition Tiger Beer. When will I find it in our supermarkets? Wouldn’t
this be the perfect moment to introduce Tiger Beer worldwide, possibly instead of a local
brand that sells poorly? In Asia, Tiger is very well known and could become a strong brand
globally, thanks to its reputation. Thank you.
The chairman: Thank you. I’ll hand over to the Executive Board for answers to these difficult
questions.
13
Mr Van Boxmeer: James Bond, 60 million euros. The amount is right, but of course the
producer didn’t get the entire amount. We do not publish the share that we actually pay the
movie producer to include those two bottles. Remember that the vast majority of what is
spent is to run campaigns relating to James Bond. The money we spend is to produce our
own James Bond movie, as you saw, and to roll it out in all countries where we sell James
Bond, plus all our promotional efforts for the James Bond movie. We do not pay such a huge
amount to the James Bond producer. But we do help sell the movie all over the world, and
James Bond helps us sell beer. It makes for a win-win partnership. The price is high, but of
course we would otherwise have incurred the costs in different ways. Please understand that.
It’s not only about those two beers. We are very happy we got him to drink the beers this
time. In Fleming’s original book, James Bond drank beer, not martinis. We are closer to the
reality of the original writer. As to whether this boosts sales, we can obviously measure this
too. Our absolute Heineken sales went up 5.8%. You cannot say specifically: this it is thanks
to James Bond, and that is thanks to everything else, but we do sense this it gave the brand a
buzz on a great many markets. And the campaign revolving around James Bond was one of
our stronger campaigns this year. The Netherlands was indeed the last country, where the
green bottle was introduced. This is the jewel in the crown of the green story. It was very
long in the making, but now it’s here. The green bottle was long available in a nonreturnable format. And Albert Heijn supermarkets have been selling green bottles for ages.
But now the returnable bottle comes in green packaging as well.
As for the Bahamas, yes we have a brewery there. It has been brewing beer for a very long
time. We have a leading market share on the Bahamas, and this brewery only sells beer. So
the answer is no. We do not have tax devices in tax havens to evade taxes. The Bahamas is a
tax haven, but all we have is a brewery that sells beer there. Take my word for it. We also
have an import agent on the Cayman Islands. I assure you that all this is business-related.
Your last question was about the Tiger brand. I have said repeatedly that we will continue
taking it beyond the national borders of the Asian countries alone. We already started in
England a few years ago. It’s a big success, and we’ll probably repeat this in other countries
in the future. The brand does not conflict with Heineken, so that might work beautifully. You
are absolutely right. I’d like to hand over to Mr Hooft Graafland for your question about the
tax arrangements.
Mr Hooft Graafland: You already said something about it: that we do not have all kinds of
tax-dodging mechanisms in tax havens. You also referred to the annual report, which says
that the tax burden in 2012 was influenced by several arrangements or agreements we made
with the tax authorities in different countries. Especially in 2012, when we acquired Scottish
& Newcastle in England, there were quite a few tax issues with the inland revenue service in
England, and we settled those last year. We have agreed on what we will and will not pay,
and the outcome is somewhat better than we had expected. This explains the small surplus
in 2012.
The chairman: Thank you very much. I see several people have questions. May I give you the
floor? Go ahead.
14
Mr Knaap: I am a private shareholder. My question actually follows up on the question that a
lady before me asked. I was reading over the sustainability report and notice that you score
well there. The figures look good. What I do not see, is what you just referred to as effluent,
which I would like to call waste water. I see very little about that. I know that other beer
brewers obtain up to 90% of their energy needs from waste water, which of course is very
good. I know that in the past you derived brewers’ yeast from waste water for quality
applications. What I would like you to tell me is: what kinds of projects are you running to
manage energy in valuable reuse of brewers’ yeast? Concerning recycling water: what
percentage of the water do you recycle, and what are your targets in these areas in the
coming years? I would like to see something about that in the annual report next year,
because waste water is obviously a substantial waste product, and I would hope – as is my
impression – that you treat it with care, and that you improve upon this every year as well.
The chairman: Thank you.
Mr Van Boxmeer: The answer to your question is threefold. Every brewery is required to
install a waste-water purification system, as we are doing as well, so we do that too now. Off
the top of my head, I do not remember how many do not have one yet, but such installations
have been planned everywhere. We recently acquired a few breweries in Ethiopia and are
building exactly one there. Generating energy there depends very much on whether aerobic
or anaerobic energy is used. Depending on the technology selected, energy or biomass may
be derived from that. Both techniques are possible, but no standard is compulsory. The
brewers’ yeast is usually sold to the pharmaceutical industry or to pet food companies and is
used in agriculture as well. In more rural areas, it is mixed with draff and is added to animal
feed. Locally, ways are sought to use the surplus yeast properly each time. I do not
remember anymore exactly what the regulations for CO2 reduction and BOD (biological
oxygen demand) degradation are, but each type of waste water purification is subject to
rigid degradation regulations.
Mr Knaap: But what percentage do you reuse, and what are your targets? I have not heard
you tell us this yet, since of course it would be wonderful, if you could reuse an everincreasing share of that vast quantity of water.
Mr Van Boxmeer: I’m sorry, I don’t know the exact figure. After the meeting I can tell you, or
the specialist may notify us.
Mr Van Boxmeer: We will take note of it. Some breweries in Africa farm fish in ponds of
waste water to prove that we are doing it right. Organising fish farms in waste water is very
popular.
Mr Knaap: A good application.
Mr Van Boxmeer: Yes, absolutely.
15
The chairman: Thank you. May I give the lady at the back in yellow... I’m not colour blind, so
I’m positive. Next to her is a gentleman who had his hand raised as well, but he’ll get his
turn in a moment.
Mrs Heide: I’m Rachel Heide of the VBDO, the association of investors for sustainable
development. Heineken’s Brewing a Better Future is a wonderful strategy, which aims to
make this the greenest brewery in the world. The VBDO welcomes this ambition. That the
strategy is proving its merits is clear from the fine ranking on different benchmarks and
lists. In the annual report and the sustainability report you reveal that you are taking very
serious steps to become a green brewery. After examining the annual report and the
sustainability report, we formulated a few questions as well.
The first one is about chain management. The VBDO believes that you could improve in
chain management. It remains unclear, for example, how you identify risky suppliers, and
how you monitor them. Can you tell me who is responsible for such identification, and who
is in charge of monitoring?
Next, you indicate in the sustainability report that you conducted nine audits in the chain.
You also indicate that non-compliance was noted on some aspects. We are very curious
which areas such non-compliance concerned, and whether this led to specific measures
targeting these suppliers.
Regarding human rights: at last year’s AGM, the situation with the Cambodian beer girls was
raised. We are delighted to read in the sustainability report that you have taken appropriate
measures on that and no longer use these girls. You have our gratitude and our compliments
on that subject. We would still like to know which measures you will take to prevent these
situations from occurring in other countries.
On the subject of human rights, we understand that you are involved in pilots for a living
wage. We are very curious whether policy has been formulated yet, and, if so, for which
countries this has been done.
I would also like to talk about biodiversity. I was delighted to read in the annual report that
you have set up a biodiversity pilot in Spain, since I see many companies coping with this
subject. That is why I am very curious as to whether you will disclose your progress on this
project. I understand that this was launched on 1 January 2012. I am curious whether we will
be able to read more about it next year. I would also like to know whether you intend to
conduct comparable projects in other countries. Pesticide use is generally known as a threat
to biodiversity. Organic farming impacts the environment less and is less of a danger to
biodiversity. You have just shown that you have different beer brands, but they do not yet
comprise an organic line. Does Heineken intend to launch an organic brand as well? We are
also very curious whether the controversial pesticides Neonicotinoids are used in producing
Heineken beer. In recent weeks much was said about them on Kassa. Finally, My final
question is about remuneration.
The chairman: Madame, would you please ask that question at Item 3 of the agenda, when
we are dealing with that specific subject? We will now answer your questions. Thank you.
Mrs Heide: Thank you.
16
Mr Van Boxmeer: You asked about supply audits. A standard procedure is conducted each
year. I’m not sure in how much detail we should report any problems we encounter there. Of
course you are always welcome, if you want more information about specific things. We’ll be
happy to tell you about them. To be honest, though, I cannot go into any more detail on this
question at the moment. You are welcome to ask me after the meeting to put you through to
people who can tell you more. Vendor audits are a recurring practice, and we ensure that
they comply with the codes we aim to enforce internally.
You made a remark about the Cambodian situation. Yes, our importer in Cambodia stopped
using promotion girls on the Cambodian market. We helped wrap things up as best we
could, since that was not easy either. We had to intervene to ensure a decent end. This does
not mean that no more promotional work is being done in Asia. Now that we fully own APB,
we have 13,000 people working with us on promotional activities all over Asia. It is not a
specifically Cambodian matter. Cambodia received the most extensive media coverage,
bordering on obsessive. But this does not prevent us from addressing other countries, where
ladies conduct promotional activities. So Heineken will operate for APB in the future, as well.
This is not so difficult, because we are 100% owners. That allows us to set our own
standards. We will work according to the standards we have publicized in Cambodia. These
will serve as a blueprint in all countries where we generally operate.
You also asked about a living wage. A living wage is a nice concept. I worked in Africa for ten
years. A living wage is based primarily on the judgement of the local management. Of course
it is very complicated, and we are working to see how this should be defined. On the one
hand, countries set minimum wages. We will of course always observe those. But in some
countries the minimum wage may not be sufficient as a living wage. We are investigating
how to define this better than a judgement and a local judgement you make in the countries
where you operate. But please take my word for it that our management in all countries that
might face a situation like the one you are describing knows how to handle them. After all,
Heineken pays attention to these things. Countries such as Rwanda, Burundi, the DRC are
countries where a living wage is an issue. We devote the necessary attention to it there and
will continue to do so. If we devise what is truly a structured policy and deserves to be
designated as such, we will do that. It would be premature to say that we have such a policy,
but we are certainly considering it.
Biodiversity covers a broad scope, and we are not the only agent. You will hear some more
about what we are trying to do in Spain. Just as we have worked for years in the Netherlands
on the Flevo polder on the Leeuwerik project, where we also tried to introduce sustainable
agriculture. It is a journey, as the English say. There is no single solution. You cannot switch
to organic farming overnight, nor can we force it on others. Even if we wanted to impose it,
we could not, simply because not enough land is available, or the knowledge is lacking. The
good news is that we are making progress there. We are not alone. We have teamed up with
the people engaged in agriculture and with other companies similarly involved in making our
agriculture more sustainable. Of course there are many ramifications. It depends on water
use, soil management, plant treatment, whether or not you use pesticides; it is about
chemical use; sustainable agriculture involves so many different things. My sense is that we
are achieving progress, and we want to continue doing so. But I cannot claim that we will
solve everything at once. The answer is yes, we will continue tracking our projects and
publicising them, because we believe that being open about them will encourage others to
17
adopt our perspective, just as we look at what others do to practise sustainable agriculture.
You mentioned Neonicotinoids. I cannot provide an absolute guarantee that we purchase
agrarian products that have not been exposed to them. That is impossible to trace. It is the
hot topic of the day, but to answer: we know exactly, we can assure you that that is not as
issue. That would be lying, and I won’t start doing that. Of course we are looking into the
situation.
The chairman: Thank you very much. I see two more people. May I start with the gentleman
at the back, because he was already on his feet, and next the gentleman in front here. Then
we will gradually need to move on to the next item on the agenda. May I interrupt you? I
gave the gentleman at the back the floor, not you. Would you please take your seat. You are
welcome to remain standing, but the gentleman at the back has the floor. The gentleman
back there wearing the headset.
Mr Rousseau: Thank you very much Mr Chairman for the opportunity to address the
Heineken shareholders’ meeting. My name is Thomas Rousseau, and as a money manager I
represent nearly 10 million shares of Heineken Holding company. I have held these shares
since the 1980s I have had the privilege of watching the family and the management team in
partnership deliver long-term value. It is a special privilege to speak here, because I gather
that as I speak, I am being translated into Dutch. So it is enjoyable to be speaking in Dutch.
The chairman: Most people understand it anyway.
Mr Rousseau: Good. Thank you. It’s been a long time since I last spoke. When I came it was
to speak on behalf of the dual class structure for shares. There was a movement at the time
led by American-based investors who purchased shares of the Holding company to require
the company to consolidate the share class. This would have been likely to generate a shortterm gain for those shareholders. It would have been a long-term disadvantage for the
company because I think it would have distracted management. At the time I stressed my
belief that the dual class shareholder structure enables Heineken to take the long-term view.
Management know that they can pursue their mandate to pursue the building of wealth with
assurance of support from the Heineken family shareholders who controlled the destiny of
the company through the holding company. Such assurance to management is vital. If steps
to devise long-term wealth lead as they inevitably do to a short-term loss of profits, the
capacity that management possesses to shoulder its short-term burden allows them to take
bold steps to increase long-term wealth. Today I am here to speak in support of the
compensation proposals for those managers. When I first spoke at Heineken …
The chairman: Sorry to interrupt you. On the compensation I understand you support it. We
have a separate item, where you can express your support on that matter. But I understood
the basic thrust of your comment.
Mr Rousseau: I would be delighted. Considering the compensation support, I guess I will
finish by simply saying to think what management accomplished over the past year, control
18
of APB, the turning around of Mexico, these are all remarkable accomplishments. I do have a
few words about compensations but will reserve those for later.
The chairman: Thank you very much. And usually, one says: and the question is. But we
thank you for your statement of support. May I switch back to Dutch and continue with the
gentleman here?
Mr Vreeken: Good afternoon, Chairman Van Lede. I am Robert Vreeken of We Connect You
Public Affairs and Investor Relations. I am delighted with the excellent way that the Executive
Board and the Supervisory Board handle this. The communication is highly effective. The 60
million euro investment in Skyfall is extraordinarily effective and was an exceptionally
reasonable price. You might consider a follow-up to increase market share and protect the
Heineken brand, for example Tom Cruise with Heineken Zero. Let me explain. Heineken’s
advertising has a huge impact. When I think of the schools my children attend in Amsterdam,
the pre-university schools and hockey clubs, Heineken is the market leader. Heineken is
especially popular among the 13-16 age group. Teens tell me: ‘five beers? That’s not a lot.
Ten is normal.’ They drink so much beer at the Vossius [school] that the Jellinek [rehab
clinic] already provides information there. Introducing Heineken Zero would really boost your
image. It would prevent a ban on beverage commercials and would also stop 13 year-old
girls from drinking before parties and lying about drunk in the Amsterdamse Bos. Besides,
smart phone use, Twitter and Whatsapp relate to consumption of alcoholic beverages. I also
suggest that you invite the neurosurgeon Van der Top from the AMC [hospital] or the
director of the Jellinek to serve on the Supervisory Board or the Executive Board.
The next point is sustainability. The Netherlands has a wonderful group comprising Wubbe
Ockels, Jan Terlouw and Hans Wijers, who could take simple measures to ensure that
Heineken serves as a role model. For example by introducing a hybrid and electric fleet of
cars. So hybrid cars for the Supervisory Board and the Executive Board. The new Mercedes S
Class is environmentally very thrifty. The same holds true for the BMWs and Audis that are
about to be launched. The staff at the head office in Amsterdam have access to an electric
fleet of five hundred Car to Go electric cars. The hourly rate is only 13 euros. Attaching solar
panels vertically and horizontally to buildings is another idea. Even if you get only three
hundred for a hundred thousand, a modest investment. Over the long term, it will cost
50,000 euros, but it shows that Heineken takes it seriously. If you opt for solar energy, then
you need not cut energy consumption, since the sun is free. Thank you for listening.
The chairman: Thank you. We are getting one statement after another. Thank you. I will not
deprive Mr Roest from the VEB of this opportunity. He has just approached the microphone,
but I overlooked him. Please, you have the floor.
Mr Jorna: Thank you. But my name is André Jorna: and I am speaking on behalf of the VEB. I
have not brought a book and definitely will not be kissing you.
The chairman: Thank you.
19
Mr Jorna: It’s mutual. Perhaps that opportunity will come after this meeting. There have
already been many speakers, so I’ll try to be brief.
Now, about the APB. This acquisition, I notice that your management just let it happen.
Along those lines, I’m asking you: would it not have been wiser to approach the Singaporean
Bank, OCBC, from the outset to avoid putting Thaibev in the driver’s seat and having to enter
that battle? Could it be that you were caught off guard, when it happened? Once you were on
the defensive, you had no other option – you now also have the chairman of Ajax with you,
who provided you with sound advice: take the offensive – but it has cost you a pretty penny.
In that sense the question is actually: did you not take action far too late against Thaibev in
the bidding process? The second, related question is: have Thaibev and Kirin as competitors
registered their shares with you by now? Or will they not do this, and will they remain a
difficult shareholder that may cherish an interest in APB as an investment? By acquiring the
Tiger Beer brand and putting Asia firmly on the map, some blank spots still remain. Certainly
considering that you are identifying the bad weather as the culprit for the first quarter.
Perhaps you should register Jägermeister, then you will also be able to do good business in
polar areas and in bad weather. Acquiring APB drove your debt ratio up to 3.3. You now
have a very good cash flow, and it is undoubtedly below the 2.8 we know. The money comes
in daily, so you’re doing well in that respect. My concern is whether after acquiring APB, if
one of your minority interests is attacked again, or if we look at the US GrupoModelo, where
AB and Inbev need to be scaled back, will you have the leverage to defend or attack?
My next question is about prices. This has already been raised. In the restaurant and bar
beverage business, your position of power enables you to raise prices. Are you able to do so
at supermarkets as well?
Now for my last question. If we look at AB Inbev, we see that it has a 40% margin on every
euro earned. You do not exceed € 0.15, and APB had a 27% margin. How will you bridge that
margin gap, which may be keeping you at a disadvantage? Those were my questions, Mr
chairman.
The chairman: Thank you very much. Mr Van Boxmeer
Mr Van Boxmeer: Elaborating on the dealings with OCBC is of course extremely tricky. We are
not going to get into that today. What is interesting is that you are telling us we paid very
dearly for it. We did indeed pay a pretty penny and do not regret it. The joint venture had
existed since the 30s. This contract had no change of ownership clause. That means that
whoever bought F&N would have been our partner, and we had no say in that. I am not going
to discuss whether or not we were active with OCBC. But it is up to you to decide whether we
were complete fools, I am not going to address that. So much for the first question.
I will be very clear about the second one. Kirin was an F&N shareholder, sold in FNN [sold
F&N], is no longer an F&N shareholder. We purchased F&N’s shares in APB and now own
100% of APB. Nobody besides Heineken is now involved in APB. It has become a private
company.
The third question is about Tiger. Yes, of course, but making Tiger a world brand may take
the next ten or twenty years. Just because we live in the internet era does not make taking a
project global or worldwide easy. It goes from country to country, from city to city. After all,
everybody needs to be convinced that this is a good beer to buy, to drink, to try. We are
20
working on it, and we have ambitions. One of the reasons why we think that APB is not only
our ticket to doing business throughout Asia is also the Tiger brand, which we believe has
much to offer in the long run. You definitely have a point there. Yes, we have always
maintained a rigid policy of paying off our debts as quickly as possible and remaining below
two and a half times EBIT (beia). This is why we have that leverage every time to, you may
call it reactive or active, participate and to seize opportunities that surface on the market.
Your last point was about margins, but I would like to share that fairly with René.
Mr Hooft Graafland: You have rightly noted that APB operates at higher margins than the
Heineken group overall. That is also one of the attractions of APB. They run at around 25%,
and our firm as a whole is at 16%. These units are incomparable. This is because of the
regions where we work. It is also because of our brand portfolio. APB has 50% of its business
in the premium segment, so they are very focused on the premium segment. Margins are
higher there than on the mainstream market. The VEB once did a comparison with other
brewers. What you should also consider about us is that we have a very large wholesales
business. We generate three and a half billion euros in sales through our wholesale
businesses in Europe. They work as wholesalers usually do, with margins that are very
different from the ones that brewers make. They work at a 2% margin. This impacts
Heineken’s total margin. If you separate them, the figures are entirely different. We are
pleased with the fine margins that APB makes, because this will boost our total margin. As a
firm, we of course try continuously to increase our margins. You do that by reducing costs
and improving revenues, and that is what we are doing.
The chairman: Mr Roest gets to ask the last question. Obviously the last and the best
question. Do you have a brief follow-up question? Please remain standing, Mr Roest.
Mr Jorna: You did not address the huge difference that is increased by APB, but AB Inbev is at
0.40, and why is that? It is a mass market, in two countries: the U.S. and Brazil, but does that
explain the difference? I still do not see the difference between AB Inbev and Heineken.
Mr Van Boxmeer: May I answer that very briefly? It is not my call to comment on the results
of competitors, but in the Americas, the market structure is very duopolistic. There are
usually one or two operators. This consistently leads to higher margins. We also see such
situations in some countries in Africa. I often say: if Nigeria were as large as Brazil, then our
overall margin would be better there. It is very market-related, and however large and
concentrated that market is, underlies a relatively large difference between the margins of
these competitors and ourselves. We are working to improve the margins. Comparing them
in terms of: they are like this, and you are there won’t get me anywhere. Our goal is to
improve our own margins. We are doing this through innovation, by having more premium
brands. In Europe we operate in one of the most competitive markets in the world.
Mr Hooft Graafland: Allow me to add one figure to that. If you omit Brazil and the U.S., which
you are referring to, ABI’s margin is less than ours and is below 15%.
21
The chairman: We are not going to say any more about the competition, but Mr Roest has
had to spend so much time getting ready, that he will get the floor as the pièce de
résistance.
Mr Roest: I have been waiting eight years, so I’m certainly patient. I’m John Roest and speak
on behalf of Heineken’s food and beverage service staff. We were outsourced by Heineken in
2005. Our work stayed the same at the time, but we lost 50% of our salary. Heineken’s trick.
We objected and raised the subject at the shareholders’ meeting in 2006. At the time Mr Van
Boxmeer said that mistakes had been made in outsourcing the food and beverage service.
The case is pending in court, and we will wait and see. The European Court of Justice will
rule in the case. After that we will simply pay, if that is what justice dictates. We did indeed
approach the European Court of Justice. Seems rather odd for the catering staff to do this.
But Heineken wanted to do it this way. We won. Unfortunately, Heineken never got back to
us. Heineken’s HR director said: we’d like to close the chapter after six years. The Supreme
Court issued its ruling this year. The chairman said at the start of the meeting that the year
has been a fascinating and an exciting one. It was for the catering staff as well. The
outsourcing happened on 1 March 2005, and the Supreme Court upheld the judgment by
various lower courts and the European Court of Justice on 5 April 2013. After eight years of
litigating, the former catering staff prevailed. Sometimes justice is done, but having a lot of
money as Heineken does really helps. Now it turns out that Heineken already had a bailiff
ready to impose an attachment before the Supreme Court issued its judgment. Fortunately
the bailiff was a beautiful woman who came to my door, so that mitigated the circumstances.
Heineken expressed a desire to continue litigating about the severance pay and terms of
employment. This is shocking. In addition, such a court case once again causes many
tensions and legal fees among staff members who have worked for Heineken for twenty or
thirty years on average. This needs to end someday. Especially if you’re a good employer, as
you mention at each shareholders’ meeting, or want to be one. A good employer takes
responsibility and accepts his loss. It is a matter of basic decency. Sadly, reality is otherwise.
This course of events has definitely sunk Heineken in my view. In this country those who
have money can litigate those who do not into bankruptcy. It is a deep disgrace for a
company that deals with billions, where this payment to the staff is undoubtedly trivial,
compared with the bonuses to which the Heineken senior executives may once again look
forward today. We have also said: rehire us at Heineken. We do not expect a bonus for
staying on. But you will understand that their egos wouldn’t accept this. They definitely will
not do this. Especially since the courts have been very clear. In our society we have courts to
resolve disputes. The purpose of justice is not to prevail by the force of your money.
Heineken should be deeply ashamed and is a disastrous employer. (Applause)
The chairman: Thank you for your speech. All I can do is hand over to Mr Van Boxmeer to
respond.
Mr Van Boxmeer: That speech was breathtaking. I admit that. Your group has been very
courageous in opposing the decision or our action by suing, and you and your group have
definitely won. You mentioned a rule of law, and that large sums of money could buy
everything. Those are your words. I’m not sure whether that is the way things should work. I
22
do not think that is the case in a country such as the Netherlands, and I do not think things
work that way in Europe, and that is why the European legal institution ruled in your favour.
How can we move this case forward? Of course we could do that at this forum, but this does
not seem like the appropriate body to me. You have won this case together with several of
your co-workers. I’m going to talk about this matter, because you have made many people
witnesses to what happened. When the department was outsourced to Albron, the staff
members were paid compensation. The last mile in this affair is to say: that’s not how it
works. The European directive prevents outsourcing with these kinds of arrangements. We
accept that too. So all provisions applicable to a Heineken employee also apply to an
employee coming from Heineken but presently employed at Albron. We accept that too. I
believe that the only dispute that remains is to discuss the compensation that was offered in
2005 for the transition. That is technical. Regarding the substance of the case, we will be
happy to engage in any debates that remain between the company and your group. Again,
though, I don’t know whether we can work it out in this room.
Mr Roest: You can always work things out with people. When your salary is halved, you lose
your pension and everything. On 31 October your director convened a meeting. He said
there: I am making you all an offer, a ridiculous offer, to put it bluntly. If you don’t take it,
we will carry on in court for another four years, since Heineken has good lawyers too. That is
no way to treat people. I have always appreciated Heineken as a decent company. We have
always been happy to do it. And if you lose, you should be a worthy opponent and consider
what you lose. Having a Heineken actuary crunch some numbers… There is a Dutch saying:
he who pays, from his word one speaks. No more, no less, Mr Van Boxmeer. You know that
too. In any case, thank you for allowing me to speak, and please carry on with the good news
show.
The chairman: I think we will terminate the discussion here. Mr Van Boxmeer made your
group an offer. I think it would be wiser to get back to this subject outside the meeting. You
have clearly made your point here with the knowledge of the shareholders. We have heard it.
I hope that in the contact between your group as it is called and Heineken, we will make
more progress. I see three requests for the floor. I would ask all three of you to terminate
this item. You can undoubtedly restructure your question in some way relating to the next
item. It is now 4.00 PM. We hope to conclude this meeting before the next king is installed.
We have several agenda items left, and I am sure you will find a subtle way to get the
questions you still have answered there.
According to the attendance sheet, 155 shareholders are present, 41 shareholders are
represented. The total is therefore 196 shareholders, holding a combined total of
495,327,358 shares, which covers a very high percentage. Five shareholders have cast their
votes online. An additional 59 shareholders of Heineken Holding N.V. are attending this
meeting as auditors. We will now move on to the financial statements. As stated, this item is
about the quantitative aspect. That is the other part of the annual report, pages 67 to 152.
This has been audited by KPMG. You will find the statement from the auditor on page 153.
Who would like the floor? The fact that you are standing there means that you would like the
floor. Go ahead.
23
Speaker: I just saw refrigerators listed under the CO2 reduction. I didn’t understand that.
Neither Heineken nor Heineken N.V. manufactures refrigerators, right? Or are you a majority
shareholder of the firm that sells refrigerators?
Mr Van Boxmeer: No. Of course we installed refrigerators on standing loan to display our
products for sale, and all draft systems are refrigerated. The refrigeration systems emit CO2,
and we made a commitment to keep improving these systems to meet the highest industry
standards and thereby contribute to reducing CO2.
Speaker: Thank you. Another very brief question. Let me read this aloud. It’s very short.
Heineken’s first quarter was weaker than expected, as the beer brewer reported this
morning. That was yesterday, in the NRC evening paper. Finally, Heineken is downgrading its
expectations for the rest of the year, without disclosing details. Can you do anything about
that? For example through massive advertisements in the press, perhaps in my newspaper
the NRC Handelsblad or on billboards or in magazines? What is your answer to that?
Mr Van Boxmeer: We will continue doing our best. You will not be drinking twice as much
beer tomorrow because you skipped having a beer yesterday or did not visit an outdoor café.
We need to be realistic about that. We will not over-promote. So let us look beyond a quarter
that was less good.
Speaker: You do so with policy and wisdom. I am convinced of that and will accept that.
Thank you.
ADOPTION OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR 2012
The chairman: Thank you. You have taken us to the next agenda item, which we are now at.
Any other questions about the financial statements. Madame, please go ahead.
Ms Heine: Thank you. I am still Rachel Heine of the VBDO. The VBDO regards corporate social
entrepreneurship as a way of contributing to a country’s development. One way to do this is
by paying taxes, which enable investments in infrastructure, environment and human rights.
The financial statements show clearly that Heineken pays taxes as usual. We are very curious
how you relate taxes to sustainability. We have also noticed that the financial statements do
not yet report on taxes country-by-country. We are very curious whether we may expect that
in 2013. I would also like to know whether I may ask my question about remuneration policy
here.
The chairman: No, I will have to keep you waiting a bit longer.
Ms Heine: It really is about policy.
The chairman: We will talk with you about that in detail soon.
24
Ms Heine: Then I will stop here at the taxes. Thank you.
The chairman: Thank you.
Mr Hooft Graafland: You asked whether we relate taxes to sustainability. We most certainly
do. A healthy, responsible and justifiable tax policy is compatible with good sustainability
policy. I think those two are very closely related. You referred to our taxes. They are between
27 and 29%. At any rate, that is what we expect for 2013. That is a very standard level of
taxation. You referred to it earlier. If you are looking for the rate by country, we cannot
publish that, just as we cannot publish all other items in the income statement by country. In
that respect we observe the IFRS regulations in our annual reporting practices, and they do
not stipulate that such items need to be set out by country. As we mentioned earlier in this
meeting, we do not use tax havens. Our transfer pricing model is based on managing the
business as well as possible and not on avoiding taxes. That is not what our transfer pricing
model is based on. It serves to support the business and should motivate managers in the
countries to make the right choices. We have statutory financial statements in nearly all
countries. These are registered. In some countries we have a company listed on the stock
exchange, and there are annual reports. But the registered annual reports are open and
public as well, and you should be able to find out what taxes we pay by country there, but
we will not be making this book thicker than it already is.
The chairman: Thank you. The gentleman back there.
Mr Spanjer: I have a question. Nowadays we have to pay a crisis tax for the Netherlands for
this year 2012. What is the situation for your organisation?
Mr Hooft Graafland: If you are referring to the Netherlands, of course we operate all over the
world. Counties have different regulations, but I think you are referring to the Dutch system,
and there it would be 16% taxes on all salaries over 150,000 euros.
Mr Spanjer: That’s quite a substantial amount of money.
Mr Hooft Graafland: Do you mean the 16%?
Mr Spanjer: Yes.
Mr Hooft Graafland: That’s true.
Mr Spanjer: That’s what I mean. Would it be a good idea to post buttons on the central
Heineken site, so that you can check the financial records other countries, to view the taxes
in those other countries? Wouldn’t that be a good suggestion?
Mr Hooft Graafland: I heard somebody here mention that we are not the inland revenue
service
25
.
Mr Spanjer: I understand that. But then we could see how other countries do it. Otherwise,
we need to request all those hard copies.
Mr Hooft Graafland: We will consider you suggestion. Thank you.
The chairman: Many people want us to believe that we live in a tax haven here. I have never
noticed any of that. But that is how rumour has it. May I give you the floor?
Mr Van Hoorn: I’m Mr Van Hoorn. I am here on behalf of Ms Haasnoot. You may have read
the article I wrote in today’s edition of the Volkskrant. I would like to take you up on your
invitation to sneak in an agenda item. I would like an itemised list of the costs of legal
proceedings for Heineken Netherlands. The company is litigating from here to Kingdom
Come, also against me. I just heard several fine stories about Heineken’s leadership. I’ve
been with Heineken for a long time. I know some great feats of Heineken’s leadership in
Lebanon and Rwanda. At the same time, we notice Heineken Netherlands going through one
scandal after another. After ten years of litigating, I submitted my case to your Integrity
Committee. After looking into the matter, your Integrity Committee proposed three months
ago that Heineken Netherlands did not treat me properly, that they caused me
disproportionate personal harm, and that Heineken should have solved this differently. I
then proposed having a conversation with Heineken Netherlands, and Heineken Netherlands
has so far refused. Because the Integrity Committee reports to the Executive Board, I would
like to discuss this with the Executive Board some time. This need not be a plenary occasion.
I would also like to ask you what your view is of the recent media reports about Heineken
Netherlands. Let me tell you, this has a long way to go. Thank you.
Mr Hooft Graafland: Frank, we have known each other a long time. We have a business
dispute that was tried in court. There was an appeal. Each time, the court ruled 100% in our
favour. You then decided not to accept this and not to pursue any legal options that might
still be available. Instead, you took the offensive via the media. This explains the deluge of
letters and the article in this morning’s Volkskrant. You approached our Integrity Committee
as well. They considered the case. I do not know what you and the Integrity committee
agreed on. I received a report from the Integrity Committee stating that there is nothing
there. I am looking in the direction of a member of the Integrity Committee, our legal
counsel, and he is nodding to confirm this. I do not understand why you are saying now that
the Committee indicates that Heineken Netherlands acted improperly. That is not what the
Integrity Committee concluded. Let that be very clear.
The chairman: I would like to leave it at that. This is not the platform where we fight out
individual conflicts between the firm and whoever. This is a shareholders’ meeting, and we
need to review approval of what happened in the previous year. If you have such questions,
and you own a share, you may ask any question. You have done so. If you feel a need for
contact, you should contact the company directly and not raise it here anymore. I would like
26
to hear a real question about the financial statements, because that is the present subject.
Please go ahead.
Mr Jorna: I have a question about pricing policy. Are you in a position to issue pricing
recommendations to supermarkets and to enforce them? A second question about pricing
policy. France has raised excise taxes considerably. In hindsight, we have seen that the bad
strategy applied in Russia cost both revenues and profits. How will you handle this in France?
Now for my third and final question, Mr chairman. Increasingly, companies have been giving
the auditor the floor this year to elaborate on his audit of the financial statements, as well as
on what he did and to describe the issues that his recommendations address via the
management letter. Would you please allow the auditor to speak at this meeting too?
Mr Van Boxmeer: Your question about pricing. The competition is eavesdropping. I am not
responsible for how we agree on prices with our customers. That is competition-sensitive
information, and we will not address that at a shareholders’ meeting. The increase in excise
taxes in France was indeed very steep, 160% all at once. We teamed up with the brewers’
industry to fight that, taking the matter all the way to the minister of Economic Affairs and
Finance. We feel that this is truly excessive. It really has a huge impact on prices. The next
question is whether to accept a loss in margin, but that reaches a level that is actually
unacceptable or plays into the competition’s hands. Excise duties deter consumption. They
are passed on to the consumer. In France all parties on the market passed them entirely on
to the consumer. Of course this influences volume, very significantly so. Only after the
summer will we know where it will stabilise. Today I can make little sense of it yet, except to
say that it will have an impact. You mentioned Russia. Russia was a different matter. The
different players there tried to solve it in different orders. In 2010 we opted to pass most of
the excise increase on to the consumers and lost a great deal of volume as a consequence.
As I’ve said before – and it’s been two years now – it was an error in judgment on our part.
Because we are not market leaders, in hindsight, we should not have done that. But that was
three years ago, and the situation in Russia has fully recovered.
The chairman: The auditor. You had already notified us about that. As far as I know, all other
companies have been very transparent about how they work with the auditor. The auditor is
present and able to answer questions via the chairman. In a moment, I will ask him to
elaborate clearly on his audit duties in that respect. Let me mention one small part where I
disagree with you: the management letter. It’s quite simple. The management letter is a
highly critical document written by the auditor, actually for the information of the Executive
Board and the Supervisory Board, listing internal points that require action. Notwithstanding
all the good intentions of the VEB, if that document is to be made public, there is a danger
that it will be written in very general terms, and that it will no longer reveal precisely the
information that the Executive Board and the Supervisory Board need. With all due respect
for your position, I believe that as long as I still have any say – don’t worry, I’m almost done,
you may try again next year – we need to keep it internal. If the auditor would like to
elaborate on his audit duties such as they are and would mind the time, then he is welcome
to do so. I’m not sure where he is seated. Yes, please go ahead.
27
The auditor: Chairman, ladies and gentlemen, of course I am happy to elaborate on our
duties as external auditors to the company. To put the exercise in perspective, the Executive
Board of Heineken N.V. compiles the financial statements. The Supervisory Board signs the
financial statements and submits them to you, shareholders, for adoption. We have been
commissioned to perform our independent audit on them. Our independent audit serves to
determine that the financial statements presented accurately reflect the reality. This means
that we determine with a reasonable degree of certainty that the financial statements contain
no material errors. In the process, we focus on individual items in the financial statements,
as well as on the cash flows, how the result comes about and on the explanations in the
financial statements. We also determine that the management report has been adopted in
accordance with the law, and that the management report does not conflict with the financial
statements. We then determine that the financial statements have been drafted in
accordance with generally accepted accounting principles, and that these have been applied
correctly. We have reported on our duties to the Executive Board and the Supervisory Board
in accordance with the law. We have expressed our conclusion from our audit in an auditor’s
opinion, which has been disclosed to you. You have had a chance to determine that we have
issued an unqualified audit opinion for 2012 as well.
We conducted our audit according to the generally acceptable audit standards, as drafted by
the Netherlands Institute of Chartered Accountants, and which correspond with international
standards. In the process, we focus on the risks in the firm, on the internal audit measures
that apply in the firm and on critical audit targets. Critical audit targets are targets
addressing items in the financial statements that may be materially important. As you can
imagine, we paid more than average attention during the past year to the acquisition of APB,
processing this APB acquisition and the financial statements. We reviewed the goodwill
impairment testing. We checked the credit risks among customers. And we examined the
transfer of accounting processes to the shared service centres in Poland, which Mr Van
Boxmeer mentioned earlier this afternoon.
As far as the risks within the firm are concerned, we examine those during the interim audit
duties. We check in what measure the firm Heineken N.V. was able to hedge risks through its
internal control system. Our year-end audit is focused primarily on balance sheet positions
and explanatory notes. The risk analysis I mentioned was also performed by Heineken. On
that subject, please see pages 36 through 40 in the annual report, where Heineken’s risk
management is explained.
Heineken also has many foreign subsidiaries. It is a global organisation, and let me assure
you that with the majority of these foreign subsidiaries, we are involved in the audit we
conducted of the 2012 financial statements. With the small subsidiaries, KPMG is also the
statutory auditor in the vast majority of the countries. I, as group auditor, discuss planning
the duties abroad, I discuss the findings, and, given the importance of the foreign entities, I
also personally visit a great many of the countries. In the past year, for example, I was in
Mexico, Nigeria, two important Heineken operating companies, in Spain, in view of the
extraordinary economic situation, in Ethiopia, given that it is a recent acquisition, in Poland,
considering that several transaction processes were transferred to Poland and obviously in
Singapore, in connection with the acquisition of APB.
The financial statements have been drafted in accordance with generally accepted
accounting principles. We determined that. In addition, the Heineken N.V. management
28
made certain assumptions, certain estimates in generating the financial statements. We
reviewed them and found them to be acceptable. Please see among other things the
explanation of the goodwill impairment testing, which explains the sensitivity analysis.
We discussed our audit procedure and our findings in the course of the year with the
Executive Board and the Supervisory Board. We met with the Audit Committee four times. As
KPMG, we attend the plenary meeting of the Audit Committee and are able to discuss our
findings with the Audit Committee. In the course of the year I had some individual
conversations with the chairman of the Audit Committee. Once a year we speak with the
Audit Committee about our findings without the Executive Board present. I hope this gives
you an idea about my duties as the external auditor of Heineken N.V., our interaction with
the Executive Board and the Audit Committee. Of course I will be happy to answer additional
questions.
The chairman: Thank you. I would like to discuss the point that you mentioned you spoke
once with the Audit Committee without the Executive Board present. This also holds true for
the Supervisory Board. The question always arises, once the auditor has completed his
report, are there any matters you would like to discuss without the management? The
opportunity is always provided. I am giving you the chance to ask one follow-up question,
because we are running late.
Mr Jorna: Very briefly. On behalf of the VEB, thank you for this detailed explanation. Rather
than the content of the management letter, the issues that captured the auditor’s attention
have certainly been mentioned. I still have the following question for the auditor: the annual
report also describes the outlook – he addresses what is established, what has already been
– but has he reviewed the veracity of the outlook for the future? Has he verified in any way
the outlook, the expectation for the future? The last question is whether he still gets a good
night’s sleep after his Heineken audit.
The chairman: I suggest that you ask the last question soon over a beer. I will be happy to
have Mr Hooft Graafland answer your question about the outlook.
Mr Hooft Graafland: I would say that the auditor should answer the question as to whether
the auditor examined it.
The auditor: As I just indicated in our audit, we assess whether the 2012 financial
statements convey an accurate impression. I cannot predict the future. As an auditor, I
provide no assurance with respect to future-oriented information. To answer your second
question, I‘ll be happy to answer that one, Mr chairman, I sleep like a baby.
The chairman: Before we wish you all goodnight, because you are dozing off, because this is
taking so long, I’m going to make you happy by telling you we are going to vote now. You all
have your handsets. Please insert your smart card, without the yellow dot, with the goldcoloured chip facing you into the top part of the handset, after which the screen will display
the options for casting your vote. If it does not, please raise your hand, and I hope that
something will happen. Instead, I saw some people, hopefully not disillusioned, leaving the
29
room to have a beer. If you wish to vote in favour, please press the button marked 1. I
repeat: number 1. If you are opposed, press number 2. If you wish to abstain from the vote,
please press number 3.
The vote is now open to adopt the annual report and approve the financial statements. May I
now open the vote? The vote is closed. The financial statements have hereby been adopted
with an overwhelming majority in favour.
DECISION ON THE APPROPRIATION OF THE BALANCE OF THE INCOME STATEMENT IN
ACCORDANCE WITH ARTICLE 12, PARAGRAPH 7, OF THE COMPANY’S ARTICLES OF
ASSOCIATION
We will now move on to item 1c on the agenda. This is the appropriation of the balance of
the income statement. In accordance with Article 12, paragraph 7, of the articles of
association. In 2007 this General Meeting adopted the dividend policy that aims to maintain
a payout ratio between 30% and 35% of the net profit BEIA, a concept you all know from the
annual report. A dividend is being proposed for the 2012 financial year of € 0.89 per share,
of € 1.60 nominal, a payout of slightly over 30%. Of this, € 0.33 was already paid on 4
September 2012 as an interim dividend. So this represents a 7.2% increase with respect to
the previous year. The final dividend was therefore € 0.56 per share, which will be payable
from 8 May, assuming you approve it, at the ABN AMRO Bank in Amsterdam. From 29 April,
which is this Monday, the shares will be listed ex dividend on the stock exchange.
May I give somebody the floor on this agenda item? No? Then we will open the vote. I
request the voting operator to activate the system and you to cast your vote. Your dividend
glass is filling up. The vote is now closed. This one has also, if I see correctly, been approved
with 99.85% of the votes, which I think gives everyone cause for particular satisfaction.
DISCHARGE OF THE MEMBERS OF THE EXECUTIVE BOARD
As a consequence of these formalities, we are now ready for the discharge of the members
of the Executive Board, Item 1d on the agenda. For their management during the 2012
financial year. Legally, I have to add, to the extent that such management is clear from the
financial statements. Who would like the floor on this one? Nobody? Then I propose we
decide to discharge the Executive Board for this and vote accordingly. I hereby open the
vote. The vote is now closed. You have approved this one as well with 99.6% of the votes.
Thank you very much, on behalf of the Executive Board.
DISCHARGE OF THE MEMBERS OF THE SUPERVISORY BOARD
That takes us to the thorny issue of asking you to discharge the members of the Supervisory
Board for their supervision of the management, to the extent that such supervision is clear
from the financial statements.
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Who would like the floor on this subject? Nobody? Then I suggest we vote on this discharge.
The vote is open. The vote is closed. A good thing, the last time: 99.6% of the votes has been
cast in favour of discharge. Thank you very much for your trust.
AUTHORISATIONS
Next on the agenda is Item 2a. These are a few points we cover every time. You know them.
We propose that the General Meeting authorise the Executive Board during the statutory
maximum period of eighteen months, starting from today, 25 April, to acquire own shares to
a maximum of 10% of the issued share capital of the company, subject to the terms stated in
the explanatory notes. Such a decision is of course subject to prior approval from the
Supervisory Board each time. This authorisation has always been granted in previous years.
First I will ask whether anybody wants the floor on this one. If not, I propose granting the
Executive Board this authorisation and to express this by voting. The vote is open. The vote
is closed. Once again, with over 99% in favour. Thank you very much for your support in this
matter.
An equally familiar item here, authorisation of the Executive Board to issue shares or rights
to shares. It is proposed that authorisation be granted for a period of eighteen months,
starting from 25 April, to issue shares or to grant rights to subscribe to shares. The
authorisation is limited to 10% of the issued share capital as per the date of issue. Such an
authorisation is once again subject to the approval of the Supervisory Board. This
authorisation has also, at least in all the years I have been here, been granted by you each
time. Would anybody like the floor on this item? No? Then I propose granting this
authorisation and confirming this with your vote, which is now open. The vote is closed. This
has also been adopted with a vast majority, virtually 100%. Thank you.
Authorisation of the Executive Board to restrict or exclude shareholders’ pre-emptive rights.
This is a somewhat different matter. This has also consistently been addressed here as well.
It is proposed that you grant the Executive Board authorisation to exclude or restrict the
pre-emptive right in relation to issuing shares or granting rights to subscribing to shares,
once again for eighteen months, starting from today. Would anybody like the floor on this
one? If not, I will open the vote on the subject and ask the operator to activate the system.
The tap is running. The vote is closed. And this item has also been adopted with virtually
100% of the votes. Thank you very much for your cooperation with these formal but
important items for the firm.
EXTRAORDINARY SHARE AWARD EXECUTIVE BOARD
Now we will proceed with Item 3 on the agenda, the extraordinary share award to the
Executive Board. To reward the Executive Board for the exceptional achievements in the
acquisition of Pacific Breweries, the Supervisory Board proposes an exceptional share award.
You have seen the proposal. I will not specify that just now. I would like to make a few
introductory remarks about it. First, however, I wish to make the following procedural
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agreements with you. The chairman of the Remuneration Committee, an expert in this field,
Mr Maarten Das, will explain this agenda item, and afterwards, the floor will be open for
questions. We have already seen that, understandably, several people have questions about
this subject. We would like to gather these questions first. So we will let you ask all your
questions, and then Mr Das will answer them. Afterwards, we will see whether there is a need
for additional questions, and in the second round we will gather all remaining questions, and
Mr Das will answer them.
I have three small additional remarks about this. First, discussing such matters in the
presence of the Executive Board is always somewhat sensitive. We could have asked them to
leave the room. We are not doing this. They will stay where they are. Let me tell you, these
proposals are completely the initiative of the Supervisory Board. The responsibilities are
entirely separate. Contrary to what is reported now and then in the press, obviously not by
the representatives of the press present here, which is that they operate hand in glove. That
is absolutely not the case. They have not asked for anything. This is entirely the initiative of
the Supervisory Board. My second point is that I hope you remember, many of you may have
forgotten by now, that the Supervisory Board decided in 2008 to freeze the remuneration of
the Executive Board because of the recession at the time, even though their contracts
entitled them to certain things they did not receive. Sometimes when there is something
extra, we forget that in other periods they may look the other way in the interest of the
company. The last point I would like make is that you cannot really tell from the documents
that the Supervisory Board also spoke with the Executive Board last year about their
pensions, in the sense that as the long-term compensation rises, it is logical to check
whether the pensions might be getting too generous. I assure you that the Executive Board
was immensely cooperative with our decision to adjust this part downwards. You don’t see
these things so clearly, but for the context of this discussion, please bear in mind that this
initiative comes exclusively from the Supervisory Board, and that in the past discretion was
applied for downward adjustments. We are not talking about that today. The Executive Board
was exceptionally responsible and reasonable, when we had that discussion about pensions
last year. After these introductory remarks, I am pleased to give the floor to Maarten Das.
Mr Das: Ladies and gentlemen. On behalf of the Supervisory Board, I would like to elaborate
on Item 3 of the agenda. This is the proposed extraordinary share award in connection with
the APB acquisition. Please note that another remuneration point will be addressed later on
in the agenda under Item 4b. I will explain that one separately. Again, this one concerns only
the extraordinary share award in connection with the APB acquisition.
Let me start the explanation by emphasising that the Supervisory Board is very well aware
that remuneration for the senior management, especially in times of economic uncertainty, is
a very sensitive issue. We have given immense thought to the subject that is now being
presented to you. After extensive deliberation, however, we have concluded that a special
award is appropriate for the extraordinary achievements by the Executive Board in
connection with the APB acquisition and therefore fully support the proposal we are
submitting to you. To evaluate this proposal properly, let us consider first the eminent
importance to Heineken of the APB acquisition. First, thanks to the APB acquisition, Heineken
has considerably greater access to rapidly growing, emerging markets, which substantially
expand Heineken’s potential growth. Especially the markets in Southeast Asia and China
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feature high demographic growth, economic growth and a rapidly growing middle class,
increasing political stability and a warm climate. All these circumstances are ideal for
growing the beer market, in which Heineken will of course be pleased to take its share.
Vietnam is already the second-largest market for the Heineken brand, just to mention an
example revealing the massive growth potential of the Asian markets for Heineken.
Now my second point. As a consequence of the APB acquisition, as well as through other
acquisitions preceding it in Africa and Latin America, Heineken now generates 64% of its
consolidated beer volume and 59% of its EBIT from emerging markets. Five years ago this
was only 51% and the beer volume 40% of EBIT. So these acquisitions have dramatically
changed the firm’s profile, and the firm now has far greater exposure to emerging markets
with the commensurate growth potential.
The importance of APB for Heineken has been assessed as being of value not only by the
firm; the financial world acknowledges the value of this acquisition as well. This is clear from
the following [data]. In 2012 the value of the Heineken N.V. share rose 41%, from about € 35
to about € 50. This 15% increase happened almost entirely in the second half of the year,
during and after the acquisition of APB, and the share price has continued to rise during the
early months of this year to a share price of € 60 in the early months.
Now for my second point. The relative valuation of the Heineken N.V. share, expressed in
what is known as the trading multiple, is considerably higher than it was prior to the APB
acquisition. The trading discount with respect to other brewers, which was previously about
20%, has now virtually disappeared. This illustrates the eminent importance of this
acquisition for Heineken.
And there is more. This acquisition was a very difficult acquisition, which required that the
Executive Board do its very utmost day and night for months to complete the acquisition
successfully. The Executive Board was dealing with an unknown and unpredictable opponent
with massive resources and local connections at its disposal. This makes clear that the APB
acquisition definitely did not succeed simply by pulling out a billfold. On the contrary. The
APB acquisition was completed only thanks to strategic moves, excellent negotiations,
diplomacy, creativity and persistence on the part of the Executive Board. Given all this, the
Supervisory Board believed and continues to believe that an extraordinary share award is
appropriate, specifically a share package with a gross value of about 2.5 million euros for
the CEO and 1.3 million euros for the CFO. The net awarded shares resulting after
withholding income taxes will remain blocked for five years, and there is a clawback
provision.
Over the past few weeks, as chairman of the remuneration committee, I have spoken with
various investors and corporate governance advisors about the present remuneration
proposal, among other things. These constructive conversations yielded three topics, which I
would like to review briefly. The first topic was that this extraordinary share award for the
exceptional APB acquisition is said not to be performance-related, because it is supposedly
not based on targets disclosed in advance. As I have just explained, the Supervisory Board
believes that the success of the APB acquisition was an exceptional achievement on the part
of the Executive Board. The share award addresses this achievement. The APB acquisition
was in fact not included in advance among the objectives of the Executive Board. This would
not have been possible, as such an acquisition is impossible to plan. The opportunity arises
suddenly, and it is up to the Executive Board to seize that opportunity and complete the
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acquisition successfully. So this is an unforeseen exceptional achievement. The unforeseen
nature of the achievement does not make its importance or the intrinsic achievement any
less impressive. The Supervisory Board therefore believes that an award is definitely
appropriate.
The second topic raised in these conversations was that some believe that acquisitions
pertain to the standard duties of the CEO and the CFO and are not cause for a separate
award. We basically agree with such a policy. Since they joined first the Executive Committee
and later on the Executive Board over the course of their careers, the CEO and the CFO have
in fact completed over forty large and small acquisitions, for which they have never received
a separate award. So we agree in principle, but we also believe that such a principle should
allow for an exception under extraordinary circumstances. In our view this is such a case of
extraordinary circumstances. The Supervisory Board considers the APB acquisition to be such
an exceptional achievement that it merits exceptional compensation through an
extraordinary share award, even though the ordinary policy does not provide for this. The
last of the three topics raised in these discussions was that an award should not be granted
for the acquisition process, but that an award is appropriate only once the acquisition turns
out to have been successfully integrated.. This takes time. In this special APB case, the
Supervisory Board believes that both elements should be rewarded. The unusual and tedious
acquisition process and the success of the acquisition will need to become clear over time.
That is why we have opted for an award consisting of a share package that may be cashed
out only after five years. And the Executive Board obviously cares very much about
integrating APB properly, making it a success and having it contribute to the success of
Heineken. This will lead to a high Heineken share price in five years. Accordingly, the
interests of the Executive Board are aligned with the interests of the shareholders, thanks to
this special award. In addition, successful integration of APB has been included in the shortterm variable pay targets for 2013 of the Executive Board. Mr chairman, that was my
explanation for Agenda Item 3.
The chairman: Thank you, Mr Das. I see the first request for the floor. Please go ahead.
Mr Spanjer: I have a question. In the agenda I read that the share price is determined, when
this meeting ends. Suppose the share price, I don’t know it off the top of my head, is about 5
euros, then five years from now a share would be handed over to the gentlemen at 5 euros,
assuming that everything proceeds as planned. Or is it supposed to be the share price in five
years? That is unclear.
The chairman: We will gather all the questions and then answer them. Thank you
Mr Spanjer: I have another question. Only millions are mentioned. Can you tell me how many
shares that would be, and whether they are repurchased, or will new ones be printed?
The chairman: Thank you. Madame.
Ms Lindeman: I’m Farida Lindeman, employed at MN, asset management company for the
PME, PMT pension funds. Today I am also speaking on behalf of APG, PGGM, Robeco,
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Syntrus, Achmea, Menzis and the pension fund for the graphic industries. Thank you to Mr
Das for the detailed explanation just provided. We were in fact one of the shareholders who
spoke with Mr Das about this special award in the run-up to this meeting. I have been
attending the Heineken shareholders’ meeting for several years. Remuneration is in fact the
topic that returns every year. A pity that this debate about remuneration has not been more
positive. I’m sure you understand that this year I had hoped for a more positive discussion
about remuneration or perhaps no discussion at all about remuneration. Unfortunately, I am
back here again, and I regret that once again I do not have good news for you. We
acknowledge that APB has been a complex acquisition, and that it has changed the firm
considerably. We hope it will be integrated smoothly in this firm. As the Dutch Corporate
Governance Code describes, the duty of the Executive Board is to weigh interests with
respect to the strategy, and as part of this process: remuneration policy needs to be closely
aligned with the strategy of the firm and the corresponding risks, so why not have the
regular remuneration match this strategy? We view this acquisition as part of the normal
duties of the Executive Board, and the members are already remunerated for this. As you had
indicated previously, we were one of the advocates that clearly would have liked the
Supervisory Board to introduce a conditional bonus, to be distributed over three years, linked
to specific criteria concerning effective integration of APB and contribution to Heineken’s
performance to be realised by APB. In the coming years of course we will learn whether the
acquisition is successful. The short-term reaction from the financial markets has been good,
but only a few months have passed. We would prefer that the interests of several parties
receive consideration. Both the shareholders and the firm. In addition, such a bonus should
include a retention element and would thus eliminate any need for the separate retention
bonus, listed on the agenda under Item 4b. The Executive Board receives a generous
remuneration package. What do you think of an extra bonus, in the current circumstances, in
which moderation prevails? Given my previous points, we do not support such additional
bonuses, and we will be voting against this item. I look forward to your explanation.
The chairman: Thank you. The lady is approaching. Please go ahead.
Ms Heine: Thank you. The VBDO strongly supports connecting variable remuneration to
long-term objectives and concrete results relating to sustainability. Heineken already
associates remuneration with long-term objectives and is willing to reward special
achievements as well. The VBDO is very curious whether you intend to link variable
remuneration to concrete sustainability objectives as well. Thank you.
The chairman: Thank you. Here in front to the right, I saw... you.
Mr Vreeken: I think remuneration rates should reflect market practice, internationally
speaking. The acquisition has contributed substantially, for example, to driving up the AEX.
So I think it is very good for you to receive generous remuneration. On the other hand, the
wages of many employees have been frozen. That is the dilemma. On principle, it is
important for the Heineken multinational to pay very well and to make fine acquisitions.
Thank you.
35
The chairman: May I give you the floor?
Mr Schaeffer: I am Emiel Schaeffer. I am a shareholder. Please tell me what the relationship is
between the acquisition, the efforts to bring it about and the remuneration. I heard a figure
of 2.5 million euros. Why not 25 million euros or 100,000 euros? I have another question.
The benchmark companies I see on the list do not include a company such as Nestlé, where
the senior management is paid about 0.5 million Swiss francs a year. Working for the
company is considered more of an honour. Is there sufficient awareness that this is also a
social responsibility? Thank you.
The chairman: Thank you. Please go ahead.
Mr Jorna: After this morning’s newspaper, it will come as no surprise that the VEB will be
voting against this as well. I would also like to relate this to the base salary, even though that
is not on the agenda here. In 2009 Mr Van Boxmeer earned a base salary of 750,000 euros.
Each year, he has been granted a considerable raise. His fixed salary now exceeds 1 million
euros. Now another 100,000 is being added to keep him at the median. Good remuneration
is good, but too good becomes strange, especially given what we just heard about the
employees’ perspective. One side can’t possibly be expected to suffer the consequences
each time. You provided a clear explanation regarding the acquisition bonus, but we also
assume that APB was important. That’s why you did it. You would be foolish to invest so
much effort in something trivial. Except for the salary increases for that excellent acquisition
of the Asian brewer, you needed, as I have said before, to invest every possible effort. I am
less positive about that. You let it happen, and, as I also said: you were forced onto the
defensive. You ultimately chose the offensive, and that turned out to be very expensive. It is
not so exceptional, because you solved the problem by throwing money at it and perhaps
with some other aspects, but at first it certainly did not – although it did after your last offer
– seem that way. So as far as that is concerned, is the achievement really that outstanding? I
understand that it was extremely time consuming. We subscribe to that. The variable payout in Heineken’s wage system provides for granting very generous remunerations. You had
sufficient leverage there. Finally, my question is therefore: was the decision by the
Supervisory Board unanimous? I affirm what has been said here: we always talk about
remuneration here, and the purpose is consistently the same.
The chairman: Thank you. Yes?
Mr Rousseau: World class leadership to me is world class compensation. World class
compensation however, does not mean standard compensation presence as you find around
the world. My investors find excessive compensation for lousy management as offensive as
everyone else does. Great compensation must be linked to the growth rate. And the longterm share value of the firm. And that is exactly the sort of business that was delivered to us
through the APB efforts. This particular compensation question today, however, could be
addressed alternatively, if Heineken adopted a more world class standard compensation for
the daily efforts that the senior team has been making. This project has a link specifically
because the base salaries do not necessarily reflect the compensation levels for what has
36
been delivered regularly every day by the team of excellent managers we have here. My
question for the supervisory board then is simply: in light of the fact that you are linking this
compensation to a project, do you think the link is close enough to the future returns, due to
the fact that it vests over time?
The chairman: No more questions. I see Mr Das making another note. Are you ready to
classify and answer the questions?
Mr Das: I thought so, Mr chairman. I’ll start with the question Mr Spanjer asked about how
the allocation of shares works, which values are relevant there. Shares are allocated up to a
certain amount. 2.5 million euros for the CEO and 1.3 million euros for the CFO. Shares are
purchased for that amount of money at the value after this meeting. So that results in a
certain number of shares. In this manner the amount is converted into the number of shares
after this meeting. Those shares need to be retained for five years. Then the restriction is
lifted. The value that the shares have at that point depends on how the share price changes
over those five years.
Ms Lindeman has explained that she believes that under all circumstances the standard
remuneration should also be remuneration for acquisitions, and that special remuneration
for the APB acquisition is therefore inappropriate. We have explained previously that we
support the principle that acquisitions should be included in the standard remuneration for
the Executive Board. In our view, however, this is a very special case that justifies deviating
from the principle and awarding special remuneration for this special acquisition. An
additional separate topic is that the acquisition, which we consider to be an enormous
success, should be successfully integrated as well, which then becomes relevant for the
targets in the types of variable pay in the coming period.
VBDO asked a question that did not relate specifically to the APB acquisition and the
extraordinary share award in this respect, but she asked a question about remuneration
policy in general. She asked in what measure variable pay is linked to sustainability. The
Executive Board receives a short-term variable pay-out and a long-term variable award. The
short-term variable pay-out is linked to four performance measures, which you will find at
the top of page 35 of the remuneration report in the Dutch version of the annual report. One
of these four performance measures, which counts for 25% of the total, concerns individual
leadership targets. We will not go into detail about the exact composition of this measure,
because that may comprise competition-sensitive information. But we can tell you, and I
thought this had been mentioned earlier in this meeting, that sustainability is one of the
components of the individual leadership targets. The variable compensation is thus linked in
part to sustainability.
Mr Schaeffer asked how the amount of the extraordinary share award was determined. Why
is it 2.5 million euros for the CEO and 1.3 million euros for the CFO? Why isn’t the amount
any more or any less? We derived these amounts from the sum of the base salary and the
short-term variable compensation at target level. This is about 2.5 million euros for the CEO
and about 1.3 million euros for the CFO. So we have based the amount of the extraordinary
share award on what in our vernacular is known as total cash in a given year, which consists
in part of the fixed base salary and in part of the short-term variable pay-out for
performance at target level. You also asked why Nestlé is not part of the peer group used in
37
the benchmark (the Lions mark peer group). Several criteria are used for firms that select
revenues for the peer group. These relate to the size of the firm and the market segment in
which they operate and a few more of such things. Nestlé did not meet all those criteria and
was therefore not included in this group.
Mr Jorna raised two different subjects. He spoke about Mr Van Boxmeer’s base salary and its
increase by 10% in 2013. He also spoke about the extraordinary share award for the APB
acquisition. Let me start with the first point, which I would like to place in a broader context.
In 2011 a new remuneration policy was formulated. At that time what was known as the
global labour market peer group was also introduced, which thus consists not only of Dutch
companies but also comprises companies all over the world that meet the criteria for
inclusion and operate in the same market segment as the one in which Heineken operates.
According to the policy we formulated, the Executive Board is to be remunerated at the
median level of this peer group. That policy has not changed since then. Each year we check
whether the various different remuneration elements are still at the median. If they are not,
they are ordinarily adjusted. When this new system was introduced, the immediate response
was that with respect to the long-term variable award of the CEO, the median of the peer
group was such a large gap that we did not want to bridge it all at once but would do so
gradually. The other elements, namely the base salary and the short-term variable pay-out,
were set at the median. Another comparison was done with this benchmark for 2013. The
base salary of the CEO was found to have dropped below the median, and the policy is to
adjust it in this case. This led to the 10% increase in the base salary. We have observed once
again that the gap is very large between the median long-term variable award and the longterm variable award that the CEO actually receives. Once again, the decision was taken to
leave the gap as it is and not to adjust, in part because the CEO mentioned that he would not
feel comfortable receiving such an adjustment. The conclusion of this whole story is that the
CEO’s remuneration is still considerably below the median, despite the limited adjustment to
the base salary.
You have mentioned that you see no ground for the extraordinary share award in connection
with the APB acquisition for two reasons. First, you believe that acquisitions are always
included in the ordinary remuneration system, and there can be no cause, not even under
special circumstances, to make an exception. We do not agree with this view. In addition,
you have once again shared your observations as to whether or not the intrinsic acquisition
was successful. You have also done so at a previous instance. Mr Van Boxmeer responded to
that. I will not do this again. The Supervisory Board, which of course tracked this process
very closely, is of the opinion that this was an exceptional achievement that could not be
realised simply by signing a cheque. Instead, far more was involved, and that was a good
reason to be eligible for a special award.
Then Mr Rousseau asked what the link was between the remuneration and the future
performance by this acquisition. The link is that successful integration of APB will figure
among the measures for determining the variable compensation of the Executive Board in
the future. Chairman, I think I have now answered the questions asked.
The chairman: Thank you.
38
Mr Jorna: Chairman, one question, and I believe this is essential for your colleague. I asked
whether you took these remuneration decisions unanimously, both in the Remuneration
Committee and on the plenary board.
The chairman: I can tell you that we never vote. At least, in my period, there has never been
a vote on the Supervisory Board. This is a decision by the Supervisory Board. Does this take
us to the end of this discussion?
Mr Wientjes: I understand from Heineken’s corporate structure that even if the entire
shareholders’ meeting were to vote against this, the holding structure will get whatever is
proposed here approved. I have only two requests. The first request is to the shareholders
present here to vote against this, entirely against this. If only to send a message. Second, I
ask that the Executive Board voluntarily waive this excessive bonus. Thank you. (Applause)
The chairman: Thank you. The gentleman at the rear.
Mr Blokhuizen: We call each other Papa Fulco, because rather than naming our sons after
someone in the family, we have both named them after that wonderful boy’s book by Johan
Kievit. I am wearing a pitch-black tie. I am also the last speaker and am particularly gloomy.
At this point in time, this proposal is unacceptable. I suspect that you will proceed to the
vote fairly quickly. I request that you suspend the meeting for an internal deliberation by the
Supervisory Board. Please open the tap. If this is impossible for some reason, please do so
anyway for the Supervisory Board and the Holding. Then at least we can have a beer
together.
(Applause)
The chairman: I’ll be happy to have that beer with you, the sooner the better, if it’s up to me.
I do not think that taking a break makes much sense. In fact, I do not think it makes any
sense at all, because the Supervisory Board deliberated at great length about this and
reached this conclusion and would clearly like to have you vote on this conclusion. That is
the point we have reached, unless any urgent questions remain for a second round for Mr
Das. No? Then I propose that with due respect for your remarks we nonetheless proceed with
the vote about this item. Does Mr Das have any other remarks?
Mr Das: Nothing further, chairman.
The chairman: Then I propose that you cast your vote on the extraordinary share award to
the CEO and the CFO, as described in the agenda. Would the voting operator please activate
the system, and would you please cast your vote? Thank you. The proposal has been
adopted. I think that what matters most to those who spoke is that 20% of the total votes
present here was cast against the proposal.
Now I will move on to Item 4.
39
COMPOSITION AND REMUNERATION EXECUTIVE BOARD
The chairman: Reappointment of Mr J.F.M.L. van Boxmeer as member of the Executive Board.
The Supervisory Board has issued a non-binding recommendation to reappoint JeanFrançois van Boxmeer as member of the Executive Board, starting from today, for the
maximum period of four years, until the end of the 2017 AGM. We propose reappointing
him, because, to put it in good Dutch, he is a jolly good fellow and has done a jolly good job.
I could add all kinds of superlatives, but this was good Dutch, what we are proposing to you,
Would anybody like the floor on this?
Ms Lindeman: Good day, once again, Farida Lindeman, on behalf of MN and the institutional
investors previously mentioned. I would like to ask Mr Van Boxmeer two questions at this
item. Mr Van Boxmeer we certainly do not doubt your performance and are satisfied with
your own performance and with that of Heineken as a firm. We will vote in favour of your
reappointment. But we are curious whether you can tell us anything about your intentions
concerning your subsequent career with Heineken. Especially in the past few years, there has
been strong growth, thanks to several large acquisitions. The absence of such acquisition
opportunities in the near future might influence your desire to stay on in your present
position. Could you elaborate on that? In this item you are appointed for a four-year term.
The retention bonus in Item 4b, however, targets a two-year retention period. Can you
promise that you certainly intend to serve the full four years? Thank you.
Mr Van Boxmeer: Your questions are fairly direct. Regarding the first question as to whether I
enjoy my job only because we do acquisitions: no, I devote 90% of my time to organic growth
by this firm. Please do not doubt that. The acquisitions may enhance my personal visibility,
but my role as chairman of the Executive Board of this firm for what we have acquired is
probably most attributable to organic growth. That is what consumes most of my time and
energies. The second question depends in part on me and in part on how the Supervisory
Board assesses my achievements, as well as on the shareholders.
The Chairman: I think this last question belongs primarily with the Supervisory Board to
ensure the continuity of the management and of the firm. I am convinced that my successor
will give this his full attention as well. That takes precedence. Now, I would like to see this
jolly good fellow reappointed to the Executive Board. Please activate the voting system and
vote to reappoint Mr Van Boxmeer for a four-year term. And guess what? If you approve, he
will once again be chairman, of the Executive Board, to be precies. The system has been
activated. We are ready for the vote. Hardly a close call, Jean-François.
That brings us to item 4b: Mr Van Boxmeer’s retention shares. In support of his
reappointment, the Supervisory Board proposes awarding Mr Van Boxmeer a 1.5 million euro
gross retention bonus. Once again, I will hand you over to Mr Das, so that he may elaborate
on this. I propose we do it the same way as last time. First we will gather the questions, then
Mr Das will answer them.
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Mr Das: Thank you, Mr chairman. Ladies and gentlemen, at this item I am pleased once again
to elaborate on behalf of the Supervisory Board. This concerns the proposed retention shares
for Mr Van Boxmeer. Under Mr Van Boxmeer’s aegis, Heineken has been transformed over
the past eight years from a leading brewer in Europe to a leading brewer all over the world.
When Mr Van Boxmeer became CEO of Heineken, Heineken’s revenue was 9.6 billion euros.
By 2012 this figure had increased to 18.4 billion euros and even to 19.8 billion euros, if we
count the APB acquisition for the whole year. So revenues have doubled during the period we
have been under his management. In this period under his management, EBIT has grown
even faster, from 1.2 billion euros in 2005 to 2.9 billion euros in 2012 and even to 3.2
billion euros, if we include APB for the entire year. This is a threefold rather than a twofold
increase. The Heineken N.V. share has climbed steadily throughout this period. On what is
known as the CEO profile page on the VEB’s website, we see that the Heineken N.V. share
price return has exceeded 100% since Mr Van Boxmeer joined, compared with a 16% negative
return on the AEX. From this perspective a difference of 125% has been realised during Mr
Van Boxmeer’s term as CEO. In addition, there is a modivent on the Heineken N.V. share,
which has been raised every year as well. The Supervisory Board hopes to encourage this
CEO to stay with Heineken for at least some years to come. Again, special circumstances
justify proposing this special measure in the view of the Supervisory Board. Mr Van Boxmeer
has set two future-defining changes in motion, namely the acquisition of APB, as well as a
new composition of and distribution of roles within the Executive Committee. The
Supervisory Board believes that only someone with Mr Van Boxmeer’s experience and stature
has the ability to manage these two future-defining changes properly in the coming years.
He has launched these changes and is the obvious choice for ensuring their success. That is
why the Supervisory Board believes that awarding retention shares valued at 1.5 million
euros is very much the right thing to do. The Supervisory Board understands that awarding
these retention shares does not guarantee that Mr Van Boxmeer will remain with Heineken
for at least several more years. We believe, however, that the interests of Heineken justify a
measure that will in any case increase the likelihood of this happening. The Supervisory
Board also believes that any appeal to Mr Van Boxmeer’s loyalty should express in concrete
terms how much this loyalty is appreciated. That takes me to more technical aspects of the
proposal. Following approval by your meeting, the rights to shares awarded will be issued
after two years and will be converted into Heineken Holding N.V. shares, if Mr Van Boxmeer
still holds his position by then. This means that if he leaves Heineken within two years,
nothing will be awarded. Following their issue after two years, these shares are subject to a
three-year holding restriction, which shall remain in force, if the CEO steps down after that,
so if he steps down after two years during the three-year retention restriction. Once again,
the interests of the CEO are aligned with those of the shareholders in this manner. Finally,
this share award is also subject to a clawback provision. Mr chairman that was my
explanation about this item.
The chairman: Thank you. I think I see the same group. Please go ahead.
Mr Spanjer: I just heard that Heineken Holding shares will be issued in two years. Did I heard
that correctly?
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Mr Das: I’m not sure, but perhaps I misspoke. They are supposed to be in Heineken N.V.
Mr Spanjer: You said Heineken Holding.
Mr Das: Please excuse me.
The chairman: He is so eager for the Heineken Holding meeting, which he will chair soon.
That must be the reason. Madame?
Ms Lindeman: Once again, I am Farida Lindeman, I am employed at MN and am speaking
once again on behalf of the parties mentioned earlier. Chairman, I am only going to make a
statement here and will not be asking any questions about this. In our view a retention
bonus is not the right incentive to keep a CEO with a firm. The incentive should be the
position, the corresponding duties and remuneration for this and the firm itself as the
employer. We regret that this remuneration proposal has been selected and will therefore
vote against this item. As stated earlier, this has nothing to do with Mr Van Boxmeer’s
performance but relates to the fact that we do not consider such a bonus to be the right
incentive. In addition, the bonus under Item 3 and the absence of performance criteria have
figured in this consideration. Such remuneration is incompatible with the Dutch context, and
I am referring both to the Dutch Corporate Governance Code and to the Dutch firms listed
on the stock exchange, and we hope to avert any precedent that this might set. Thank you.
The Chairman: Thank you. Your position is clear. Please go ahead.
Mr Jorna: Thank you, Mr chairman. We are delighted that Mr Das checks and reads the VEB
website, But he does so selectively. We have also indicated there that this bonus is in fact
novel for the Netherlands too. The last person to receive such a bonus, as is stated there,
was Jean-Paul Fautron. He received that for his special achievement in acquiring ABN. We
know how that ended, which is why this meeting is urging caution along the lines of: do
something, once it has been proven. But that is a digression. Mr Van Boxmeer is receiving a
bonus to keep him with the company. We cannot imagine that Mr Van Boxmeer can be bound
for 1.5 million euros, and that he would pick up and leave, if he did not receive it. In our
view, this measure might have been omitted as a means of retaining him, if that is its
purpose. A pat on the back might have been more effective in this respect and would have
been many times less expensive. The VEB has an opinion on this trend, bankers have a
reputation, they are depicted as being greedy, but Heineken seems to be getting there too. It
has been stated with reason that nearly every year the subject of remuneration comes up,
and nearly all remunerations are headed in the same direction: too high or too much, in the
opinion of your shareholders. And unfortunately we, as was also said earlier, lack the power
in number and voting rights. Twenty percent opposed should make you stop and consider
whether you are doing the right thing as the Supervisory Board. The VEB is exceptionally
critical about this. We believe that the Supervisory Board should not have done this. This
concerns 1.5 million euros, unrelated to any achievement besides staying in your job. This is
inappropriate. The regular base salary, which has already been increased, comprises a
retention element, and anything additional for staying in your job is unjustified. We also
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agree that this sends entirely the wrong message, especially in the present social context.
(Applause)
Mr Wientjes: My question is very brief. You – expressed in part by Mr Das – just eulogized Mr
Van Boxmeer. I agree that the man is extremely capable. I do not plan to argue about that.
But I have one direct question to you as the chairman. Why don’t you ask Mr Van Boxmeer
whether he is happy to stay on at Heineken?
The chairman: I am certainly willing to do that. Are there any more questions? Then I will
give the floor back to Mr Das.
Mr Das: Thank you, Mr chairman. I note that Mr Spanjer asked a question, which I answered
immediately. The other speakers made statements that do not require a response from me,
following my introductory remarks.
The Chairman: Do you have another question or comment? We certainly want to provide
every opportunity for that.
Mr Vreeken: Mr Van Boxmeer’s remuneration is very low by international standards. It’s
convenient, as I have suggested before somewhere, to have lists and graphs everywhere on
other relevant CEOs all over the world, for example of SAB, Carlsberg and so on, so that we
can see what those people earn. Heineken is no longer a Dutch or a European brewer but a
global product, which requires a somewhat different approach, including in communication.
The advertising is perfect, but if there are objections to remuneration here every year,
perhaps a more communicative, connecting, insightful approach would be more appropriate.
The remuneration is not aligned with the Balkenende [former Dutch PM] standard, but, from
an international perspective, we are getting a very reasonable rate indeed.
The chairman: Thank you for your comment. I expect that the Supervisory Board and
especially the Remuneration Committee will certainly want to consider your last remark very
seriously. We fully understand the Dutch context, which you as shareholders primarily come
from, but I am delighted that you mention that this group is entirely international, and in
terms of remuneration the Executive Board is at a substantial disadvantage compared to
other beer companies. I am saying this in the most unbiased way possible, but there is also a
PR element, which you rightly mention. The second thing I need to get off my chest is that
there was a freeze in 2008, and this happens to have escaped attention. I propose that we
vote on this item. We have heard the statements. They have definitely been recorded
correctly. So we will now proceed with the vote.
Mr Blokhuizen: I see at Item 5a, and the same holds true for items 5b and 5c, that Mr Das
holds no shares in the company. Why not? What is the reason?
The chairman: At Item 5a?
Mr Blokhuizen: Mr Das holds no shares in the company.
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The chairman: But we are now at Item 4b.
Mr Blokhuizen: Excuse me, I must have skipped ahead. I’ll get back to it later.
The chairman: Of course. Please get back to it. So we are now at Item 4b. We are going to
vote on it now. I suggest you look at your handset carefully. Would the voting operator
please activate the system. Mr Van Boxmeer’s retention bonus is the present subject of the
vote you are conducting. The vote is over. It has been adopted, just as in the previous item
about remuneration, with 20% opposed.
COMPOSITION SUPERVISORY BOARD
The chairman: We will now move on to Item 5a, which is the re-appointment of Mr Maarten
Das as member (and delegated member) of the Supervisory Board. Pursuant to the articles of
association, the Supervisory Board has made a non-binding recommendation for the reappointment of Maarten Das as member of the Supervisory Board starting today, again for a
maximum period of four years. It is proposed to reappoint Mr Das as delegated member of
the Supervisory Board as well. This is clearly described in the articles of association. In the
explanatory notes to the agenda, you will have read the information, and we propose reappointing him, in view of his broad legal experience and his contributions to the
Supervisory Board. The first question has already been asked. May I refer this one directly to
Mr Das? He does not own any shares. Why don’t you have any shares?
Mr Das: I regard this question as one relating to my personal situation, and I hope that you
will allow me to waive the answer to this one.
The chairman: Perhaps you can sort that one out together over drinks.
Mr Blokhuizen: Mr Das is certainly entitled to regard that as a personal matter. I did not
intend that as a personal question. Why do people with the firm Heineken or the Holding not
own shares in the company? Is there any specific reason why one would generally not own
shares, i.e. not personally?
The chairman: No, there is no policy on that. There is a policy concerning the Executive
Board. I’ll be happy to tell you, since I’ll be leaving soon, that when I joined Akzo Nobel, the
rule was not to own shares in your own company. Until companies became more
international, and you couldn’t show your face, if you didn’t own shares in the company.
This was regarded as suspicion or lack of faith in your own ability and in your own
contribution to the firm. This group comprises people who are a bit more old style, a bit
more progressive, that is how these things work. There is no policy for the Supervisory
Board, so it is a personal question, to which you might or might not be able to extract the
answer over drinks.
Mr Blokhuizen: Excellent. Thank you so much.
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The Chairman: You’re welcome. No further questions? Then we will start the experiment of
re-appointing Mr Das by voting. Would the voting operator please activate the system, I
mean the voting system, and please cast your vote. The vote is closed. The tap is being
turned off. Mr Das has been re-appointed by a wide margin. Congratulations, Maarten.
Now we will move on to the re-appointment of Mr Christophe Navarre as member of the
Supervisory Board. Another non-binding recommendation. Same story as with
Mr Das. We propose re-appointing Mr Navarre, in view of his broad experience in the beer
and spirits industry (that bit is especially appealing to me), his marketing and financial
knowledge and his contribution to discussion and decisions within the Supervisory Board.
Who would like the floor? Nobody? Then I propose re-appointing him for a four-year period
as a Supervisory Board member of the company and request the voting operator to activate
the system and you to cast your vote. The vote is closed. Adopted by a wide margin.
Christophe, all the very best!
Next is the appointment of a new Supervisory Board member, Mr Henk Scheffers. Henk, are
you in the room? There he is. I can list all your achievements. Please step forward, so that
everybody can see you, so we know who we’re bringing on board. There he is. Please turn
around, then next time they’ll recognise you. (Applause) Shall I explain everything he has
done, or may we proceed with the vote? His career is impressive, largely involved in the
financial end of the firm. The intention is for him to contribute significantly in this area at
Heineken as well. Please note that he holds a lot of additional offices. I won’t list them all.
You’ve seen them. But to comply with the Act on Management and Supervision, regarding
the maximum number of Supervisory Board memberships and other offices, also known as
Mr Irrgang’s initiative, Mr Scheffers stepped down at Aon Nederland on 30 March this year.
Mr Scheffers is independent as defined in the Dutch Corporate Governance Code. I must
inform you that he does not own shares in the company, before you ask about that. Would
anybody like the floor on this appointment? You already welcomed him with a round of
applause. I propose that you act accordingly. I request the voting operator to activate the
system and you to cast your vote. This is the end of the vote. We’ll stay in the mood.
(Applause) Thank you very much for the applause.
Ladies and gentlemen. This bring us to the end of this meeting. Understandably, it has taken
somewhat longer than usual. We had some tricky issues. In about ten minutes the Heineken
Holding meeting will start here. Please leave the room first – the Heineken Holding
shareholders are invited to return to this room afterwards – and return your handsets and
chip cards.
Thank you for attending.
Mr Wijers: No. Ladies and gentlemen, you can’t leave yet, Mr chairman. I would like the floor
briefly. Please take your seats again for just a moment. Thank you, ladies and gentlemen. Mr
Van Lede is not getting off that easily. You may remember that at the end of 2011 it was
announced that he would step down as chairman, and that it would be my privilege to
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succeed him. It certainly seems appropriate to thank him here on behalf of the Supervisory
Board and the Executive Board and perhaps, in fact I am sure, also very much on your behalf
for his huge contribution to transforming this firm. In 2002 he joined the Supervisory Board.
In 2004 he became chairman. And, as was mentioned today, in respect of the changes the
firm has undergone, he has been exceptionally important in supervising and transforming
the firm. In addition to strategically, of course he has figured in the subsequent development
of supervision, governance in the organisation, the role of the committees and, as we have
noticed again today, in eloquently chairing the shareholders’ meeting. Ladies and
gentlemen, let us give him a huge round of applause. (Applause)
The chairman: Thank you, Hans. If I had a hammer, which I do not, I would hand it over to
you. I am grateful to the Supervisory Board, we will follow up on that this evening, grateful to
them for being pleasant co-workers, to the Executive Board for the exciting years that we
have had. I have enjoyed them. I am also grateful to you, the shareholders. You have always
said what was on your mind, including today. You are a cheerful group. It has been very nice.
I will miss it. I have also left an even more important firm, the Koninklijke Tichelaar in
Makkum. If anybody among you plays golf, please make sure you get a helmet, because you
might encounter me on the golf course soon. That is quite dangerous in my surroundings.
The firm will carry on under the leadership of Hans Wijers. Supervisory Board members come
and go, but shareholders will always be around, under the aegis of Ms Stadlander. ( Applause)
Mr Wijers: Ladies and gentlemen, may I abuse this opportunity to mention here that the
Company Secretary, Francis Tjaarda, whom you never see but has always been exceptionally
important in preparing these meetings, in ensuring that they run smoothly, will be stepping
down from this position after 36 years of employment at Heineken and 18 years as the
corporate secretary. I would like her to stand up for a moment and show her face, so that
she gets some applause as well. (Applause)
The Chairman: Now it really is time for drinks.
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