Our
year
2021

2021 was
the year we
emerged from the crisis stronger.

Peer Swinkels,
Chief Executive Officer
Peer Swinkels,<br> Chief Executive Officer
Emerging stronger from the crisis. That was always our motto as soon as the pandemic revealed itself. We can now conclude that we have succeeded in this. In terms of profitability, the company is almost back to its pre-COVID-19 level, while we have also managed to strengthen our financial position. Despite an extremely challenging year, we were also able to achieve growth in our sales. In this respect, a great compliment to our staff is in order here. With our way of working together, acting flexibly and persistently looking ahead, we’ve managed to shape our winning family culture.

In addition to the pandemic, which once again took hold in the world, we faced several other challenges of great magnitude. A civil war in Ethiopia, hefty cost increases and inflation as well as shortages of raw and other materials sometimes demanded the utmost of our operation. While working hard out of sheer necessity to improve our balance sheet and profitability, we kept looking ahead. We further expanded our strategy, made new investments and were able to take another big step in the area of circularity. 

“Looking ahead” is therefore our theme for this annual report. 

Read more about various topics in 2021 below.

  • Netherlands hit hard by COVID-19

    Challenges

    Netherlands hit hard by COVID-19
  • Netherlands hit hard by COVID-19

    The Netherlands began and ended the year with a lockdown. During seven of the twelve months, the on-trade sector maintained either limited opening hours or was closed altogether. Only in the Netherlands does our company have its own beverage wholesaler, enabling us to largely distribute beverages via our own logistics. This comes with high fixed charges, as the cost of beverages in the on-trade sector is largely determined by distribution costs. In addition, we are also active in the Netherlands with privately-owned real estate and are often involved as a financier in the on-trade sector. We were hit hard in all four areas with substantial consequences. At the same time, we were already seeing positive effects of the cost measures taken in 2020, across the company, from procurement to sales and maintenance. Especially in the first quarter, we had to pull out all the stops. From the summer onwards, when the country reopened, the results turned for the better.

  • Other countries and the pandemic

    Challenges

    Other countries and the pandemic
  • Other countries and the pandemic

    As is the case in the Netherlands, we have many on-trade activities in Belgium. There, too, the closing of the sector – though shorter in duration – had a major impact. Thanks to the solid structure of the Belgian government’s support package, we were able to limit the impact of COVID-19 on our Belgian business. In other European countries, such as France and Italy, the main sales channel is retail. Here, supermarkets actually benefited from the on-trade shutdown which is reflected in the local results.

    We also struggled with the effects of COVID-19 in all the other countries in which we operate. The arrival of the omicron variant of COVID-19 at the end of the year was an additional blow and a great disappointment. Many events were again cancelled and opening hours for the on-trade sector restricted, with all the consequences this had for the work of our colleagues and the turnover.

  • Ethiopia at war

    Challenges

    Ethiopia at war
  • Ethiopia at war

    The tense political situation in Ethiopia, where our brewery Habesha is located, made us very concerned about the local population and our staff. In support of them and their families, we compiled a plan for repatriation or evacuation. In the end, the attacking troops came to within sixty kilometres of the brewery preventing any direct hits. Nevertheless, the great unrest in the north, among other places, made it virtually impossible to distribute our beer in that area. Furthermore, the country is struggling with the devaluation of the local currency.

  • Raw materials market disrupted

    Challenges

    Raw materials market disrupted
  • Raw materials market disrupted

    The disruptive impact of COVID-19 on the market for raw and other materials, as well as transportation, created a great deal of uncertainty. Shortages occurred on a regular basis. Some suppliers could not keep up with demand and were experiencing delivery problems. Thanks to the efforts of our procurement and supply chain staff, the effect on our production was limited. Added to this there were sharp price increases in materials, energy and transport, among other things, along with global inflation.

  • Continue building on the path taken

    Approach

    Continue building on the path taken
  • Continue building on the path taken

    Despite all these and other challenges, 2021 was the year in which we continued to build on the necessary measures of 2020. Taking care of the health of our employees obviously remained our top priority. The Crisis Management Team, which we established in 2020, remained active throughout the year. We found that the lessons we learned in 2020 made us more agile in implementing pandemic measures.

    The strategy house, which we introduced in 2020, was further expanded. We “looked under the company’s bonnet”, searching for great opportunities and improvement potential for our malt and beer operations. We translated these into programmes to be used in the coming years for investments in that which has the greatest potential. Geert: ‘It has given the organisation a lot of energy to look at the long term together and work with each other in building an even stronger company.’

    The foundation of our strategy house remained firmly in place. The purpose we formulated last year proved to be an appropriate compass for important decisions in 2021. “Seeing the world as our family” defines the way we work across the company and how we interact with our environment, whether it is about the recruitment of new employees or a go/no go for a major investment.

    We achieved great results on the various pillars of our strategy house, such as the digital transformation to the Intelligent Brewery, the winning family culture and circularity:

    • Intelligent Brewery; the start of putting several segments of the system to use was very promising. In addition, we worked with as much effort as possible on our new SAP S/4HANA Cloud platform going live in 2022.
    • Winning family culture; the way we work as a family business, our connectedness, took on a new dimension during the pandemic. Our staff demonstrated admirable flexibility. They were loyal, even when their jobs didn’t allow for keeping a safe distance from others. We worked hard on keeping teams connected and welcoming new employees while bundling our experiences in a new way of working, for which we introduced a new policy.
    • Circularity; despite the challenging circumstances, we continued to work steadily towards our circularity ambition. We are proud to have achieved the circularity target for 2021. Our business operations are already 56% circular.

    Steps have been taken on all segments of the Swinkels Circularity Index. One of the highlights is the kick-off of the development of the world’s first emission-free malting plant in Eemshaven. Developments in knowledge of circularity made it necessary to revalidate and refine our Swinkels Circularity Index. With input from our stakeholders, we dealt with this quite energetically.

  • Market and portfolio

    Approach

    Market and portfolio
  • Market and portfolio

    The beer market grew again in 2021, which is reflected in our results. Although traditionally known for the Bavaria brand, our company currently boasts a very broad portfolio. In 2021, we expanded this portfolio to include Rodenbach Red Tripel, Estaminet Refined Lager and Hollandia Light, as well as non-alcoholic and low-alcohol alternatives such as La Trappe Nillis and Cornet Alcohol-free. We are proud of the acquisition of Uiltje Brewing Company, a creative brand with great potential in the modern craft segment. This is a distinctive segment for which we still see a lot of opportunities, both in retail and the on-trade sector. A great example is the availability of Uiltje Brewing Company’s freshly canned beers at top restaurant De Librije. Despite the lockdowns, our focus in 2021 was on the on-trade and events. These are promising channels to further introduce consumers to our brands, as shown by growth figures and market shares. We have also further expanded the direct approach to consumers through investments and a feat of professionalisation in E-commerce. Consumers are increasingly able to find our platforms which is a great addition to our multi-channel approach.

  • Flexible and financially sound

    Results

    Flexible and financially sound
  • Flexible and financially sound

    The company has become more agile. We have been better able to adapt immediately, to take cost measures, but also to restart the business after a lockdown that put enormous pressure on our organisation.

    That we have managed to structurally lower costs in the past two years will enable growth in profitability in the future. The 2021 cash measures improved our working capital. This has created more room to invest in major projects such as the Intelligent Brewery and the Holland Malt’s emission-free malting plant.

    We were able to meet our financial targets in 2021, which significantly increased the profit compared to the previous year. The company’s financial situation has been fortified and is very healthy, which is a wonderful starting point for our growth strategy.

    The turbulence of the past two years is unique in the history of our company. We are extremely proud and grateful that, thanks to the flexibility and dedication of all our employees, we have been able to navigate this ordeal so successfully. An accomplishment of stature that also inspires great confidence for the future.

  • As a family business, we work together based on solidarity.

    Geert van Iwaarden,
    Chief Financial Officer
    Geert van Iwaarden, <br> Chief Financial Officer

Looking to the future

We are a strong company that moves towards the future on the basis of a very healthy financial foundation. We have learned lessons and created success stories on which to build further. There is a lot of confidence in our breweries and our strong brands. Life is also looking brighter for our staff and brewery in Debre Birhan now that the political situation in Ethiopia has calmed down. 

image

We expect
that 2022
will be another year of recovery.

Due to the uncertainty surrounding COVID-19, the war situation in the Ukraine and the increased inflation, we do expect 2022 to be a challenging year. In this respect we as well are dependent on global developments and government decisions.

  • The Intelligent Brewery

    The Intelligent Brewery
  • The Intelligent Brewery

    The year 2022 will be a year of importance for our major Intelligent Brewery programme that we have been going all-out on for several years now. In 2022, the go live is scheduled for almost the entire Lieshout location, both the head office and the production locations. Digital dashboards with continuously updated quality information are going to make life easier for us where making the right choices is concerned. Within a few years, we will be working in exactly this same way worldwide. From then on, interchangeable data will allow us to better utilise the scale in our business. The implementation of the Intelligent Brewery programme will be a major efficiency improvement and will enable us to provide even better service to our customers.

  • Circularity

    Circularity
  • Circularity

    Our ambition to become fully circular has not changed. The Swinkels Circularity Index serves as a compass for this and we are pleased with the positive feedback received from stakeholders. However, we do see that circularity is still a fairly young science and is therefore much in flux. We must constantly assess whether our way of measuring and weighing is still in line with the latest developments. An analysis of the model in collaboration with stakeholders has led to some optimisations in the weighing for 2022 and beyond. Starting in 2022, we will also implement the systematics of SBTi, Science Based Targets initiative, and roll out a climate strategy as part of our circularity ambition. The emission-free malting plant in Eemshaven will make a major contribution to our SCI score on the energy segment. This promising development will also require a substantial investment in the coming years, but is of great value to us and to Holland Malt’s customers.

  • Winning family culture

    Winning family culture
  • Winning family culture

    We will launch our new way of working in 2022. All employees with functions that are not workstation bound will move on to a hybrid way of working; alternating between office-based and working remotely. For employees with functions that are workstation bound, we will look at how to optimise that workstation to make working there as pleasant, safe and effective as possible. The coming period will be a period of experimentation and experiencing what works and what doesn’t work for our company. We will support employees in this new way of working with new tools, such as an app to reserve a workstation. Working less location-based will also create new connections and interaction amongst employees.

  • Focus on growth

    Focus on growth
  • Focus on growth

    In our new strategic plan, we have made choices aimed at growth. Among other things, we have defined opportunities in increasing the return on investments. We are more explicitly opting for investments needed to remain successful in the long term, with the ultimate goal of passing on an even more beautiful organisation to future generations. In addition to investments in machines and buildings, our investments will be aimed at acquisitions, the construction of new breweries and malting plants, and the further expansion of existing business units. Existing investments in, for example, circularity and the Intelligent Brewery run parallel to this. We expect to see an effect of all these investments in the coming years in the form of a further growth in results. 

One strategy, three divisions and dozens of challenges

The effects of the pandemic were certainly still being felt, more so in some countries than others. Yet overall, 2021 was primarily a year of a worldwide restart. A direct result being issues in the supply chain. The disruption of container shipping created uncertainty about the availability of materials such as metal, wood and crown caps. The huge inflation rate makes it quite a challenge to maintain the balance between keeping our products attractively priced, and responsibly absorbing the additional costs due to increased purchase prices of raw and other materials. 

We further detailed the strategy house, which helps us make the family business future-proof, with a five-year strategy for both the holding company and the three divisions. With a focus on the increase of returns, we are reinvigorating the core of our business, developing new and strengthening existing markets, and dedicating ourselves even more to developing our beer and malt business.

  • Swinkels Family Brewers
    Entrepreneurship in times of crisis
  • Swinkels Family Brewers

    Entrepreneurship in times of crisis

    The Swinkels Family Brewers division consists of several business units. The differences between these business units were quite substantial in 2021, also because each country had a different COVID-19 approach. Results in the Netherlands and Belgium again suffered from lockdowns in the on-trade sector. As we have a strong presence in the on-trade of these countries, the impact of a shutdown was significant. Fortunately, we also saw recovery; in Belgium, sales were back to normal within a short time. In the Netherlands, we faced a second lockdown at the end of 2021 which put pressure on the results.

    In Belgium, Cornet developed exceptionally well, making it one of our fastest growing brands. In 2021, we introduced Cornet Alcohol-free and Cornet Spirit, among others, but see many more opportunities for this brand.

    In Southern Europe, 8.6 scored greatly thanks to our strong retail presence in these countries. As the on-trade sector in these countries makes for an interesting market as well, we see great potential for our beer brands.

    Bavaria Malt, thanks in part to successful campaigns and the introduction of Bavaria Malt Cola, showed significant growth in Africa and the Middle East.

  • Holland Malt
    Strategic choices paying off
  • Holland Malt

    Strategic choices paying off

    Holland Malt achieved good results in 2021, as it did in 2020. With the malt volumes having been scaled up further the capacity is now fully utilised. This despite the pressure on the beer market. Returns were also positive and profits continued to grow.

    Holland Malt is very competitive in all areas of the malt business, shown by a benchmark in 2021. The company is well positioned. Its strategic water-side location makes for an excellent position for export and import flows. Moreover, its scale of operation enables the cost-effective production of a quality offering. The division appears to be able to cope with difficult market conditions. The result is satisfactory and again shows potential for growth.

    The work on differentiation in terms of sustainability was further expanded in 2021. At the end of 2021, the go-ahead was given for the development of the first emission-free malting plant in Eemshaven. This puts us at the forefront of the industry in terms of sustainability and the reuse of energy. Due to construction activities, production at Eemshaven may have to be temporarily halted in 2022, which may have a small negative impact on the result.
    The result of the sustainable development will be visible from 2024 onwards.

  • Habesha
    Great challenges
  • Habesha

    Great challenges

    For our Ethiopian brewery, 2021 proved to be an extremely challenging year. However, given the circumstances the results can be referred to as encouraging. Volumes sold are slightly higher than those in 2020 and profit margins have been maintained. And this despite three exceptional circumstances; a substantial devaluation of the local currency, the Ethiopian birr, the impact of COVID-19 and a major armed conflict throughout the country.

    The previous period of unrest in Tigray, north-eastern Ethiopia, had already led to sales becoming virtually impossible in that part of the country. In 2021, the threat developed that this would spread to the area where the brewery is located. Measures were taken immediately to ensure the safety of our employees and their families. Fortunately, the riots did not reach the brewery in the end. Against the backdrop of these challenges, Habesha still managed to deliver a fine result. There was even room for the introduction of draught beer. This is a segment, especially in the capital Addis Ababa, of which we have high expectations.