E-Malt.com News article: 2282

Belgian brewing giant, Interbrew, announced on March 3 it realized solid organic growth of volumes and operating profit in 2003. The company posted organic EBITDA growth +7.2%, organic EBIT growth +11.1%, driven by organic volume growth +6.3% and organic net turnover growth +6.5%. Interbrew announced strong global brand performance, led by Stella Artois® with + 8.1% volume growth worldwide and by Beck’s®, with +5.7% volume growth worldwide.

Interbrew’s CEO, John Brock, commented, ”Interbrew’s commitment in 2003 was to focus on and drive operational performance. With organic volume growth three times the industry average, and share up in most markets in which it competes, Interbrew has delivered on that commitment, and looks forward to a successful 2004.”

The reported translation impact from currencies on net after tax profit in 2003 amounted to -63m euro; on operating profit it amounted to -75m euro, Interbrew reported. The main currencies with negative translation impact on net turnover were the pound sterling (-132m euro), the U.S. dollar (-132m euro), the Russian ruble (-79m euro), the Canadian dollar (-98m euro) and the Korean won (-67m euro).

Due to the combination of strong brands and good summer weather in Western Europe, Interbrew realized organic volume growth of +3.4%. The company also delivered EBITDA of +7.6%, and EBIT of +13.2%, illustrating the positive effects of top-line growth, combined with cost containment. Interbrew’s profit and market-share growth was driven, in part, by strong mainstream brands such as Jupiler® in Belgium, whose volume growth of +2.0% ensured the company’s market leadership, and Hasseröder® in Germany.

The Beck’s® family of brands grew by +11.5% in Germany, aided by the performance of Beck’s Gold®, which was voted the country’s number one new brand in 2003. Beck’s ® is positioned as a premium brand in its home market, and, despite the impact of the deposit law enacted last year, it remains one of the fastest-growing brands, contributing to the 30 basis-point increase in Interbrew’s share of the German market.

Stella Artois® continued its strong performance in the UK premium segment, with volume growth of +12.1%. The growth of the brand contributed to the market share increase of +2.7%, up to 19.3%. Castlemaine XXXX® achieved its target of 50% replacement of lost Heineken Cold Filtered volumes and contributed 1.5% to Interbrew’s market-share growth. In Scotland, Tennent’s consolidated its leadership position, growing its market share to 42.3%.

The performance in Central and Eastern Europe was outstanding, with organic volume growth up +20.8%, organic net turnover up +31.1%, and organic EBITDA and EBIT up +33.3% and +62.7%, respectively. Growth was driven in both regions by initiatives such as the introduction of new packaging and brand extensions, which contributed 4.5m hectoliters of additional volumes. Interbrew’s exclusive, barrier-enhanced, monolayer, PET packaging—Q Pack® in Central Europe and Pivopak® in Eastern Europe—contributed 900,000 hectoliters to these additional volumes. Interbrew’s organic profit performance is a combination of effective cost management and the significant turnaround of business in this zone.

In the past, the effect of currency translation in Russia was embedded in Interbrew’s organic growth figures. The country has moved to being a ruble-reporting country and the translational currency effect of -15m euro at the EBITDA level, and -6m euro at the EBIT level is now excluded from the company’s organic growth figures.

In Central Europe, volume growth was up +12.3%. Kamenitza®, which became the leading brand in Bulgaria, was up +59.5%, and Bergenbier®, up +31.0%, became the leading brand in Romania. In the Czech Republic, Staropramen® was up +6.8%.

In Eastern Europe, Interbrew grew volume by +26.2%. The premium brand in Russia, Sibirskaya Korona®, was up +50.3%, while the core brand, Klinskoe®, was up +13.5%; both brands are now being sold in Pivopak®. Overall, beer packaged in Pivopak® now represents 7.2% of Interbrew’s total volume sold in the country. Stella Artois® grew by +114%, and Staropramen® by +46.1%. Market share in Russia reached a record level of 14.5% in 2003, confirming that Interbrew’s business has more than regained its lost market share.

In Ukraine, Interbrew strengthened its market leadership position, led by the growth of Chernigivske®, up +44%. Three years ago, Chernigivske® had only a 7.5% market share; in 2003 it reached a 16.8% market share, and during this three-year period it added to its base an average of nearly 500,000 hectoliters per year.

The Americas zone of Interbrew recorded volume down by -0.6%, while net turnover growth was +2.7%, EBITDA -2.2%, and EBIT -4.4%. The decline in volume is due to a combination of the weak performance of certain brands and the slowing growth rate of the import segment in the U.S. Profitability overall was also impacted by the strike at the Montreal brewery during the summer, which cost Interbrew 16m euro, post tax.

In Canada, Interbrew was able to maintain its market share despite the strike. Market dynamics continue to favor the premium segment, where Interbrew has a strong representation, realizing an organic volume growth of +30.7%.

Overall, for Interbrew’s business in the U.S., shipments were down -4.7%, while depletions were down by -1.1%. This difference is explained by wholesalers’ destocking which occurred extensively in 2003.

Two special situations in the U.S. developed for Interbrew last year. In July, the company took ownership of Bass® Ale, and as a result, Interbrew views the second half of the year as a period of transition. Interbrew looks forward to a better performance in 2004 when the company will have control of the brand for the full year. In 2003, Bass® experienced a decline in depletions of -14.2%.

For Beck’s®, as for Bass®, 2003 can also be considered a transitional year: a new management structure was put in place and the brand was repositioned, through the launch of the “Life Beckons” advertising campaign. Beck’s® depletions were down -7.9%, slowly recovering from the double-digit decline in 2002.

Excluding these two brands, Interbrew’s U.S. import depletions were up +3%. Since depletion is a measure of actual consumer demand, and excludes the impact of wholesaler stock levels, Interbrew anticipates a more positive growth trend for its portfolio in the future.

In Asia Pacific volume decreased by -2.3%, due to the -3.4% decline of the South Korean market, but net turnover was up +2.3%. EBITDA and EBIT increased by +5.4% and +26.1%, respectively.

In South Korea, market share has stabilized since the relaunch of OB®, and the +6% price increase taken in February of 2003 has led to margin improvement. The relaunch in April introduced a completely new go-to-market approach, followed by the introduction of Q Pack®, the first instance of barrier-enhanced, monolayer, PET packaging in the Asia-Pacific region. Q Pack®’s impact on OB®’s volume growth is already being felt.

The contribution of China to this region will increase in 2004, but in 2003 it still played a minor role, with positive impact on volume and EBIT from the inclusion of K.K. Group.


05 March, 2004