Heineken N.V. reports 2021 full year results
Amsterdam, 16 February 2022 – Heineken N.V. (EURONEXT: HEIA; OTCQX: HEINY) announces: *Key Highlights*
· Net revenue (beia) organic growth 12.2%; per hectolitre 8.3%
· Consolidated beer volume 4.6% organic growth
· Heineken® volume growth 17.4%, well ahead of 2019
· Gross savings close to €1.3 billion, on-track to deliver €2 billion by 2023
· Operating profit (beia) organic growth 43.8%, margin 15.6% (+331 bps)
· Net profit (beia) €2,041 million, 80.2% organic growth
· Diluted EPS (beia) €3.54 (2020: €2.00) *CEO Statement*
*Dolf van den Brink, Chairman of the Executive Board / CEO, commented:*
"We delivered a strong set of results in 2021 in a challenging and fast-changing environment. I am proud of how our colleagues, customers, and suppliers continued to adapt, support one another, and deliver these results.
We made a big step towards recovering to pre-pandemic levels, and in parts going beyond. I am pleased with the great momentum of the Heineken® brand, the renewal of our brand and product portfolio, the acceleration of our digital transformation and how we are strengthening our footprint with the acquisition of UBL in India and our announced intentions for Southern Africa. We raised the bar on sustainability and responsibility and are making big strides in right-sizing our cost base.
Looking ahead, although the speed of recovery remains uncertain and we face significant inflationary challenges, we are encouraged by the strong performance of our business and how EverGreen is taking shape. This gives me confidence we are on course to deliver superior and balanced growth to drive sustainable long-term value creation."
*Financial Summary**^1*
*IFRS Measures* € million Total
growth *BEIA Measures* € million Organic
growth^2
Revenue 26,583 11.8% Revenue (beia) 26,583 11.4%
Net revenue 21,941 11.3% Net revenue (beia) 21,901 12.2%
Operating profit 4,483 476.2% Operating profit (beia) 3,414 43.8% Operating profit (beia) margin (%) 15.6%
Net profit 3,324 Net profit (beia) 2,041 80.2%
Diluted EPS (in €) 5.77 Diluted EPS (beia) (in €) 3.54 76.8% Free operating cash flow 2,514 Net debt / EBITDA (beia)^3 2.6x
^1 Consolidated figures are used throughout this report, unless otherwise stated. Please refer to the Glossary for an explanation of non-GAAP measures and other terms. Page 24 includes a reconciliation versus IFRS metrics. These non-GAAP measures are included in internal management reports that are reviewed by the Executive Board of HEINEKEN, as management believes that this measurement is the most relevant in evaluating the results.
^2 Organic growth shown, except for Diluted EPS (beia), which is total growth.
^3 Includes acquisitions and excludes disposals on a 12-month pro-forma basis.
*Operational Review*
During 2021, we deployed our EverGreen strategy across the business, designed to emerge stronger from the COVID-19 crisis and adapt to new external dynamics for superior and balanced growth with enhanced profitability, whilst simultaneously raising the bar on sustainability and responsibility.
*DRIVING SUPERIOR GROWTH *
Our superior growth ambition is grounded in building a favourable geographic footprint, our strong premium beer brands, including non-alcoholic variants and developing winning beverage propositions in fast-growing segments.
*Net revenue (beia)* for the full year 2021 increased by 12.2% organically, with total consolidated volume growing by 3.6% and net revenue (beia) per hectolitre up 8.3%. The underlying price-mix on a constant geographic basis was up 7.1%, driven by assertive pricing and premiumisation, with the regions Americas and Africa, Middle East and Eastern Europe (AMEE) growing double-digits. Currency translation negatively impacted net revenue (beia) by €515 million or 2.6%, mainly driven by the Brazilian Real and the Nigerian Naira. The consolidation of United Breweries Limited (UBL) in India positively impacted net revenue (beia) by €280 million or 1.4%.
In the second half of the year, net revenue (beia) grew 10.6% organically. We took further pricing actions and accelerated net revenue (beia) per hectolitre growth to 11.0%. Underlying price-mix in the second half was up 8.8% primarily driven by Nigeria, Brazil, Mexico and Europe, the latter benefiting from an improved channel mix. Total consolidated volume declined slightly by 0.3%, mainly impacted by the restrictions in the Asia Pacific region.
*Beer volume *grew 4.6% organically for the full year. In the fourth quarter, beer volume grew 6.2%, benefiting from fewer restrictions in Europe relative to last year, continued momentum in the Americas and AMEE, and a sequential recovery in Asia Pacific (APAC) relative to the third quarter.
*Beer volume*^*1* *4Q21* Organic
growth *FY21* Organic
growth
(in mhl) 4Q20 FY20
Heineken N.V. *61.1* 56.2 6.2 % *231.2* 221.6 4.6 %
Africa Middle East & Eastern Europe *10.1* 11.2 4.5 % *38.9* 39.6 10.4 %
Americas *23.9* 22.5 6.5 % *85.4* 79.1 8.2 %
Asia Pacific *10.0* 7.6 -9.0 % *29.4* 28.1 -11.7 %
Europe *17.1* 14.8 15.0 % *77.5* 74.8 3.8 %
^1 2021 volume reflects the shift of malt-based, unfermented, non-alcoholic drinks from Beer to Non-Beer Volume. Organic growth has been corrected.
*Driving premiumisation at scale, led by Heineken® *
*Premium beer *volume grew 10.0%, outperforming the portfolio in the majority of our markets, and accounts for more than 60% of our total organic growth in beer volume in 2021. Our growth in premium is led by* Heineken®, *up 17.4%, significantly outperforming the total beer market and well ahead of 2019. The growth was broad-based with more than 60 markets growing double-digits in 2021.
The outstanding growth of Heineken® Original was further supported by the strong performance of its line extensions. *Heineken® Silver* more than doubled its volume, driven by excellent performances in China and Vietnam. Building on this success, we will roll-out Heineken® Silver internationally to reach more than 20 markets in 2022.
*Heineken® volume * *4Q21* Organic
growth *FY21* Organic
growth
(in mhl)
*Total* *13.3* 24.1% *48.8* 17.4%
Africa Middle East & Eastern Europe *1.9* 19.9% *6.7* 24.6%
Americas *6.0* 34.4% *19.6* 22.9%
Asia Pacific *1.9* 4.5% *7.1* 14.6%
Europe *3.5* 23.3% *15.5* 9.4%
Our *world-class sponsorships* are a unique vehicle to connect and reach consumers, and 2021 was our biggest year in history despite COVID-19 restrictions. The UEFA Champions League and Euro 2020 took place in 2021, and Heineken® invited fans to come together and be rivals again, with only the Euro 2020 reaching more than 5 billion views.
Formula 1 and Formula E were a highlight with the Dutch Grand Prix cruising Heineken®'s home ground for the first time since 1985 at Circuit Zandvoort in the Netherlands. We celebrated the 2020 Olympics and joined in to cheer on all athletes as they competed in Tokyo. To promote gender equality in sports, Heineken® announced several upcoming sponsorships of women's sports, including UEFA Women's Football and the Formula 1 W Series. The highly anticipated Bond movie, "No Time to Die", was released 30 September 2021 featuring Daniel Craig and a crisp bottle of Heineken®. It was "well worth the wait."
We accelerated premiumisation at scale via our *international brands portfolio, *complementing Heineken® in addressing specific consumer needs. *Amstel* grew volume in the mid-twenties, with 20 markets growing double-digits, with in-market results particularly strong in Brazil, Mexico, South Africa and Nigeria. Leveraging its success in Brazil and high impact platforms like the Copa Libertadores, the brand has now expanded into six markets in South America. Amstel Ultra reached more than 1 million hectolitres in Mexico and began its international roll-out, reaching 11 new markets in 2021 with more to come in 2022. Amstel Ultra and Amstel 0.0 appeal to a younger, more health-conscious consumer group, and this year served up a partnership with Rafa Nadal promoting moderation as part of an active balanced lifestyle. *Birra* *Moretti* grew in the high-twenties, sharing the true taste of Italy across Europe. It reached more than 1 million hectolitres in the UK alone, grew rapidly in Romania, Switzerland and Ireland, and was successfully launched in the Netherlands, Germany and Serbia. *Tiger* was heavily impacted by the lockdowns in Vietnam and Cambodia and declined in the teens, with the last quarter showing improving trends in volume and market share as restrictions eased. Outside Asia, the brand rallied as it almost doubled its volume in Nigeria and continued its global expansion with launches in Brazil and Peru. Tiger Crystal continues to grow and expanded into 14 markets in 2021. *Sol* grew slightly driven by strong growth in Chile, South Africa and Canada. *Edelweiss* grew in the mid-teens as it brought consumers the taste of the Alps with its first global campaign, reinvigorating the growth in South Korea and launching in China, Vietnam, Singapore, Malaysia and Russia. *Lagunitas*, although falling short of our internal ambitions in the USA, continued to grow internationally playing meaningfully in the IPA premium beer segment. The brand grew double-digits in Brazil, France, Italy, and the Netherlands and was launched in Russia, Greece, South Korea, and with local production in Mexico.
We are making* fewer, bigger bets on premium local brands*. In Europe, we carefully selected brands specifically meeting the needs of younger consumers, resulting in growth in the thirties this year and representing now c.8% of volume in Europe. In Brazil, we are leveraging the strength of the Coca-Cola System to significantly increase the distribution of Eisenbahn. In Ethiopia, Bedele Especial continues to lead the growth of our local premium portfolio.
*Pioneer choice in low & no-alcohol*
Consumers are increasingly looking for healthy hydration and a tasty, adult refreshment with lower or no alcohol content to enjoy on any occasion. Meeting this consumer need, our* Low & No-Alcohol (LONO) portfolio *grew more than 10%, reaching 15.4 million hectolitres (2020: 14.0 million). We strengthened our global leadership in the non-alcoholic segment with the growth in the low-teens of our portfolio, led by Heineken® 0.0 and Maltina in Nigeria. *Heineken® 0.0,* the largest non-alcoholic beer brand in the world, grew in the thirties, with an outstanding performance in the Americas region. Heineken® 0.0 has now been introduced in more than 100 markets. We are rapidly testing and scaling non-alcoholic alternatives; for example, we launched Desperados Virgin 0.0, bringing the Desperados vibe to any occasion - without the alcohol.
*Intentionally expand beyond beer *
We aim to stretch our product portfolio* beyond* *beer* to reach a spectrum of consumer needs, including fast-growing segments loved by young consumers.
*Desperados* continued its momentum and grew in the high-teens, driven by its core markets in Europe, particularly France, and successful expansion into Africa with the launches in Nigeria and Ivory Coast. The brand launched its new Go Desperados creative platform, designed to capture the essence of the brand – inviting people to try new things and pour some unusual in their lives. Desperados launched the world’s first dance-powered app, Rave to Save, providing hybrid experiences by connecting people at home with parties around the world through holograms and virtual reality, simultaneously raising money for nightclubs affected by the pandemic. To date, it has realised over 15 million dance steps.
*Cider* volume grew by a mid-single-digit to 4.9 million hectolitres (2020: 4.6 million), mainly driven by Strongbow following the recovery of South Africa and the acquisition of the brand in Australia. In the UK, cider volume declined by a mid-single-digit, as a result of the pub closures in the first half of the year.
We continue to experiment across different markets in the *Hard Seltzer* category, for example with Amstel Ultra Hard Seltzer in Mexico, Dos Equis Ranch Water in the USA, Doctor Diesel Hard Seltzer Lemonade in Russia and Pure Piraña in Europe, Mexico and New Zealand.
*Build a future-fit digital route-to-consumer*
Digitalisation trends have accelerated, consumers are changing shopping patterns and customers are adapting to new realities. We aim to be the best connected brewer, leveraging our strong customer relationships to build a future-fit digital route-to-consumer. In 2021 we increased our investment to strengthen our capabilities and scale our *e-commerce platforms:*
· We accelerated the deployment of our* business-to-business digital (eB2B) platforms* in all regions. We now operate them in 30 markets, representing 75% of our net revenue. With these platforms, our customers in the fragmented trade can grow their business with more and better services and data insights, while we can increase sales and productivity.
· We captured* €2.8 billion in digital sales value*, a growth of 130% versus last year, driven by strong growth in Mexico, Brazil, Vietnam, Nigeria, the UK, Italy, France, Cambodia, Singapore, Egypt and Ireland, and well on-track to €10 billion by 2025. In 2021, we captured close to one-third of the net revenue (beia) of the fragmented trade in our markets via our eB2B platforms, and almost half by the end of the year. During 2021 we connected with close to 370,000 active customers during the year, more than 3x last year.
· *Beerwulf, *our direct-to-consumer (D2C) platform in Europe, grew its revenue in the high-thirties, mainly driven by sales of our home-draught systems, especially the Blade in the UK and the Netherlands.
· In Mexico, following all the learnings from Six-2-Go, we launched our new D2C platform *GLUP*, with a value proposition designed to delight consumers who want beer, beverages and more delivered in less than 60 minutes.
*Strengthen and optimise our footprint*
We continue to develop and expand our *geographical and portfolio footprint *to build a long-term, sustained growth advantage.
On 29 July 2021, HEINEKEN obtained control of *United Breweries Limited (UBL)*. UBL is now a top HEINEKEN operating company, and Kingfisher a top five global brand with an exciting long-term growth opportunity. Integration of UBL is progressing as planned.
On 15 November 2021, HEINEKEN announced that it has entered into an Implementation Agreement with Distell Group Holdings Limited (‘Distell’), Namibia Breweries Limited (‘NBL’) and Ohlthaver & List Group of Companies to integrate their respective and relevant businesses to *create a regional beverage champion for Southern Africa*. Completion of the proposed transaction is conditional on obtaining shareholder and regulatory approvals including anti-trust approval in South Africa, Namibia and certain other African countries. If all the conditions are fulfilled, completion of the proposed transaction is expected in the third quarter of 2022.
We have also addressed most of our *value-dilutive operations*, including restructuring of our businesses in the Philippines and Lebanon; whilst making steady progress towards sustained scale and profitability in recent market entries like Ecuador and Peru.
*FUNDING THE GROWTH *
To support our growth ambitions, offset inflationary pressures, restore our profitability and thereafter gear our business to deliver operating leverage consistently, we are* structurally addressing our cost base and building a cost-conscious culture*.
At the end of 2020, we launched a *productivity programme *targeting €2 billion of structural gross savings by 2023, relative to our cost base of 2019. Five quarters into the programme we achieved much: we streamlined our organisation, reduced unnecessary portfolio complexity, lowered conversion and logistics costs and took unproductive non-consumer facing investment out. By the end of 2021, we captured close to €1.3 billion gross savings versus our cost base of 2019, putting us well on track to deliver on our 2023 objective.
As important, we now have a company-wide, *systematic* *approach* to find cost opportunities. Projects and initiatives are captured in a standardised tool and follow a disciplined project management funnel approach to bring ideas to maturity and value realisation.
Next to the gross savings delivered by our productivity programme, we also took drastic *cost mitigating actions *to partially offset the financial impact from lockdowns and other restrictions to operate. These actions resulted in a reduction of expenses (beia) of circa €0.5 billion relative to 2019, mainly related to marketing, selling and personnel expenses. These cost mitigation actions are by nature non-repeating benefits and are expected to reverse next year.
*Operating* *profit* *(beia) *grew 43.8% organically with a strong recovery in Europe, AMEE and the Americas, partially offset by the impact of the pandemic in APAC. Currency translation negatively impacted operating profit (beia) by €98 million, or 4.0%, mainly driven by the Brazilian Real, the Surinamese Dollar, the Vietnamese Dong and the Ethiopian Birr. Operating profit grew by 476.2% mainly due to the exceptional gain this year from the remeasurement to fair value of the previously held equity interest in UBL in India, and the exceptional losses from last year's impairments and restructuring provisions.
*Net profit (beia) *grew 80.2% organically to €2,041 million (2020: €1,154 million), driven by the increase in operating profit. Currency translation negatively impacted net profit (beia) by €43 million or 3.7%, mainly driven by the Brazilian Real, the Vietnamese Dong and the US Dollar. *Net profit *after exceptional items and amortisation of acquisition-related intangibles was €3,324 million (2020: €204 million loss), driven by the same variances in exceptional items as operating profit.
For more details, please refer to the Financial Review.
*RAISING THE BAR ON SUSTAINABILITY AND RESPONSIBILITY*
In 2021, we launched the next phase of our sustainability and responsibility strategy in the form of 22 new Brew a Better World commitments focusing on three areas: Raising the bar on climate action, accelerating our social sustainability agenda and driving our brands to be more ambitious in promoting moderate consumption of alcohol.
*Environmental: Path to zero impact*
In April 2021, we shared our goal to reach net zero *carbon* *emissions* in our full value chain 10 years ahead of the Paris Agreement. Our stepped-up ambition to decarbonize first in production by 2030 has been approved by the Science Based Targets initiative (SBTi), with scope 1 and 2 reductions in line with the 1.5°C climate change pathway. With 2018 as a baseline, we have reduced absolute carbon emissions in production by 16%. We also published a climate action plan that explains the actions we are taking to become net zero. We continue working with SBTi to validate our long-term 2040 target.
We continue to focus on *healthy* *watersheds* via efficient water usage, wastewater management and water security. Aligned with our 2030 commitments, we aim to further reduce water usage to 2.6 hectolitre per hectolitre (hl/hl) in water-stressed areas and 2.9 hl/hl worldwide. By the end of 2021, we reached 3.1 hl/hl and 3.4 hl/hl, respectively. 23 of our 31 sites in water-stressed areas have begun watershed protection programmes with the aim to fully balance our water use by 2030, one third of these sites are already fully balanced.
*Social: Path to an inclusive, fair and equitable world*
While our percentage of women in senior management has doubled from a decade ago, much opportunity remains in terms of *gender* *diversity*. By the end of 2021, 25% of our senior management positions were held by women. Our commitment is to increase this percentage to at least 30% by 2025 and 40% by 2030 on the path to gender balance.
We also commit to *equal* *pay* for equal work between female and male colleagues and want to ensure that all our employees worldwide earn at least a fair wage^1 by 2023 with a focus on the most vulnerable communities. By the end of 2021, 97% of operating companies have been assessed on equal pay and we will have actions in place to close any gaps by 2023. Regarding *fair* *wage*, 63% of operating companies have been assessed so far, of which 99% are compliant.
*Responsible: Path to moderate and no harmful use*
Our ambition is to make 0.0 alcohol options available for consumers everywhere so that there is *always a choice*. Heineken® 0.0 is now available in more than 100 markets and, by 2023, we will ensure a zero-alcohol option is available for at least two strategic brands in the majority of our operating companies, accounting for 90% of our business by volume. By the end of 2021, we were at 43%.
We will continue to use the power of our flagship brand to promote moderation. We commit 10% of all Heineken® media spend to advance responsible consumption campaigns and to *make moderation cool*. Through this effort, we will reach one billion people with moderation messaging annually. In 2021, our operating companies invested over 10% of Heineken® media spend in dedicated responsible consumption campaigns. In total, we have reached 1.2 billion unique consumers worldwide.
*Governance*
In 2021, we continued to raise the bar on our ways of working, *governance* and transparent reporting. Given the importance of sustainability and responsibility for long-term value creation:
· We formally added sustainability and responsibility to our long-term value creation model, the Green Diamond
· We started two Sustainability & Responsibility Committees: one at Supervisory Board level and one at Executive Management level
· We committed to the World Economic Forum's Stakeholder Capitalism Metrics (WEF) and the Task Force on Climate-related Financial Disclosures (TCFD), which both aim to improve quality and consistency of climate-related disclosures
· We assessed how best to align our remuneration policy with our sustainability ambitions; a proposal will be shared during our Annual General Meeting in April 2022
More details on these and other areas of our 2030 strategy are available on our website and in our 2021 Annual Report.
*Outlook Statements*
We launched our EverGreen strategy in February 2021 to future-proof our business and deliver superior, balanced growth for sustainable, long-term value creation. It requires us to constantly navigate the long-term transformation with the short-term financial delivery under fast-changing external circumstances. We are encouraged by the progress made, witnessed by the strong performance of our business in 2021 and how EverGreen is taking shape.
In 2022, we will continue to navigate an uncertain environment and expect COVID-19 to still have an impact on revenues. Our plans assume markets in APAC to progressively bounce back during the year, yet full recovery of the on-trade in Europe may take longer.
We also expect to be significantly impacted by inflation and supply chain resilience pressures. More specifically, we expect our input cost per hectolitre (beia) to increase in the mid-teens given our hedged positions and the sharp increase in the prices of commodities, energy, and freight. We will offset these input cost increases through pricing in absolute terms, which may lead to softer beer consumption.
Reflecting our confidence in the long-term, we intend to reverse the cost mitigation actions undertaken in 2021 and to further step up our investments in brand support and our digital and sustainability initiatives. This investment will be partially offset by further delivery of gross savings from our productivity programme. These changes are expected to have a greater impact in the first half of the year.
Overall, we expect a stable to modest sequential improvement in operating profit margin (beia) in 2022. Whilst continuing to target 17% operating margin (beia) in 2023 and operating leverage beyond, there is increased uncertainty given current and evolving economic and input cost circumstances. Therefore, we will update the 2023 guidance later in the year.
We also anticipate:
· An average effective interest rate (beia) broadly in line with 2021 (2021: 2.7%)
· Capital expenditure related to property, plant and equipment and intangible assets of around €2 billion (2021: €1.6 billion)
· An effective tax rate (beia) of around 28% (2021: 29.9%), back to the level of 2019.
*Total Dividend For 2021*
The Heineken N.V. dividend policy is to pay a ratio of 30% to 40% of full year net profit (beia). For 2021, a total cash dividend of €1.24 per share, representing an increase of 77.1% (2020: €0.70), and a payout ratio of 35.0%, in the middle of the range of our policy, will be proposed to the Annual General Meeting on 21 April 2022 ("2022 AGM"). If approved, a final dividend of €0.96 per share will be paid on 3 May 2022, as an interim dividend of €0.28 per share was paid on 11 August 2021. The payment will be subject to a 15% Dutch withholding tax. The ex-dividend date for Heineken N.V. shares will be 25 April 2022.
*Translational Calculated Currency Impact*
The translational currency impact for 2021 was negative, amounting to €515 million on net revenue (beia), €98 million at operating profit (beia) and €43 million at net profit (beia).
Applying spot rates as of 14 February 2022 to the 2021 financial results as a base, the calculated currency translational impact would be positive, approximately €465 million in net revenue (beia), €65 million at operating profit (beia), and €45 million at net profit (beia).
*Regional Overview*
*Net revenue (beia)* *FY21* FY20 Organic growth
(in € million)
Heineken N.V. *21,901* 19,724 12.2%
Africa Middle East & Eastern Europe *3,159* 2,782 25.9%
Americas *7,226* 6,319 17.9%
Asia Pacific *2,764* 2,707 -6.1%
Europe *9,494* 8,631 8.6%
Head Office & Eliminations *-744* -716
*Operating profit (beia)* *FY21*
FY20
Organic growth
(in € million)
Heineken N.V. *3,414* 2,421 43.8%
Africa Middle East & Eastern Europe *442* 264 89.0%
Americas *1,215* 1,045 19.5%
Asia Pacific *753* 867 -13.5%
Europe *1,160* 447 154.1%
Head Office & Eliminations *-155* -202
*Developing markets FY21* Group beer volume
Group
net revenue (beia)
Group operating
profit (beia)^1
(in mhl or € million unless otherwise stated)
*Developing markets in:* 177.6 11,983 2,085
Africa Middle East & Eastern Europe 40.6
Latin America & the Caribbean 78.1
Asia Pacific 55.5
Europe 3.4
% of Group 64% 48% 53%
^1 Excludes Head Office & Eliminations
*Africa Middle East & Eastern Europe (AMEE)*
*Key financials* *FY21* FY20 Total growth Organic growth
(in mhl or € million unless otherwise stated)
Net revenue (beia) *3,159* 2,782 13.6% 25.9%
Operating profit (beia) *442* 264 67.2% 89.0%
Operating profit (beia) margin *14.0**%* 9.5% 449 bps
Total consolidated volume *50.3* 45.4 10.7% 12.2%
Beer volume *38.9* 39.6 -1.9% 10.4%
Non-Beer volume *11.3* 5.7 97.5% 24.5%
Third party products volume *0.1* 0.1 25.4% 25.4%
Licensed beer volume 2.4 2.1
Group beer volume 41.7 42.2
Our *Africa, Middle East & Eastern Europe* region presents strong growth opportunities derived from its growing population and urbanisation trends. We are expanding and enhancing our strong market positions with assertive commercial strategies, disciplined cost management, and capital efficiency to ensure we deliver balanced and profitable growth.
*Consolidated beer volume* grew 10.4% organically, mainly driven by Nigeria, South Africa, and the Democratic Republic of Congo (DRC). The premium portfolio outperformed and grew in the twenties, with a particularly strong performance in Nigeria, South Africa, Russia, Ivory Coast and Rwanda. The low- and non-alcoholic portfolio increased around 10%, driven by the double-digit growth of malts in Nigeria, the DRC and Ethiopia. Total volume was slightly ahead of 2019, driven by the performance in many markets across the region, especially Nigeria and the DRC.
*Net revenue (beia) *grew 25.9% organically, with total consolidated volume up 12.2% and net revenue (beia) per hectolitre up 12.2%. Price mix was up 12.5% on a constant geographic basis, driven by strong pricing across the region, particularly Nigeria and Ethiopia, and premiumisation, especially in Russia, Nigeria and Egypt. *Operating profit (beia) *grew 89.0% driven by broad-based growth across the region, particularly South Africa, Nigeria, Egypt, Lebanon, the DRC, Ethiopia and Mozambique.
In *Nigeria,* total volume grew in the low-teens and is well ahead of 2019, held back however by production capacity constraints we are addressing. The premium portfolio grew in the thirties, led by Tiger, Heineken® and the successful introduction of Desperados. The low-and non-alcoholic portfolio grew in the mid-teens, led by Maltina.
In *South Africa, *total volume grew in the forties, ahead of the market. Beer volume grew close to 40%, with strong growth from Heineken®, Amstel and Windhoek. Cider volume grew in the sixties, driven by Strongbow. There were alcohol bans in during January and July, however the impact was less severe than those in 2020.
In *Russia,* beer volume grew by a low-single-digit, driven by the strong double-digit growth of our premium portfolio, ahead of the market. The growth was led by Heineken®, Miller and Dr Diesel. We enhanced the repertoire of flavours of Dr Diesel with the introduction of Strawberry Lime mix, with reduced calories and no sugar. Our cider portfolio grew double-digits, strengthening our leadership position in this fast growing segment.
In *Ethiopia,* beer volume grew in the low-teens, in line with the market, led by the strong growth of Harar and Bedele. The premium portfolio continued to deliver double-digit growth, driven by Bedele Special. The country continues to face tensions and instability.
In *Egypt, *total volume grew by a high-single-digit, led by the strong recovery of our beer, wine and spirits portfolio, particularly Heineken® in the premium segment. The last quarter of the year saw a strong recovery in tourism as restrictions were lifted. The non-alcoholic portfolio grew by a low-single-digit despite a significant price increase.
In *Ivory Coast,* beer volume grew in the twenties, well ahead of 2019, driven by the strong growth of Heineken® and the successful launch of Desperados under local production.
Beer volume also grew in the double-digits in *the* *DRC*, *Mozambique*, *Algeria*, *Tunisia, Sierra* *Leone,* and across many export markets.
*Americas*
*Key financials* *FY21* FY20 Total growth Organic growth
(in mhl or € million unless otherwise stated)
Net revenue (beia) *7,226* 6,319 14.4% 17.9%
Operating profit (beia) *1,215* 1,045 16.3% 19.5%
Operating profit (beia) margin *16.8**%* 16.5% 28 bps
Total consolidated volume *89.4* 86 4.1% 4.1%
Beer volume *85.4* 79.1 7.9% 8.2%
Non-Beer volume *3.9* 6.7 -41.4% -44.9%
Third party products volume *0.1* 0.1 11.7% 11.7%
Licensed beer volume 3.1 2.1
Group beer volume 97.1 89.0
The *Americas* represent over 40% of the value of the global beer market and HEINEKEN is well represented, yet a distant number two. We are driving growth in our key markets of Brazil, Mexico and the USA, expanding our footprint and building new consumer-relevant propositions.
*Consolidated beer volume* grew 8.2% organically, mainly driven by Mexico, finishing in line with 2019. The premium portfolio grew in the low-twenties led by Heineken® in Brazil and Amstel Ultra in Mexico. The low- and non-alcoholic portfolio grew close to 30% due to the strong performance of Heineken® 0.0 in Brazil, Mexico and the USA. Non-beer volume declined 44.9% following the de-listing in Brazil of two litre PET soft drinks with low margins.
*Net revenue (beia) *grew 17.9% organically, with total consolidated volumes up 4.1% and net revenue (beia) per hectolitre up 13.3%. Price mix was up 10.3% on a constant geographic basis, mainly driven by strong premiumisation and pricing in Brazil with net revenue (beia) per hectolitre growing in the thirties. *Operating profit (beia)* grew by 19.5% organically, mainly driven by Mexico and Brazil.
In *Mexico*, beer volume grew in the high-teens, ahead of the market, and in line with 2019. Our premium portfolio grew by more than 30%, led by Amstel Ultra, Bohemia and Heineken®. Amstel Ultra continued its successful expansion and reached more than 1 million hectolitres. We launched Dos Equis Ultra Lager, the first Mexican Ultra, to further accelerate premiumisation. Heineken® 0.0 continued its strong momentum, growing more than half and strengthening its position as the #1 non-alcoholic beer in the market. We began local production of Lagunitas in October. Our SIX stores accelerated their growth with improved productivity, the development of non-beer categories and the expansion of new stores, reaching close to 15,000 stores by the end of the year.
In *Brazil*, beer volume grew by more than 10% in the fourth quarter, driven by our premium and mainstream portfolios. For the full year, we gained value share in beer as strong pricing and premiumisation effects more than offset a low-single-digit decline in volume. We strengthened our leadership in premium and grew close to 30% in volume led by Heineken® and Eisenbahn. Heineken® volume is now double its pre-pandemic level. Heineken® 0.0 more than doubled its volume, making Brazil the largest market globally for the line extension. Our mainstream portfolio grew in the mid-twenties led by Amstel, Devassa, the launches of Tiger and more recently Amstel Ultra. Our economy portfolio declined close to 30%. We accelerated the deployment of HeiShop, our B2B platform, connecting 100,000 active customers by the end of the year.
In the *USA*, beer volume grew by a low-single-digit, ahead of the market, driven by Heineken®, Dos Equis and our innovations. Heineken® 0.0 strengthened its position as the #1 non-alcoholic beer in the market. Dos Equis grew in the mid-teens, boosted by the success of innovations Dos Equis Lime & Salt, as well as variety packs and Ranch Water.
The strong performance in the region was also supported by strong growth in *Panama*, *Peru*, *Ecuador*, *Jamaica*, and from our joint venture partners in *Chile*, *Colombia*, *Argentina,* and *Costa* *Rica. *
*Asia Pacific*
*Key financials* *FY21* FY20 Total growth Organic growth
(in mhl or € million unless otherwise stated)
Net revenue (beia) *2,764* 2,707 2.1% -6.1%
Operating profit (beia) *753* 867 -13.2% -13.5%
Operating profit (beia) margin *27.2%* 32.0% -481 bps
Total consolidated volume *30.4* 28.7 5.8% -11.1%
Beer volume *29.4* 28.1 5.0% -11.7%
Non-Beer volume *0.9* 0.7 32.8% 5.0%
Third party products volume *0.1* 0.0 148.5% 148.5%
Licensed beer volume 3.7 2.9
Group beer volume 59.3 57.6
The *Asia Pacific* region offers a large growth potential, and we are well-positioned to capture it given our strong market positions. We are building brands that serve consumers that often prefer less bitter variants, non-alcoholic beer, and modern wheat. We are also accelerating our growth in Vietnam while broadening our base with investments in future growth markets.
After a strong performance at the start of the year, the region was impacted severely by the pandemic, which led to suspension of breweries, alcohol bans and closing of the on-trade. As a consequence, *consolidated beer volume *declined 11.7% organically, driven by Vietnam, Cambodia and the restructuring of our business in the Philippines, partially offset by double-digit growth in Indonesia, Myanmar, Singapore and Laos. As vaccination rates increased and markets gradually and selectively reopened, we saw encouraging recovery of our business across most markets.
*Net revenue (beia)* declined 6.1% organically, with net revenue (beia) per hectolitre up 5.7% with a significant positive geographic mix. Price mix was up 2.1% on a constant geographic basis, driven by Malaysia and Indonesia. *Operating profit (beia) *decreased 13.5% organically, driven by Vietnam and Cambodia, partially offset by Indonesia, Malaysia and the Philippines.
In *Vietnam*, our growth momentum was disrupted by the lockdowns introduced between June and September. Beer volume declined in the high-teens, as our strongholds in the South saw the most restrictions, particularly in Ho Chi Minh City. We observed a gradual recovery in the last quarter as the social-distancing measures were lifted and we restored our leadership position towards the end of the year. Bia Viet grew in the high-twenties as we continue to increase our penetration into mainstream and outside our strongholds, while in premium Heineken® grew slightly, driven by the success of Heineken® Silver.
In *India*, beer volume grew in the thirties, outperforming the market, following a progressive recovery and returning back to pre-pandemic levels in the fourth quarter. Premium volume grew ahead of the total portfolio, led by Kingfisher Ultra, Heineken® and Amstel. The integration of UBL is progressing as planned.
In *China*, Heineken® grew strong double-digits, led by the continued excellent momentum of Heineken® Silver. Heineken® volume nearly doubled compared to pre-pandemic levels. China is now the fourth largest market for Heineken® globally.
In *Cambodia*, beer volume declined in the high-teens, in line with the market, driven by lockdown restrictions and alcohol bans. These were relaxed in the fourth quarter and beer volume returned back to growth. We have revamped our route-to-consumer by expanding direct coverage and accelerating the implementation of our B2B platform, which now captures 30% of our net revenue.
In *Malaysia*, beer volume increased by a low-single-digit, outperforming the market and growing by a double-digit in the last quarter of the year. The premium portfolio grew by a high-single-digit, led by Heineken® and the introduction of Edelweiss.
In *Indonesia*, total volume grew in the high-teens, driven by a gradual recovery in the domestic market and the strong growth of Heineken®. The on-trade remains closed, and quarantine requirements are keeping tourists away from Bali.
In *Singapore*, *Myanmar* and *Laos* beer volume outperformed the market and grew in the double-digits, driven by the premium portfolio, led by Heineken®.
*Europe*
*Key financials* *FY21* FY20 Total growth Organic growth
(in mhl or € million unless otherwise stated)
Net revenue (beia) *9,494* 8,631 10.0% 8.6%
Operating profit (beia) *1,160* 447 159.5% 154.1%
Operating profit (beia) margin *12.2**%* 5.2% 704 bps
Total consolidated volume *91.8* 88.8 3.4% 3.5%
Beer volume *77.5* 74.8 3.6% 3.8%
Non-Beer volume *9.0* 9.0 -0.5% -1.0%
Third party products volume *5.4* 5.0 8.0% 8.0%
Licensed beer volume 0.7 0.7
Group beer volume 80.4 77.6
Europe is our largest region and as market leaders we aim to grow the category and our market share by tailoring our products to emerging consumer trends and winning in premium whilst leveraging our scale.
*Consolidated beer volume* grew organically by 3.8%, with the fourth quarter up by 15.0% with restrictions less widespread and severe as compared to last year. Premium beer volume grew in the low-teens, led by Heineken®, Desperados, Birra Moretti, Amstel, Gösser and Ichnusa among many others. On-trade beer volume grew in the high-teens, mainly driven by the growth in the fourth quarter, still below 2019 by more than 30% for the full year. Off-trade beer volume was broadly flat versus last year and yet ahead of 2019 by around 10%, with two-thirds of our markets with stable or growing market share. Third-party volume grew by 8.0% driven by the growth in the last quarter as the on-trade reopened. The non-alcoholic portfolio outperformed the market, led by the growth of Heineken® 0.0 and Desperados Virgin 0.0.
*Net revenue (beia)* increased by 8.6% organically with net revenue (beia) per hectolitre up 5.4%. Price mix was up 4.3% on a constant geographic basis, with growth across all markets due to positive channel mix, premiumisation, and pricing. *Operating profit (beia) *grew by 154.1% organically with strong growth in all major markets.
In the *UK*, total volume grew by a mid-single-digit, in line with the total market. Consumers show a growing appetite for premium products, driving the growth of our premium beer portfolio by a high-single-digit, led by Birra Moretti and Desperados. Birra Moretti reached more than 1 million hectolitres this year. Our low-and non-alcoholic portfolio grew in the thirties, led by the continued success of Heineken® 0.0. Our pub estate opened quickly and safely, ahead of the wider on-trade.
In *France*, total volume grew by a mid-single-digit, driven by the double-digit growth of our premium beer portfolio, led by Desperados and Affligem. We outperformed the market in the off-trade. Our consumer-led innovations had an excellent performance, particularly Affligem Blanche, Desperados Florida Sunrise and Desperados Virgin Mojito with 4 SKUs in the top 5 liquid innovations in hypermarkets and supermarkets.
In *Spain*, beer volume grew by a high-single-digit and outperformed the market in both the on-trade and off-trade channels, driven by the growth of our premium portfolio, led by Heineken® and El Águila. Our non-alcoholic beer portfolio grew in the mid-teens, led by Amstel Oro 0.0 as it leveraged the partnership with Rafa Nadal, and was further supported by the growth of Heineken® 0.0.
In *Italy*, beer volume grew in the low-teens, outperforming the market in the off-trade. The premium beer portfolio performed particularly well, driven by Messina, Birra Moretti Filtrata a Freddo and Ichnusa. The low- and non-alcoholic portfolio grew in the mid-teens, led by Heineken® 0.0 and Birra Moretti 0.0.
In *Poland*, beer volume declined by a mid-single-digit in a declining market, driven by the economy portfolio. Heineken® and Desperados had a strong performance in the premium segment. The low- and non-alcoholic portfolio grew by a mid-single-digit, driven by Heineken® 0.0 and the launch of Desperados Virgin 0.0.
In the *Netherlands*, beer volume was broadly in line with last year, following a strong recovery in the last quarter. The premium portfolio grew in the low-teens, driven by the successful launch of Birra Moretti l'Autentica and the continued growth of Affligem and Desperados. Birra Moretti was the #1 innovation in beverages in 2021 in the market.
*Financial Review*
*Key figures*
(in mhl or € million unless otherwise stated) FY20 Currency translation Consolidation impact Organic growth *FY21* Organic growth
*Revenue (IFRS/beia)* 23,770 -538 647 2,704 *26,583* 11.4 %
Excise tax expense (beia) -4,046 24 -368 -292 *-4,683* -7.2 %
*Net Revenue (beia)* 19,724 -515 280 2,412 *21,901* 12.2 %
Total other expenses (beia) -17,303 417 -249 -1,352 *-18,487* -7.8 %
*Operating profit (beia)* 2,421 -98 31 1,060 *3,414* 43.8 %
Net interest income/(expenses) (beia) -470 8 1 59 *-403* 12.5 %
Other net finance income/(expenses) (beia) -146 23 -4 32 *-94* 22.2 %
Share of net profit of assoc./ JVs (beia) 147 -6 -7 103 *238* 70.0 %
Income tax expense (beia) -593 14 -6 -287 *-872* -48.5 %
Non-controlling interests (beia) -205 16 -11 -41 *-241* -20.1 %
*Net profit (beia)* 1,154 -43 4 925 *2,041* 80.2 %
Eia -1,358 1,283
*Net profit/(loss)* -204 *3,324*
Note: due to rounding, this table will not always cast
*Main changes in consolidation*
As part of the organisational redesign of EverGreen, HEINEKEN merged its export business units of Europe and Africa, Middle East & Eastern Europe into a single unit, which is now reported under Europe as of 1 April 2021.
On 23 June 2021, HEINEKEN acquired additional ordinary shares in UBL, taking its shareholding in UBL from 46.5% to 61.5%. On 29 July 2021, HEINEKEN obtained control and consolidated UBL as of that date, following the changes to certain provisions in the Articles of Association of UBL.
*Revenue*
Revenue was €26,583 million, an increase of 11.8% (2020: €23,770 million). Revenue (beia) increased 11.4% organically to €26,583 million.
Net revenue increased 11.3% to €21,941 million (2020: €19,715 million). Net revenue (beia) increased by 12.2% organically to €21,901 million, with total consolidated volume increasing 3.6% and an increase in net revenue (beia) per hectolitre of 8.3%. Currency developments negatively impacted by €515 million or 2.6%, mainly driven by the Brazilian Real and the Nigerian Naira. The positive impact of consolidation changes was €280 million, related primarily to UBL.
*Expenses*
Total other expenses were €18,979 million, in line with last year (2020: €18,993 million) as lower exceptional expenses offset the underlying growth in costs. Total other expenses (beia) were €18,487 million, up 7.8% on an organic basis, driven by the increase in volume and higher input costs per hectolitre, partially offset by cost savings from our productivity programme and cost mitigation actions in some markets.
Input costs per hectolitre increased faster in the second half of the year, by a high-single-digit, and closed the year up by a mid-single-digit. The increase was mainly driven by transactional currency effects, particularly from the Brazilian Real, and higher prices of raw and packaging materials, energy, and freight, partially offset by structural costs savings.
Marketing and selling (beia) expenses increased organically by 2.6% and represented 9.5% of net revenue (beia) (2020: 10.4%; 2019: 11.0%), driven by cost mitigation actions in markets under lockdown, lower credit losses and commercial efficiencies from our productivity programme.
Personnel expenses (beia) increased organically with 5.5% to €3,489 million (2020: €3,339 million) driven by the re-instatement of variable pay, partially offset by a lower number of employees. Government support received under different support programmes amounted to €37 million (2020: €49 million), mainly in Europe.
Depreciation & amortisation expenses (beia) decreased organically by 1.7% to €1,539 million (2020: €1,584 million), driven by the impairments of last year in combination with lower investments in assets due to the partial suspension of non-committed CAPEX in 2020.
*Operating profit *
Operating profit increased to €4,483 million (2020: €778 million) driven by the performance this year, the remeasurement to fair value of the previously-held equity interest in UBL in India, and the impact from exceptional items in 2020, mainly impairments. Operating profit (beia) was €3,414 million, up 43.8% organically, mainly driven by the strong growth in revenue, partially offset by higher variable and personnel expenses. Currency translation had a negative impact of €98 million, mainly from Brazil, Suriname, Vietnam and Ethiopia. Consolidation changes had a positive impact of €31 million or 1.3%.
*Net finance expenses (beia)*
Net interest expenses (beia) decreased organically by 12.5% to €403 million, reflecting a lower average effective interest rate and a lower average net debt position. The average effective interest rate (beia) in 2021 was 2.7% (2020: 3.0%).
Other net finance expenses (beia) amounted to €94 million, down 22.2% on an organic basis, driven by a lower negative impact from currency revaluations on outstanding foreign currency payables.
*Share of net profit of associates and joint ventures (beia) *
The share of net profit of associates and joint ventures (beia) amounted to €238 million, including the attributable profit from China Resources Beer (CRB) with a two-month delay (November 2020 to October 2021). The organic increase was €103 million, mainly driven by the strong performance of Cervecerías Chilenas Unidas S.A (CCU) and CRB.
*Income tax expense (beia)*
The effective tax rate (beia) was 29.9% (2020: 32.8%). The decrease is mainly driven by the increase in the profit before tax basis. As a result, the effect of permanent items is lower and we have fewer losses for which no deferred tax assets could be recognised.
*Net profit and loss *
The net profit for 2021 was €3,324 million (2020: €204 million loss). Net profit (beia) increased organically by €925 million to €2,041 million. The impact on net profit (beia) of currency translation was negative €43 million (3.7%), and of consolidation changes positive €4 million (0.3%).
*Exceptional items & amortisation of acquisition-related intangibles (eia) *
Exceptional items are defined as items of income and expense of such size, nature or incidence that in the view of management their disclosure is relevant to explain the performance of HEINEKEN for the period. Exceptional items include, amongst others, impairments (and reversal of impairments) of goodwill and fixed assets, gains and losses from acquisitions and disposals, redundancy costs following a restructuring, the tax impact on exceptional items and tax rate changes (the one-off impact on deferred tax positions).
The impact of eia on net profit amounted to a benefit of €1,283 million (2020: €1,358 million expense). On operating profit, the impact of eia amounted to a benefit of €1,069 million (2020: €1,643 million expense).
Amortisation of acquisition-related intangibles recorded in operating profit amounted to €286 million (2020: €273 million). Net exceptional benefit items recorded in operating profit amounted to €1,355 million (2020: €1,370 million expenses), of which:
· €41 million benefit on excise tax (2020: €8 million expenses)
· €1,270 million gain on previously-held equity interest from UBL and €187 million benefit from tax credits in Brazil recorded in other income (2020: nil)
· €108 million in impairments (net of reversals), including €203 million for Lagunitas (total impairments in 2020: €963 million)
· €32 million in restructuring expenses (2020: €331 million)
· €3 million of other net exceptional expenses, including loss on disposals (2020: €68 million)
Please refer to page 24 for a description of the exceptional items and amortisation of acquisition-related intangibles below operating profit.
*Capital expenditure and cash flow*
Capital expenditure related to property, plant and equipment and intangible assets (CAPEX) amounted to €1,597 million (2020: €1,640 million; 2019: €2,101 million) representing 7.3% of net revenue (beia). The investments of the year amounted to €1,769 million (2020: €1,389 million; 2019: €2,215 million) and include capacity expansions in Brazil, Vietnam, Nigeria and Italy and the acquisition of Strongbow in Australia. The lower CAPEX versus 2019 is driven by delays in the execution of some projects, mainly COVID-19 related.
Free operating cash flow amounted to €2,514 million (2020: €1,513 million; 2019: €2,228 million), ahead of 2020 mainly due to higher cash flow from operating activities, and ahead of 2019 mainly due to lower CAPEX. Delayed payments of value-added taxes, granted by governments in some countries, had a negative impact of €154 million in 2021.
*Financial structure*
Total gross debt amounted to €16,873 million (2020: €18,196 million). Net debt decreased to €13,658 million (2020: €14,210 million) as the positive free operating cash flow exceeded the cash outflow for dividends, acquisitions, and the negative foreign currency impact on debt.
Including the effect of cross-currency swaps, 65% of net debt is Euro-denominated, and 22% is US dollar and US dollar proxy currencies. The pro-forma 12 month rolling net debt/EBITDA (beia) ratio was 2.6x on 31 December 2021 (2020: 3.4x). HEINEKEN is committed to returning to the Company’s long-term target net debt/EBITDA (beia) ratio of below 2.5x.
The centrally available financing headroom at Group level was approximately €4.6 billion as at 31 December 2021 (2020: €5.2 billion) and consisted of the undrawn committed revolving credit facility and cash minus short-term bank borrowings.
*Average number of shares*
HEINEKEN has 576,002,613 shares in issue. In the calculation of basic EPS, the weighted average number of shares outstanding was 575,740,269 (2020: 575,625,598).
In the calculation of 2021 diluted EPS (beia), shares to be delivered under the employee incentive programme (229,127 shares) are added to the weighted average shares outstanding. The weighted average diluted number of shares outstanding was 575,969,395 (2020: 575,821,605).
*Full Year 2021 Consolidated Metrics*
In mhl or €million unless otherwise stated & consolidated figures unless otherwise stated FY20 Currency translation Consolidation impact Organic growth *FY21*^*1* Organic growth
*Africa, Middle East & Eastern Europe*
Net revenue (beia) 2,782 -274 -69 720 *3,159* 25.9%
Operating profit (beia) 264 -47 -10 235 *442* 89.0%
Operating profit (beia) margin 9.5% *14.0**%*
Total consolidated volume 45.4 -0.7 5.5 *50.3* 12.2%
Beer volume 39.6 -4.9 4.1 *38.9* 10.4%
Non-beer volume 5.7 4.2 1.4 *11.3* 24.5%
Third party products volume 0.1 — 0.0 *0.1* 25.4%
Licensed beer volume 2.1 2.4
Group beer volume 42.2 41.7
*Americas*
Net revenue (beia) 6,319 -224 — 1,131 *7,226* 17.9%
Operating profit (beia) 1,045 -33 — 203 *1,215* 19.5%
Operating profit (beia) margin 16.5% *16.8**%*
Total consolidated volume 86.0 — 3.5 *89.4* 4.1%
Beer volume 79.1 -0.2 6.5 *85.4* 8.2%
Non-beer volume 6.7 0.2 -3.0 *3.9* -44.9%
Third party products volume 0.1 — — *0.1* 11.7%
Licensed beer volume 2.1 3.1
Group beer volume 89.0 97.1
*Asia Pacific*
Net revenue (beia) 2,707 -62 283 -164 *2,764* -6.1%
Operating profit (beia) 867 -28 31 -117 *753* -13.5%
Operating profit (beia) margin 32.0% *27.2**%*
Total consolidated volume 28.7 4.9 -3.2 *30.4* -11.1%
Beer volume 28.1