Procurement at HEINEKEN Public Procurement Conference Athens Goebel

Procurement at HEINEKEN Public Procurement Conference Athens Goebel | 20 June 2014 HEINEKEN Global Procurement

Questions to address today ♦ What are the characteristics of the HEINEKEN company and its operating environment? 2 ♦ How is procurement in HEINEKEN organised? ♦ How does HEINEKEN manage market intelligence? ♦ How does procurement deliver a competitive advantage? ♦ What measures have been put in place to prevent corruption? ♦ How are procurement competencies managed and people trained?

HEINEKEN is a proud, independent and responsible global brewer , operating in a highly competitive truly global market The world’s most international brewer § § No 1 in Europe and No 3 in the world by volume Operations in over 70 countries globally Brewing great beers, building great brands Committed to surprising and exciting consumers everywhere Long and proud history and heritage 3

HEINEKEN Global Procurement has the mandate to buy on behalf of HEINEKEN Op. Co’s worldwide Raw Materials: - Malt/Barley - Hops - Adjuncts - Compounds & Flavours Packaging Materials: - Glass - Metal - Plastic - Paper Supply Chain: - Energy - Brewery Materials - Investments - Transportation - Warehousing - Prod. Services Commerce: - Marketing Services - Merchandising Materials Business Services - HR - ICT - Professional Services - Facility Services 4

HEINEKEN Global Procurement Organisation Structure GIS HGP Director HR Legal Finance Director Risk Management Director Procurement Transformation Director Procurement Services Director (AME) Op. Co PSM Procurement Services Director (Americas) Op. Co PSM Procurement Services Director (CEE) Op. Co PSM Local buyer PSM = Procurement Services Manager 5 Procurement Services Director (WER) Local ctr mgr Op. Co PSM Raw Materials Category Director Packing Materials Category Director Supply Chain Category Director Business Services Category Director Commerce Category Director Malt Glass Energy HR Agencies, Media, Research Hops Metal Investment Projects ICT Merchandise Mats and Equipment Auxiliary Paper Brewing Materials and Services Professional and Facility Services Adjuncts Plastic and Kegs Logistics

Overview of the Procurement process CENTRAL OPPORTUNITY ASSESSMENT SOURCE TO PAY SOURCING Category Management 6 LOCAL CONTRACT MANAGEMENT PURCHASE TO PAY Procurement Services Primary Focus Sourcing Strategy Supplier Selection Contracting Management of Contract Transactional process (P 2 P) Supplier Management Execution Example Roles Category Director Category Leader Category Buyer Procurement Services Director Procurement Services Manager Contract Manager Purpose Create multi-year competitive advantage for the Company through global leadership of the category Maximise value from sourcing strategies and contracts by optimisation of procurement services Empowerment Contract spend responsibility: Can commit volumes and terms Engages with budget holders in projects & strategies

Procurement creating commercial advantage • Conduct product value analysis and engineering • Substitute materials • Pursue system buying alternatives • Optimise life cycle costs • Consolidate # suppliers • Redistribute volumes among suppliers • Combine volumes from different categories Leveraging • Renegotiate prices HEINEKEN scale • Compare “total” costs • Model “should-costs” • Volume price points & rebates • Expand geographic supply base • Profit from global supply/ demand imbalances Price focus Exploit buying power 7 Cost focus Create an advantage Specification Improvement Strategic Sourcing Star Relationship Restructuring Joint Process Improvement • Value stream mapping • Share productivity gains • Integrate logistics • Support supplier operations improvement • Process and price compliance • Develop new suppliers • Employ strategic alliances / partnering • Examine strategic make vs buy • Develop integrated supply chain • Unbundling pricing • Hedging and risk management • Supply Chain Finance

HEINEKEN Values and Behaviours embedded in Code of Business Conduct HEINEKEN has policies and processes in place to prevent and expose potential corruption, including: v v v 8 Code of Business Conduct with rules covering: v Personal integrity v Commercial integrity, including: v HEINEKEN policy on Fair Competition v HEINEKEN policy on Bribery and improper advantages v Company integrity Globally available E-learning tool (Compulsory) Trusted Representatives in each country that Heineken operate Proseco, Heineken’s internal Security experts to investigate reported activities of fraudulent, illegal, or suspicious behavior. Compliance with the Code of Business Conduct is audited regularly Business Conduct creates competitive advantage by becoming a more attractive and ‘safe’ business partner

Supplier Governance Roadmap Signing Supplier Risk Analyses Supplier Monitoring Audit Plan CSR assessment Supplier definition + Non compliance procedure + Internal risk assessment + Supporting evidence + 360° Scan + Corrective actions plan Audit plan for CSR assessment high risk suppliers + Pro-active corrective actions plans and follow-up Storage and monitor in CLM 9 Identification of high, medium and low risk suppliers Supplier score card

HEINEKEN Procurement Competencies ♦ The HGP competencies are intended to simply and clearly explain the core processes within the function ♦ They are inter-related and should ensure that HGP have the right capability to deliver its goals ♦ They focus on knowledge, skills and behaviors ♦ The HGP competencies are designed to support the practical application by line managers and employees: ■ Competency areas clearly linked to the process ■ Levels enable the line manager and the employee to have a meaningful career development conversation ■ Manageable number of competency areas to provide focus and understanding ♦ 10 A full day (external) assessment is part of recruitment process

HEINEKEN Procurement Competencies ♦ ♦ ♦ ♦ 11 Knowledge, skills and behaviour requirements defined for each competency Levels defined Part of annual review process Drives professionalisation of procurement function Budget secured and allocated to depatments Training programs provided Heineken Purchasing Course Procurement Academy