Heineken N : 2020 Full Year Results Presentation

Disclaimer

This presentation contains forward-looking statements with regard to the financial position and results of HEINEKEN's activities. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.

Many of these risks and uncertainties relate to factors that are beyond HEINEKEN's ability to control or estimate precisely, such as future market and economic conditions, developments in the ongoing COVID-19 pandemic and related government measures, the behaviour of other market participants, changes in consumer preferences, the ability to successfully integrate acquired businesses and achieve anticipated synergies, costs of raw materials, interest-rate and exchange-rate fluctuations, changes in tax rates, changes in law, change in pension costs, the actions of government regulators and weather conditions. These and other risk factors are detailed in HEINEKEN's publicly filed annual reports. You are cautioned not to place undue reliance on these forward-looking statements, which speak only of the date of this presentation.

HEINEKEN does not undertake any obligation to update these forward-looking statements contained in this presentation. Market share estimates contained in this press release are based on outside sources, such as specialised research institutes, in combination with management estimates.

A year of profound impact and transition

People at the heart of our response

FY 2020 Highlights

Top-line performance materially impacted by government restrictions to contain COVID-19

Strong competitive performance and Heineken® momentum

>90% of operating profit decline coming from Europe, Mexico, South Africa and Indonesia

c. €800 million cost mitigation

AMEE Region

Strong recovery in NIGERIA in second half, growing volume FY and winning market share. Double-digit growth in premium, led by Heineken® and Tiger

SOUTH AFRICA strong momentum disrupted by alcohol bans and capacity constraints. Heineken® 0.0 grew double-digits

PREMIUM PORTFOLIO outperformed broader portfolio in most key markets like Nigeria, Ethiopia, Russia, the DRC, Ivory Coast, Burundi and Mozambique

Americas Region

MEXICO government restrictions and dry laws eased in second half. Strong price mix c. 2x inflation. Amstel Ultra, Heineken® 0.0 and cider grew strongly

BRAZIL volume flat while hitting maximum capacity in Q4. Rev per hl growth in the low teens. Premium and mainstream grew double-digits, now 50% of the beer portfolio led by Heineken® with >40% growth

USA impacted by supply disruptions and on-premise closures. Heineken® grew low single-digit, the best performance in a decade. Heineken® 0.0 is #1 in non-alcohol

APAC Region

VIETNAM volume was stable, significantly outperforming the market and confirming our market leadership. Mainstream grew double-digits with Larue and Bia Viet. Heineken® Silver doubled its volume.

CHINA strong double-digit Heineken® growth. Now in the top five markets for the brand globally

INDONESIA heavily impacted by absence of tourism and on-trade restrictions. Outperformed the market in all regions, except Bali

Europe Region

High exposure to ON-TRADE heavily impacted results, particularly in Q2 and Q4

OFF-TRADE continued to grow, driven by premium with strong performance of Desperados, Birra Moretti and Sol. Outperformed the market in UK, Italy, France, Spain, Poland and the Netherlands

NON-ALCOHOL portfolio outperformed the market led by Heineken® 0.0, strengthening our leadership in the segment

Heineken®: The most trusted international brand

E-Commerce acceleration @ Beerwulf

Dec

Jan 2020

FebMarAprMayJunJulAugSepOctNovDec

Financial Overview

Key Financials €m unless otherwise stated FY 2020 Total Growth	Organic Growth
Revenue	23,770	-16.7%
Net revenue (beia)	19,724	-11.9%
Operating profit (beia)	2,421	-35.6%
Operating profit (beia) margin	12.3%	-455 bps
Net profit (beia)	1,154	-49.4%
Net loss	-204	-109.4%
Diluted EPS (beia) in €	2.00	-54.3%
Free operating cash flow	1,513
Net Debt/EBITDA (beia) ratio	3.4x

Top-line impacted by COVID-19

Net Revenue (beia): 11.9% organic decline

€m

FY 2019 Net Revenue

Total VolumeNet rev/hlCurrency Translation

Consolidation

Impact

€m

FY 2020 Net Revenue

(beia)

(beia)

Diligent action on costs to mitigate the impact

Operating Profit (beia): 35.6% organic decline

>90% - EUR, MX, SA & ID

€m

4,020

€m

2,421

FY 2019 Operating Profit (beia)

Net RevenueCostless Variable Mitigation2 Expenses1

Others3

Currency Translation

• 1. 'Variable expenses' include input costs, goods for resale, transportation and other variable expenses

  Consolidation

  Impact

• 2. 'Cost mitigation' includes selling & marketing expenses, repair & maintenance, personnel expenses, energy & water, other fixed expenses

• 3. 'Other' includes other P&L items of which Depreciation & Amortization represent >90% of this effect

FY 2020 Operating Profit (beia)

1.

Balanced reduction of discretionary expenses

Excludes the effects on input costs, goods for resale, transport and depreciation

Other

Exceptional items and amortisation of acquisition- related intangible assets on operating profit

FOCF impact mitigated by reduction of non-committed CAPEX

Free Operating Cash Flow: €1,513 million

€m

FY 2019

FOCF

Cash flow from operations1

Working Capital

• 1. Cash flow from operations before changes in working capital and after provisions and post-retirement obligations

• 2. Cash flow (used in/)from operational investing activities

Capex2

Interest, dividend & income tax

€m

FY 2020

FOCF

Committed to long term target <2.5x

Net Debt/EBITDA (beia)

Long term target

3.3

2.2 2.2

3.4

2008

09

10

11

12

13

14

15

16

17

18

19

2020

Closing a decade of Brewing a Better World

"If you're driving, don't drink this."

responsible consumption campaign

launched in New Zealand

• 1. Ten sites replenish more water in the respective watersheds than their annual beverage production volume

• 2. Domestic markets only

For 2021, we expect

Pandemic to continue to impact first half of 2021

Conditions to gradually improve in second half 2021

Product & channel mix to continue to adversely impact results

A higher negative transactional currency impact on input costs

Revenue, operating profits and margin to stay below 2019 level

A year of profound impact and transition

Impact of COVID-19, amplified by on-trade and geography

Strong competitive performance and Heineken® momentum

Sharp mitigating actions while continuing to invest for the future

Solid results of Brewing a Better World 2020

Strong balance sheet and dividend in line with policy

SUPERIOR & PROFITABLE

GROWTH

IN A FAST- CHANGING WORLD

Invest in new sources of growth & restore operating leverage

Future proof HEINEKEN

Framing our way forward: HEINEKEN growth algorithm

HEINEKEN growth algorithm

Building on a strong foundation

A growth company, innovating and pioneering in the beer industry

Heineken® brand present in over 190 markets

OpCo centric, entrepreneurial model driven by 80+ OpCos

HEINEKEN values, quality and people centric culture

Our long-term focus rooted in our 156-year history

Revenue OG avg 2015-20191

HEINEKEN is a superior growth company

HEINEKEN

5.0%Other brewers3.9%SpiritsFoodSoft Drinks

1.

3.9%

3.3%

2.6%

Other brewers (ABI, CARLB, STZ & TAP); Spirits (DGE, CPR, RCO & RI); Food (NESN, BN & ULVR); Soft Drinks (CCH, CCEP & BVIC). Organic revenue growth as reported by corporates in each year

Diversified global footprint geared for growth…

Significant deals

…with known challenges to address

Reduced inorganic headroomExposure to FX volatilityValue dilutive operations

Winning premium brand portfolio…

Heineken®

International brands

>40% of total beer revenue

from premium in 2019

Local premium champions

• 1. Expected 2021-2025. Methodology: HEINEKEN 2019 footprint and stable market share in each country going forward

• 2. Organic volume growth of Tiger

• 3. Organic volume growth of Ichnusa

Source: Global Data, Statista

…to capture the growing opportunity in premium

People entering the >100m middle class each yearExpected volume growth of HEINEKEN +60bps premium vs. 3.6% overall premium beer market1

Global market leader in 0.0…

~1.4x Total market share 0.0

versus fair share

2017

18

19

Heineken® 0.0 # of markets

84

2020

1.

Assumes closing the penetration gap vs. the benchmark; for FAB the US market is used as benchmark, for Low Alcohol Spain and for underserved segments gaps in consumption looking at gender, age and affluency

Source: Global Data

Our OpCo-centric model is a competitive advantage…

High PROXIMITY resulting in deep UNDERSTANDING of local customers and consumers

LOCAL accountability, entrepreneurship, adaptability and agility

...with value creation opportunity by leveraging our scale

More focused PORTFOLIO STRATEGYFaster COMMON PLATFORMS adoptionFoster CROSS-OPCO learningsCONTINUOUS PRODUCTIVITY improvement

2015 16

Pre-COVID margin stagnation…

Gross profit margin1 % of revenue2

17

18 2019

Operating profit margin % of revenue2

2015 16

17

18 2019

• 1. GP Margin is calculated as Net Revenue minus Raw Materials, Non-Returnable Packaging, Goods for Resale, Inventory Movements, Transport Expenses and Energy & Water

• 2. 2015 & 2016 restated based on pro-rata (of revenue) of 2017 restatement adjustments for IFRS 15

Deep COVID impact…

Operating profit margin development % of revenues

16.8%

2019

2020

…stretching beyond 2020

Steep DROP IN REVENUE with VARIABLE RECOVERY

OPERATIONAL DELEVERAGE amplified by impact in Europe on-trade, which will take time to fully recoverContinued COST PRESSURE from inflation, commodities and significant transactional currency effects

A foundation in Digital & Technology…

Kick-started standardisation

27% ERP standardisation completed since 2017

8

BASE go-lives in 2020, all done remotely

Strong eCommerce momentum

>€1bn Net revenue from B2B platforms

>3x Number of orders in D2C

in 2020 vs. 2019

…and opportunity to further unify IT & capture full eCommerce potential

Remaining IT backlog

35 ERP systems

Limited re-use of applications across OpCos

Limited current scale of B2B and B2C platforms

Potential disruption of fragmented trade channels

Solid results on Brewing a Better World1 2020 targets…

33% REDUCTION VERSUS 2008 of average water consumption to 3.4 hl/hl in all breweries, and to 3.1 hl/hl in water-stressed areas

51% REDUCTION IN CO2 EMISSIONS in our breweries since 2008, down to 5.1 kg CO2-eq/hl

55% OF MARKETS in scope invested >10% OF HEINEKEN® MEDIA SPEND in responsible consumption campaigns2

58% of our main agricultural raw materials came FROM SUSTAINABLE SOURCES

ACCIDENT FREQUENCY REDUCED BY 58% versus 2015 to 0.58 accidents per 100 FTE

Our operating companies contributed >€36M TO LOCAL COMMUNITIES in 20203

• 1. More comprehensive details in Annual Report

• 2. Due to COVID-19, we expanded the scope of our commitment with Heineken® "Back to the bars #socialiseresponsibly" campaign. Including this campaign, 98% of markets in scope invested at least 10% of Heineken® media spend

• 3. Including cash and in-kind donations, employee time and management costs

Source: Nielsen 2018, Edelman Trust Barometer 2020

Strong culture and healthy organisation climate…

Strong values built on TRANSPARENCY, TRUST and RESPECTNO-NONSENSE 'Deliver the Goods' MENTALITY

OUTSTANDING employee engagement

Source: Employee survey

IN A NUTSHELL: HEINEKEN is a superior growth company, with significant value creation potential going forward

Enhance our PORTFOLIO and strengthen our DIGITAL ROUTE TO CONSUMER, with CONSUMERS and CUSTOMERS at the core

Complement GROWTH with increased PRODUCTIVITY FOCUSAccelerate IT SIMPLIFICATION and capture full E-COMMERCE potential

Raise our BREWING A BETTER WORLD AMBITION towards 2030

Drive SPEED, AGILITY & EXTERNAL ORIENTATION in our organisation

HEINEKEN is first and foremost a growth company

Our 5 pillar growth strategy has consumers and customers at its core

Footprint

Portfolio

Route to consumerCommercial executionResource allocation

Strengthen and optimise our global footprint to maintain our growth advantage

2019

Colombia

2016	Philippines

2019

Ecuador

2014

Ethiopia

2015

Myanmar

2020

Peru

2016	Ivory Coast

2017	Mozambique

2021

Australia

Markets with #1 or #2 positions HEINEKEN and JV partnersOther marketsWhite spacesGreenfield / acquisition market entry

Strengthen our #1 and #2 positions

Greenfield expansion into new

growth markets

Resolve value dilutive

operations

Amplify our strong premium position

Heineken®

International brands

Local premium champions

Expand our portfolio and innovate to better serve consumers

Make 0.0% beer available everywhere, alwaysExpand beer to new consumer needs & occasionsMove beyond beer to serve consumers better

Become the best-connected brewer

Strengthening our Route to Consumer, digitally enabled

Distributors / Wholesalers

Channels

Consumers

HEINEKEN growth algorithm

We see a path to continuous productivity improvements

Building one company-wide productivity management system

Continuous renewal of global and local initiative funnel

Embedded in performance management Cross-OpCo learning and benchmarking

Starting with €2bn in gross savings initiatives

Mitigating cumulative inflation and transactional FXRe-investing in growth:

Restoring Marketing & Sales spend levels

Front-loading investments in Digital & TechnologyGearing for operating leverage when top-line recovers

Three key productivity areas to deliver the €2bn gross savings

Three year programme: implemented over 2021-2023

Organisational redesign

Total cost to achieve: ~€500m OPEX and ~€400m CAPEX

• 1. Excluding savings on other fixed costs (e.g. travel, infrastructure)

• 2. In 2020 restructuring costs amounted to €331 million, mainly related to this programme

COGS efficiency

Commercial effectiveness

Recover operating margin by 2023 and gear for operating leverage beyond

Operating Margin 2019

Operating Margin 2020

Topline Growth

COVID recovery

Gradual on-trade recovery

Accelerated premiumisation

Cumulative inflation

Includes transactional FX

Productivity Savings1

€2bn gross savings

Reinvestments

Restore Marketing & Sales spend levels

Front-load D&T investments

Operating Margin 2023

1.

Excludes 2020 cost mitigations

HEINEKEN growth algorithm

Restore and sharpen CONSUMER & CUSTOMER FACING INVESTMENTS

Frontload DIGITAL & TECHNOLOGY DISCIPLINED use of CAPITAL

Accelerate our investments and make them work harder

Marketing & Sales

Restore 2019 spend % by 2023

Fully reinvest commercial productivity gains

Digital & Technology

Front-load investments to accelerate transformation & build a future-proof HEINEKEN

Sharper and more deliberate marketing and sales spend allocation

Optimise spend within OpCos

1.

Marketing & sales spend as % of revenue

Focus spend between OpCos

Disciplined use of capital

1 Improve operating capital efficiency and cash flow conversion

• 2 Rigorous financial discipline towards investments

• 3 Committed to Net Debt to EBITDA ratio <2.5

• 4 Sustain healthy dividend pay-out of 30-40% of Net Profit (beia)

HEINEKEN growth algorithm

LAUNCH OF S&R 2030 ambition later in 2021

LEVERAGE OUR PEOPLE STRENGTHS to evolve our CULTURE, CAPABILITIES and

Superior growthOPERATING MODEL

Sustainability & Responsibility focus areas in the next decade

Launch of S&R 2030 ambition and programme later in 2021

Environmental sustainability

Responsible consumption

Raise the bar on our people strategy

Strengthen culture

Boost capability buildingEnhance OpCo centric model

"Disciplined entrepreneurship": getting the balance right

Framework

Alignment

Focus

Common process

Internally collaborative

Externally competitive

Freedom

Empowerment

Explore

Local relevance

Renewed Executive Team

Dolf van den BrinkChief Executive Officer & Chairman of the Executive BoardLaurence DebrouxChief Financial Officer & Member of the Executive Board

ET member since: April 2018 Years in company: 23

ET member since: April 2015 Years in company: 6

Marc BusainPresident Americas

ET member since: July 2015 Years in company: 25

Roland PirmezPresident AMEE

ET member since: July 2015 Years in company: 26

James ThompsonChief Commercial Officer

ET member from: March 2021 Years in company: -

Søren HaghPresident Europe

ET member since: June 2020 Years in company: 7

Stacey Tank

Chief Corporate Affairs & Transformation Officer

ET member since: June 2020 Years in company: 41

Magne Setnes

Chief Supply Chain Officer ET member since: May 2020 Years in company: 20

Jacco van der LindenPresident Asia Pacific

ET member since: June 2020 Years in company: 21

Yolanda TalamoChief People Officer

ET member since: January 2021 Years in company: 4

Ronald den Elzen

Chief Digital & Technology Officer ET member since: March 2020 Years in company: 26

1.

Previous experience in HEINEKEN 2012-2015

HEINEKEN growth algorithm

Phasing

Growth

Post pandemic top-line recovery

Pandemic revenue impact

Superior growth

Productivity

Short-term mitigation

€2bn productivity programmeOperating leverage Cost-conscious culture

Investments

Reduce all discretionary spend Selective capex investmentsRestore M&S spend levels Frontload D&T investmentScale brand investment Leverage D&T investment

S&R and People

Health & safety focus New team

Launch next level S&R programme Build spiky capabilities

S&R delivery Networked organisation

Expand our aspiration

Our renewed approach to long-term value creation and goals

Q&A