Good morning, everyone, and welcome to the Heineken 2019 full year results call. My name is Seth, and I'll be the Operator for your call today. If you'd like to ask a question at the end of the presentation, you may register at any time by pressing star one on your telephone keypad. I will now hand over to the Heineken Management and Investor Relations team to begin the call.
Good morning, everyone, and thank you for joining us today for our 2019 full-year results conference call. I'm joined by Jean-François van Boxmeer, our CEO, and Laurence Debroux, our CFO, for today's call. Following some prepared remarks on the results, we will be happy to take your questions. With that, I would like to hand the call over to Jean-François.
Thank you, Federico, and good morning, everyone. I know that you might have some questions about the press release of yesterday. For now, I'd like to concentrate on our full-year 2019 earnings results. Starting immediately on slide two, we delivered another year of superior top-line growth with continued strong performance in the second half. Organic net revenue beia was up 5.6%. Growth was well-balanced, with beer volume up 3.1% and net revenue beia per hectoliter up 3.3%, due to robust pricing and premiumization in all regions. The Heineken brand growth accelerated to 8.3%, the best performance in a decade. The growth was across many geographies, with more than 40 markets delivering double-digit growth. We closed the year with an operating profit beia growth of 3.9% and an operating profit beia margin of 16.8%, down 12 basis points.
In the context of increased input costs, we have continued working on the efficiency of our operations while steadily investing behind our brands, our sustainability agenda, and our digital transformation. Net profit beia increased 4.3% organically, slightly ahead of operating profit beia growth, as lower financing costs partially offset higher taxes. Diluted EPS beia was EUR 4.38 per share, an increase of 5.5%, driven by net profit beia and a positive benefit from currency translation for once. Looking ahead to 2020 and barring major negative macroeconomic and political developments, we expect our operating profit beia to grow by mid-single digits on an organic basis. Let me turn to slide three, where you can see an overview of our performance with organic net revenue beia growth in all regions and double-digit growth in Asia Pacific.
Price mix on a constant geographic basis was up 3.4%, driven by share increases and premiumization across all regions. Starting with Africa, Middle East, and Eastern Europe. Consolidated beer volume grew 4.6% organically, price mix was up 2.9% on a constant geographic basis. The premium portfolio increased double digits, with strong performance of Russia, South Africa, Nigeria, and Ethiopia. Organic net revenue growth was up 8.9%, with Nigeria flat despite an increase in excise duties. Regional operating profit beia was stable as the growth in South Africa, Russia, the DRC, Egypt, and Ethiopia was offset by declines in Nigeria and Ivory Coast. In the Americas, consolidated beer volume was up 2.6% organically, following a strong fourth quarter with 5.2% growth. Price mix on a constant geographic basis was strong at 7.1%, mainly driven by Brazil, with growth in the mid-teens due to premiumization and pricing.
In Mexico, pricing was ahead of inflation, and beer volume grew low single digits, with a double-digit growth of the premium portfolio led by Heineken, the launch of Heineken 0.0 and the successful rollout of Amstel Ultra. The impact of the OXXO contract renewal continued in line with our expectations, and additional locations have begun operating under the new terms from January 2020. In Brazil, the Heineken brands, Amstel, and Devassa grew strong double digits, whilst the economy portfolio declined high single digits following two price increases in the year. In the U.S., beer volume declined mid-single digits. The Heineken brand was slightly down, including the benefit from the introduction of Heineken 0.0. Operating profit beia for the Americas was up 4.6% organically, with growth in Mexico and Brazil was partially offset by the U.S.
In the Asia Pacific, consolidated beer volume grew 11.8%, with double-digit growth in Vietnam, Cambodia, Myanmar, Korea, and Japan. Price mix was up 0.8% on a constant geographic basis. In Vietnam, we grew strongly on the back of favorable beer market conditions and our portfolio expansion strategy driven by Tiger, Larue, and Heineken, supplemented by the launch of Heineken Silver. The region delivered organic operating beia growth of 12.1%, driven by Vietnam and Cambodia. In Europe, consolidated beer volume was marginally lower on an organic basis, with the region back to growth in the second half. The premium and low and no alcohol portfolios grew mid-single digit, with Heineken 0.0 growing mid-double digits. Price mix was up 1.8% on a constant geographic basis, driven by the growth of Heineken, Desperados, Birra Moretti, local premium brands, and craft.
In the U.K., beer volume increased low single digit, driven by the premium portfolio, while cider declined high single digit, largely due to the challenging comparable of last year when we had great weather and the Football World Cup. In France, beer volume declined slightly but outperformed the market, driven by the growth of our craft and premium portfolio. In Italy, beer volume was up mid-single digit, driven by Ichnusa and Messina. Spain declined slightly, with our craft and cider portfolios growing double digits. In Poland, beer volume was down high single digit, mainly driven by our economy portfolio. In the Netherlands, beer volume declined mid-single digit due to a challenging comparable versus the good summer of last year. Regional operating profit beia decreased 4.8% organically impacted by a significant step up in investments to upgrade our technology and digital platforms in region. Now turning to slide four.
The Heineken brand accelerated its growth to 8.3% to deliver its best growth in more than a decade. Growth came from many markets, led by double-digit growth in Brazil, Mexico, South Africa, Nigeria, the U.K., Romania, and Germany. Brazil is now the largest market for the Heineken brand globally, and with the addition of the U.K. and Nigeria, 12 markets now sell more than 1 billion hectoliters of the brand. The successful rollout of Heineken 0.0 continues and is now available in 57 markets. The brand will be the official beer partner of the UEFA Euro 2020 and has extended its partnership with the Champions League until 2024. Turning to slide five, I would like to share some highlights on other drivers of our strong top-line growth.
Our portfolio of international brands grew high single-digit, driven by the double-digit growth of Tiger in Vietnam and Cambodia and Amstel in Brazil, Mexico, Russia, South Africa, and the U.K. Our craft portfolio grew mid-single-digit, driven by double-digit growth in Europe, more than offsetting lower volume in the Americas. Lagunitas is now available in 35 markets, with local production in the Netherlands and Brazil. Volume of our low and no alcohol portfolio increased high single-digits to 14.1 million hectoliters. The no alcohol portfolio grew double-digits, driven by Heineken 0.0, line extensions of other leading brands, and beer mixes. Cider volume was stable at 5.6 million hectoliters, with double-digit growth outside the U.K., especially in South Africa and Russia. In the U.K., volume declined, as I said earlier, high single-digit. We see encouraging results in new cider markets like Vietnam and Mexico.
Revenue from our proprietary draft systems grew double digits. To date, our countertop draft system is now available in 32 markets. We continue to deploy our e-commerce platforms to digitally connect with our customers. Today, our digital B2B platforms are operational in 17 markets, and Beerwulf, our B2C, business to consumer, platform in Europe, continues to gain scale. Moving now to slide six on sustainability. Brewing a Better World is one of our five strategic priorities. It addresses our commitments to promote health and safety in our operations, protect our water resources, reduce CO2 emissions, source sustainably, advocate responsible consumption, and grow with the communities where we operate. Over the past decade, we have lowered our water usage by almost a third to 3.4 hectolitres of water per hectolitre produced, and 3.1 hectolitres in water-scarce areas in 2019, ahead of our 2020 targets.
In March 2019, we introduced our 2030 water ambition, which is called Every Drop. Next to the continuous improvement in water consumption, we aim to improve the water catchment areas surrounding our production sites. To date, 15 of the 24 of our breweries in water-scarce areas have started water balancing projects, including nature-based solutions like reforestation and also wetland restoration. In 2018, we set out our Drop the C program to reduce CO2 emissions. With an ambitious target to power our production facilities with 70% renewable thermal energy and electricity by 2030. Thermal energy accounts for nearly 80% of total energy consumption in a brewery. We are at the beginning of this journey and reached 19% in 2019. In 2019, we increased our local sourcing percentage of agricultural supplies in Africa to 44%.
Although we made progress, we have much more to do to reach our ambition of 60% in 2020. We're far off. We spend over 10% of Heineken media budgets on "When You Drive, Never Drink," or other responsible consumption awareness campaigns in more than 60 markets. We aim to reduce our plastic use and contribute to increased collection and recycling of plastic where possible. To have the biggest positive impact, we use regional strategies that take into account the maturity of each region, local use of plastic, and the current availability of recycling infrastructure. With that, I am finished, and I will hand over to Laurence, who will talk about the hard numbers. Laurence, over to you.
Thank you, Jean-François. Good morning, everyone. Let's turn now to slide seven and the financial overview of the year. Looking at the net revenue beia of EUR 23.9 billion, organic growth for the year was 5.6%. Revenue per hectoliter beia grew 3.3%, with an underlying price mix effect of 3.4% on a constant geographic basis. Beyond the continued premiumization of the portfolio, we were very intentional in taking price in a year of significant input cost inflation. Operating profit beia grew 3.9% organically. The strong top-line performance was partially offset by the input cost inflation of around 5%, in line with our guidance of mid-single digits, and incremental investment behind our brands and our digital transformation. I will provide more context in the following slide on this.
Operating profit margin beia was slightly down by 12 basis points, driven by the impact of our incremental investment, and as you know, we restated the 2018 numbers for the accounting impact of IAS 37. Net profit beia reached EUR 2.5 billion, up 4.3% organically. Here we had some benefit from lower interest rates, but also a negative impact from higher income taxes. In particular, the Netherlands, where we have a large part of our financing, introduced a limitation on the tax deductibility of interest charges applicable from 2019. The diluted EPS beia ended at EUR 4.38, so 4.9% higher than in 2018. This still includes a dilutive effect of EUR 0.03 from the sale of Heineken N.V. shares to CRE as part of our agreement to join forces in China.
Free operating cash flow amounted to EUR 2.2 billion, pretty much flat versus the previous year, including the one-off positive impact of the first adoption of IFRS 16. Finally, our net debt-to-EBITDA ratio reached 2.6 x. Note that this includes the net investment in China for about EUR 2 billion and the impact of IFRS, which brought alone EUR 1.3 billion of lease liabilities onto the balance sheet. IFRS alone represents an additional 0.1 x in the ratio. As you can see, we're very close to our commitment to stay at or below 2.5x. Looking at slide eight and our net revenue beia of EUR 23.9 billion. Consolidation changes had a negative impact of 0.5% or EUR 119 million. The negative effect of our divestment of China and of the first implementation of IFRS were largely offset by the positive effect from other acquisitions, primarily Danisco in Poland.
Currencies had a positive translational impact last year, increasing net revenue by 1.2% or EUR 278 million. This was mainly attributable to gain in the Mexican peso, the Vietnamese đồng, and the U.S. dollar, partially offset by losses in the Brazilian real and the Haitian gourde. On an organic basis, our top line delivered growth of EUR 1.3 billion or 5.6%. Volume growth was 2.2%, with consolidated year volume up 3.1%. The largest contributors to that growth were Brazil, Vietnam, and Cambodia. Europe was broadly stable as it faced a challenging comparable versus the summer of 2018, where we had great weather and the World Cup. Revenue per hectolitre grew 3.3%, with the underlying price mix on a constant geographic basis at 3.4%. In Asia Pacific, in APAC and AMEE, we implemented robust pricing for the year with the exception of Nigeria.
In Europe, the mix impact came in strong due to the growth of our premium and low and no portfolios. In the Americas, price mix was well-balanced between the growth of premium in Brazil and pricing ahead of inflation in Mexico. Let's now look at the development of the operating profit beia on slide nine. First, consolidation changes, they had a small negative impact of 0.6% or EUR 21 million. Currencies had a positive translational impact, increasing reported operating profit by 2.1% or EUR 80 million, which come from the same currency that saw revenues. The organic growth was 3.9% or EUR 153 million, which pretty much all came in the second half. The acceleration was mostly derived from the factors that we discussed at first half. Input cost is in the second half, increasing around 5% per hectoliter on an organic basis for the full year.
This is in line with the guidance that we gave at the beginning of the year. The increase for the full year had three components, if you wish, each of roughly equal weight. Higher commodity prices from our 2018 hedges, transactional currency effects, quite a lot on Brazil, and also the mix of products. Commodities driving the impact were barley, energy for gas, and aluminum. As for the negative transactional impact, again, it mainly affected Brazil. The phasing of expenses also helped us in H2, and that is true for some of our international sponsorships, as well as for our investments in digital transformation and technology upgrades. In both cases, we had already stepped up our game somewhat in the second half of 2018, and therefore the comparison base was more favorable in H2 than it was in H1.
In addition, during the second half, our margins benefited from a more favorable mix. For instance, in Brazil, our premium and mainstream portfolios markedly outpaced the growth of our lower margin economy brand. The mix also benefited from the acceleration of volume growth in Vietnam, where margins are above group average. Regarding Vietnam, it is also interesting to highlight that in the end, we did not see in 2019 a significant uplift from the earlier test. I move now to the diluted EPS beia on slide 10, EUR 4.38 for 2018, up 4.9% or EUR 0.04. We have here a negative impact of 0.7% or EUR 0.03 from consolidation changes. On the positive side, this impact includes our share of profit from CRB in China between May and October.
On the negative side, there are also some dilutive impacts linked to smaller acquisitions and to the first implementation of IFRS 16, which we are treating as a consolidation change. Currency translation brought a benefit of 2.3% or EUR 0.08. The sale of Heineken share to CRE resulted in dilution of 0.7% or EUR 0.03. Excluding this, our EPS organic growth was 4.3%. Cash flow on slide 11. Free operating cash flow reached EUR 2.2 billion. Of the EUR 811 million increase of cash flow from operations, about EUR 250 million came from the one-off benefit of the implementation of IFRS 16. If I move to working capital, it was basically flat versus 2018. Receivables and inventories moved broadly in line with the increase in our top line and the mix of our operations.
Payables did continue to improve, but less than in 2018, where we saw a strong improvement in our payment terms, particularly in Brazil following the integration of our acquisitions. The average payment terms improved by about 10 days this year, and we believe that they are now pretty much at industry standard. CapEx reached EUR 1.9 billion, which was a little bit below our guidance of slightly above EUR 2 billion and represented 8% of net revenue. Significant investments included capacity expansions in our Vung Tau brewery in Vietnam, in four of our breweries in Brazil to increase our output of premium beer, particularly Heineken, and in Sedibeng in South Africa. It also included a step-up in net investment to refurbish the pub estate in the U.K. Finally, let's go to the outlook for 2020.
In 2020, our strategic focus remains growth-oriented, we anticipate to continue to deliver superior top-line growth through a combination of volume, price, and premiumization. We also anticipate a low single-digit increase of input cost per hectoliter on an organic basis, with the benefit of lower prices in some commodities to be largely offset by transactional currency headwinds and product mix. Note here that today we have hedges for around 70% of our main commodities, that normally gives us a pretty good view. We will also continue with cost management initiatives and productivity improvement to fuel investments behind our brands, innovations, digital transformation, and sustainability agenda. As a result, we currently expect operating profit beia to grow by mid-single digit on an organic basis, barring major negative macroeconomic and political developments.
In particular, it is currently not possible to assess the extent and duration of the impact of the novel coronavirus on the economy and on our business. Finally, let me give you some color on more technical elements of our guidance. We anticipate average interest rate and an average effective tax rate broadly in line with 2019, and CapEx related to property, plant, and equipment of around EUR 2 billion. With that, I would like to hand back to Jean-François for some final remarks before we open the floor to your questions.
I think we can go immediately to the questions.
With that, I'd like to open the floor to your questions.
I think you have.
Is that better?
Yeah. That is a good idea.
Thank you. If you'd like to ask a question, please press star one on your telephone keypad now. If you change your mind and want to remove your question, please press star two. The first question today comes from Trevor Stirling from Bernstein. Please go ahead, Trevor.
Good morning, Jean-François and Laurence. Before I dive into the questions, just wanted to wish you all the best, Jean-François, for the next chapter. Many thanks for all the patient explanations over the last 15 years.
No. Thank you. I will do my best for the last time then.
Thank you, Trevor.
Three questions, please, as ever. The first one, as you reflect on the results and the contribution of countries so far, which countries give you the greatest pleasure? You say that's a really good job, and which countries do you think are still work in progress? The second question, a bit more technical. Laurence, you've highlighted the EUR 37 million incremental IT expenses in Europe. Is that something that we should expect to be ongoing as you roll out the systems and eventually fall out? Or perhaps a little bit of color there would be helpful. Final question, the drink-driving legislation in Vietnam. I appreciate it's very early days. I note that industry volumes were down 4% in the first month. Can you give us any color about how things are working out and how you expect things to evolve?
The first one, we can hold the floor for another hour in giving you color to my favorite ranking, but I don't think that would be very useful. I think you would have three. What is important in business is always that you know what's the future potential of any businesses. You have businesses that you run for kind of a steady, slow growth, and you have others where you have to do a turnaround, and then you have third ones, which are really in the making, in the building. You have all categories of these kind of businesses around the globe, in all geographies, and you have always, somewhere, somehow, countries which are doing more than expected, and you have a few countries who suddenly have a fallout.
I think that has been my experience ever in these 50 years, is that you have to deal with reality. What the strategy behind it is that we have been placing bets on new countries year after year after year, in mature but also in developing markets, and more in developing markets than in mature markets. I think that those who are still in the building and where I watch them very closely is, of course, Brazil in the first place. It's going to be China through CRB. It's going to continue to be India, and a couple of countries in Africa to come because those are markets where we still have a lot of potential ahead of us.
When it comes to European markets, it's more about how can you engineer a steady, slow growth in markets which otherwise are saturated in our categories and which are not fueled by demographic growth intrinsically. That takes, of course, another approach. If we look at the world today, we have covered geographies pretty well, I would say. You have the countries where you need to do a kind of a turnaround, where you had better fortunes in the past and you have to re-engineer another business model, and I think particularly about Nigeria as an example of these. That is just to give a color, but I think for anyone who is at the helm of a portfolio company like us would have to look at these things and place every operation in cycle in the lifetime and run it accordingly.
Overall, you have to continue to engineer the sum of the parts in order to give the profile of growth that we try to do year after year, which is a superior top-line growth and with improving operating results. The latter part is, of course, a bit more volatile. What I would say pleased with is that we can sustain the top-line growth through managing our geographies on the one hand, and also managing our product portfolio, our offerings, and our investment in distribution and in digitalization for making our business grow.
Thank you.
You're welcome.
On your second question, Trevor, yes, EUR 37 million incremental concentrated on ShopeX, which is our technology backbone transformation in Europe. We're going to be delivering the first set of capabilities in that transformation and in that tool in 2020. You should expect that this is going to increase still a bit in 2020. At some point, probably towards 2021, it will level, but you should definitely expect that those expenses are part of the digital transformation of the company as we move on and for the foreseeable future. We're still in a ramp-up phase, and ramp-up, as you could see, was a bit more in the first half than in the second half because your comparison base was different. At some point, that will also level, but another year of increase there. Legislation in Vietnam, you want to cover that?
I think the legislation in Vietnam, on itself, it is a welcome legislation. Of course, we take the view worldwide, When You Drive, Never Drink, you have to be very coherent. We believe that that is the only sustainable policy going forward. That is not a discussion. The impact of it, that we will see. I know that everybody has clung on one article published with a very high number. It seems to me rather at the high side. It would induce that half the population is basically driving in an optimum state of being capable of driving in the cities in Vietnam.
I don't think that kind of number would be reality, but it will have an impact for sure, but it has to be seen over a longer period of time for the simple reason that, A, in January we didn't see anything because we had Tết and we had a very good Tết. You have the unfolding coronavirus, which affects mainly China, but will also have ripple effects in surrounding countries. There also, you can't make any prediction. Bear in mind that Vietnam stays a growth country. You have conjunctural things going up and down and structural things, which is the growth of the market and tougher drink and drive laws that will be enforced, I hope. It should be. That will net out. I keep on pointing out to the fact Vietnam is intrinsically still a growing beer market.
Thank you very much, Jean-François.
Thank you, Trevor.
The next question comes from Edward Mundy at Jefferies. Please go ahead, Edward.
Morning, Jean-François. Morning, Laurence. Three from me. The first, for Laurence. I'm not asking for margin guidance, but are you able to highlight if there are any new initiatives on cost management or productivity improvements relative to, let's say, six or 12 months ago? In your mind, what are the key levers to delivering mid-single-digit organic EBIT growth? The second question is on Western Europe. Do you anticipate a better year there, given more normalized weather comps as well as the European football championships? The third one for Jean-François, as you pass on the baton, putting yourself in Dolf's shoes, what do you see as the biggest opportunity for Heineken over the next decade or so?
I'm already so grateful that the first question is for me. That doesn't happen much this morning. I will answer with pleasure, not giving you a margin guidance, of course. The leading factor behind the organic EBIT growth, which was the second part of your question, definitely the superior top line growth to start with, and the tilt of that superior top line growth towards premiumization, which is continuing. If you look at even one specific market like Brazil, and you know that Brazil is still something that plays negatively on our margin because the average margin in Brazil is still much lower than the group average. When there, you see that really a large part of the growth, and strong double-digit growth, comes from our premium and mainstream, upper mainstream portfolio. Heineken, of course, but also Amstel and Devassa.
That does help with EBIT growth, our operating profit growth, and that will also ultimately tilt the margin in Brazil as well. I would say superior top-line growth driven by premiumization price, because we're very intentional on taking price when we can, the mix, and the volume. That is what plays the most. Of course, we continue to work relentlessly on productivity and there is a paramount example in this company is definitely supply chain, where we have a very decentralized production tool. We produce where we sell, where our consumers enjoy our beer, which also, by the way, sometimes protects us from some reaction. We are actually producing and employing people where people drink our beer and our consumers are. There, with that footprint, we have managed to drive productivity year on year.
We're already looking at the next stage of productivity and efficiency through digital, through connecting our breweries, through using artificial intelligence and augmented reality. That's something that's never ending. There is always a new frontier here. That is part of what we're doing. Constantly, we're revisiting the size of our operation. We're revisiting the cost base of our operations, in all their dimensions, whether it is commerce. As you know, commerce, you have to look at advertising and marketing. You also have to look at all the digital firepower that you can put behind your brand, and how you can target this marketing, and how you can target your sales much better than you used to, or with tools that actually get the consumer where they are, pretty much on their phones. We're also looking at support costs.
There are a number of plans that have been implemented in the past. There are a number of plans that actually have been announced in a number of European countries in particular, but not only. That is not only a major country versus emerging country. If you look at a country like Mexico, it's been able to weather really very strong headwinds from currencies by actually finding productivity and efficiencies year after year after year. You always have to get back to your cost base and make sure that it is tailored to your activity, but also to your environment, frankly.
Yeah. About your question, whether I should step in Dolf's shoes or he should step in mine. It's a bit confusing what's going to really happen. If you ask me about an outlook of what are we for the next 10 years. If only I had a crystal ball. I think your first strategy is a continuum. We are not in an industry where you have to expect a brutal disruption. That is not going to happen, but you can have strong evolutions, and that is what I hope for. I cannot preclude, and you will have to ask the question to Dolf in six months' time and in a year's time and every year, as time moves on. I think when you look at our industry, a company that does not grow is a company that will die. It's very simple.
I don't know any substitute for success of a company than being able to engineer its growth. That means that you have to evolve constantly, and the book is never finished of a company. What I can see for the coming 10 years is, first of all, that your strategy is most probably more differentiated region by region than it has ever been before. That is in contrast to the fact that we say we live in a global world because internet connects us all, but the business agenda will be very different. The optimization of demand and customization of offers in the West is accelerating, whereas having big super brands in some countries is still the relevant way of having a successful and growing business for the next coming 10 years. The speed at which demand will evolve is not going to be overall everywhere the same.
You have to adjust this to that differentiation, which means that you have also to constantly adapt your organization and your strategy for that. I think tendentially, we will offer more products. We have more than doubled our product offering on an organic base, not just considering the acquisitions we made, but if you take every operation in the world, they have, over the last eight years, doubled their SKUs on offering at least. There is overall a tendency of offering more choice. We will all go for premiumization because as the demand for core beer will decline, that's inevitable, people will look for more value. It inevitably also begs the question about, do you go beyond beer? It is a question which remains largely unanswered globally, but which can be answered country by country, market by market, and in a relevant way.
In a way, that's what we do with cider, that's what we do with craft beers, that's what we do with 0.0 , low alcohol beers. The fine-tuning is regionally very different. Beyond that, you have also to look at value chain integrations, vertical or horizontal. That will evolve over time. I don't believe that business is static. You always have to look in every geography where you operate, where are the next natural opportunities for growth in those geographies where you operate? I think that it is naturally there where we will look. I'm confident if I look what we have been doing not only for the last 10 or 15 or 20 years, but even the last 154 years. I think that is what ahead of us. The changes are going to be there.
The volume growth of core beer category is globally decelerating, but with very marked differences between geographies. Some geographies have still huge potential increase. Think about India or the whole African continent. For beer category, that is still big increases to expect. In Europe, none. That's what I mean by you will have to continue to develop a differentiated geographical approach. I am now set that I have to stop. There is a question on Western Europe. There I stop. Edward, then a question on Western Europe?
Yeah, the question was, do you anticipate a better year, given the more normalized weather patterns as well as the European football championships?
Well, June was very bad.
Let's pray the weather then. June last year was very bad.
We hope.
Think about, we said it, we not only continue to sponsor the Champions League, also the football world, and we have the Europa League in addition. Now, if you have better weather for that, let's pray for the better weather, but already the programs in place in Europe for the first half are good. I leave it at that.
Great. Thank you.
The next question is from Simon Hales at Citi. Please go ahead, Simon.
Thank you. Morning, Jean-François, morning, Laurence. Three questions as well, please. Firstly, over the last couple of years, clearly the profit delivery between sort of the first and second half has been a little bit more volatile than it's been in the past. I appreciate, part of it's been weather, part of it as you flagged, has been some cost phasing. As you look to 2020, should we expect more balanced delivery of the mid-single-digit organic growth between H1 and H2? Is there anything in particular you can see at this stage that might skew it to one period or the other? Secondly, can I just ask you around sort of the marketing expenses? Obviously, marketing and selling expenses in the year were growing a little over 4%, so below sales growth.
Could you give us a little bit of a color as to what marketing investment was doing within that? Just marketing investments down as a percentage of sales, or were you still investing ahead of the curve? Just finally, Jean-François, I think on Mexico, you mentioned in your remarks that some more OXXO stores have gone non-exclusive as you come into 2020. Could you give us a little bit more color as to the numbers that have actually sort of become potentially competitive areas there? Generally, how you see the underlying business in Mexico developing this year given the weak macro backdrop.
I'll start with your question on profit delivery. Yes, the weather played a role. What also plays a role is a very balanced footprint that we have now. For instance, if you look at Brazil, I would say the high season is really around November, December, and then the beginning of the year, which is quite different from some of our traditional markets. Since they contributed highly to the increase of profit in the past two years, that has also played a role. We don't guide, as you know, half by half.
What we can say is that, it's a bit coming back to the answer to the previous question, is that the first half in 2019 was marked by more difficult comparables in terms of the basis for some commercial expenses and technology upgrade, and also by a very bad month of June in terms of weather and also in terms of increased competitive environment in Europe. That I can tell you, for the rest, we'll have to see with the events as they develop. If I compare what we enter in the first half with, there are a number of things that, plus a number of event that take place this year, of course, like the Euro Cup and that plays more favorable. In terms of marketing expenses, this is pretty stable in terms of percentage of the revenue.
You say marketing and selling 11% and then we were at 11.1% last year. When you look at support behind the brand, first, the proof is in the pudding. When you have superior top-line growth balanced between volume and revenue per hectoliter, it means that we're doing something right for the brand. That is really something that you should be first looking at. The other thing is that, when you look at our technology upgrades, so some of them are the pure digital backbone, and we're talking our ERPs and SAPs of this world. Quite a lot of them are also at the direct service of the brand. We also invest in different forms today. Again, 11% versus 11.1% and the top line growth that we delivered this year, I wouldn't be too worried about that one.
Well said, Laurence. I think it is like that. Think about efficiency of ATL, BTL investments like we do in productivity. You don't have better productivity by taking ingredients out of your product. It's by having first time right and no losses. In marketing and sales, it's a little bit the same philosophy. Over time, we expect to be able to engineer a good top-line growth and having our resources better allocated. That explains the slight improvement year-over-year of the ratio, and whilst maintaining a superior top-line growth. You have to think about that, by the way. The last one is about the OXXO stores.
I have a very detailed overview of how that goes, province by province, quarter by quarter, when they go over, and it has all been engineered by our local team in order to exactly minimize the impact for us and maximize the impact for OXXO. It sounds contradictory, but it is like that. Starting in regions where the competitor was strong, was giving OXXO a lot of opportunities, and we were not losing that much. We were losing, but not that much. We kind of move up north, where our market share will be stronger. Mind you, the more shelf space you give up for brands that are not really in demand, well, they will also lose the turnover on the shelf space allocated to the competitor.
It's the same thing, if they give too much to Modelo in the north, and we were giving too much in the south, nobody's winning anything. You have to realize that we have built that deal as the optimal win-win. Overall, it is clear we will lose over the period of transition, volume. There is nothing we can do about. We lose mechanically volume, and that will go to competition. You have also to imagine that that volume is at a much lower margin for us. At a very high margin for OXXO. You have to ask the question whether OXXO has the same margin on the volume they gain with the other guys. That's a separate model altogether. We have to see this as a communicating vessel thing. Overall, I have to say the team is managing that well, and the impact in volume is there.
In terms of returns and profitability, given all things, it is absolutely manageable, and it is not bringing neither the Mexican operation in its isolation and certainly not Heineken in troubles.
We are expecting to continue to grow overall in Mexico over the period of the transition, because that is a net of this impact and of good underlying trend for our business, also based on the very good performance of our premium.
Yes.
The Heineken brand is now making inroads and then that premium is still pretty low.
I don't sound optimistic enough. You're right. The business is, of course, continuing to growing in its premium part. For us, the OXXO contract is a good new contract. It's a contract in which we can have long-term relationships with OXXO, and we live in a competitive world out there, and we are very well positioned in Mexico, really. Very satisfied with this.
That's very helpful. Can I just check, Laurence, just going back to some of the comments around the margin drivers? You referenced in the statement transactional FX headwinds around COGS. Is that also spread through the year? It's not particularly skewed to in one half or the other, given the Brazilian real or some of the other EM currencies you've got exposure to.
I am not going to give you the breakdown, but really the Brazilian real is the one that probably is the most challenging, or that we expect is the most challenging. There are other currencies, but this one is, I would say, the largest exposure. If you look at the volumes of beer, Brazil is our largest market. It's become the largest market for Heineken, and you know that a number of things have to be bought in hard currencies. That does play a role. The same way that we've seen the Mexican operation having to absorb that, well, our Brazilian operation moving forward, this is very much integrated in their plans. The way we look at it, is planning to absorb a contrary impact on that. That is why we are moderating a bit the positive impact of the commodities prices.
That's great. Thanks ever so much. All the very best this year as well.
Thank you.
Our next question is from Sanjeet Aujla from Credit Suisse. Please go ahead, Sanjeet.
Hi, both. Three questions from me also. Firstly, on Nigeria, how are you feeling about the underlying market there. Are you in a position yet to be able to lead on pricing? Secondly, on Brazil, Laurence, you highlighted margins are still way below group levels. When would you expect those margins to get close to group levels? I think that was the medium-term target. Just on the growth of the Heineken brand. Of the 8% growth that you've seen, how much is zero contributing to that? Thank you.
We're not splitting the Heineken brand between zero and the mother brand. Also because what you're seeing, is that you have far less cannibalization than what you had, for instance, when we launched Heineken Light in a number of markets. Because with Heineken 0.0, zero alcohol, you actually get into some non-beer outlets. You get into occasions where people don't drink beer or don't drink alcohol anymore, such as lunch. You're actually also appealing to people who don't want to drink alcohol or cannot drink alcohol in certain occasions. What we're saying is that basically, Heineken has the strongest performance in over a decade. Actually, if you check the quotes last year, you'll see that we already said that. This is another record year versus last year. I can repeat what I said last year.
Last year, we said that the performance of the brand, even excluding Heineken 0.0, was the strongest in a decade. This year, the performance, the growth of the brand, even excluding Heineken 0.0, is pretty much the same as last year. This should be encouraging, but we don't split and we won't split it because it wouldn't make sense. Your question on Brazil. The midterm guidance is that the RONA, the return on net assets, will be above WACC within five years. That is definitely the case. The guidance we gave was in terms of how it paid for the cost of capital. That is definitely what we are seeing in that timeframe. In terms of the margin, the margins will move up. They have to move up also as a factor of premiumization. This will develop.
I am not telling you today how long it will take, where exactly it will go, but definitely we continue to work on margin. The portfolio has also a natural tilt that will help us, and that is helping us working on margin. Remember, we're starting from a low base. We're a low single digit in the Heineken part of the portfolio, and we acquired business that was losing money. This is going fast. Some of the synergies will be a bit delayed in terms of reuniting the distribution, but all the synergies in terms of back office, in terms of breweries are being extracted. We're very happy about how this is going. This is an operation we're building for the great future. You see the growth of the Heineken brand there, and that tells you that it's going in the right direction.
Nigeria. That's my most difficult thing for the moment, to be honest. Yeah, it's a listed company, so you can follow it. The market is growing better, so that's the good news. Pricing is not going anywhere. We have increased last year our prices in November, if I recall well, and we just did it again in January, but that is because of a VAT increase. Our bigger competitor in the world, the smaller recently announced that it will not increase the prices before March. It remains a very tense, competitive environment. Don't know where we go there. We hold up our share. We're still market leader. I think, in beer, Diageo is suffering more in terms of share, if you will, but it remains a pain point. We continue to believe that after all, we work a lot on productivity.
I have to say that the teams over there, I went there mid last year, they have done a tremendous job in terms of productivity and re-engineering their business for operating at structurally much lower prices than we had, let's say, five years ago. That job has been done and is currently still being done. The good news out of Nigeria is that the premium end of the portfolio is tilting up, but the overall pricing is still lagging behind. Don't ask me to make too much projections, but I can tell you this is indeed a real concern because the profit pool of that whole market has tumbled quite a bit over the last few years. This is just a bare reality. It is high on our radar screen.
Got it. Thank you.
The last question we are taking on the call comes from Tristan van Strien from Redburn Partners. Please go ahead, Tristan.
Thank you. Good morning. Just a couple from me. The first one, if I have my numbers correct, it appears that 2019 was the first year you've been able to get price and mix that's in line or even exceeding the weighted inflation of your markets, which is quite an impressive achievement. Wonder, is 2019 unique? Did you do some extra pricing because of the input cost pressure, or is this kind of the new philosophy going forward in the markets where that's possible? Obviously not Nigeria, but in other markets, is that just the way Heineken is thinking about it at the moment? The second question, a bit more detailed, Laurence, as you close the preparation phase on your HANA implementation in Europe, what are you doing to mitigate any disruption that you may have in the implementation of the deployment of the program?
Can we expect some rolling stock-ups in some markets of inventories before you actually implement the program? How should we think about that? Last question is simply a very big thank you to Jean-François, and I wish you much luck and enjoy your venture forward.
Thank you for the last one.
Actually, on price mix, Tristan, you usually have your numbers right. If you look at 2019, it's pretty much 5050 price and mix, but it's very different from one place to another. As you know, we did say it, input cost higher this year. We have to be intentional, and this is something that we said internally and we said there need to be a very good reason not to take price. We operate in places where affordability is a key issue. We operate in places like Europe, where basically you have a significant deflationary impact. There, if you look at Europe, it will be effort on pricing, but it will be a lot of mix and premiumization. I wish we could run the company on philosophy.
It's run very much on being intentional, in going towards premium, in taking pricing while keeping our product an affordable luxury, which they are, and they have to be. we do it on a case-by-case basis, and our management teams are very connected to their countries and the environment. What we did is we did actually blow a little bit their horn this year and say, "Guys, this is difficult here in terms of input cost." you have to actually look at what you can do on the side of pricing. We will continue to be pragmatic and reacting, and it will also depend on the mix of countries. that is the way we're gonna run it. As for HANA, you will notice that I carefully say this is the first phase of capabilities. We're starting with the data.
We're starting with actually having a unified data management. That's what's going to happen pretty much in 2020. We're going to actually standardize and normalize whatever's done at our shared service center in Kraków. We could go in much more details into the way we are transitioning, and I can cover that separately. That's what our plans are. We are starting with basically the core of the financial processes for all our 20 markets centralized in Kraków. The first step is about unified data model. Hopefully, that doesn't bring any kind of disruption in the operation because we're not transferring the transactional part of it yet. It's when you start transactions in the new system. To give you an example, last year, 2018, when we actually merged our two SAP systems in Brazil, we had a few days where we could not invoice.
That is actually when you merge system, you start transacting, when you decommission your old way of transacting, that is kind of like the cut-off moment. As part of life, you do everything you can to mitigate it. Sometimes it happens, and you have to have contingency plans in place. That's also part of the preparation. It doesn't mean that you're completely safe and immune to everything. That is the way it goes. It's more, it's the data this year in Europe more than transactions.
Tristan, if I had to put a philosophy behind the price mix thing, because I listened to Laurence, she said there is no philosophy, there is a lot of pragmatism. If you absolutely want to make a philosophy, it would be mix always, price wherever you can. As you heard about my Nigeria story, that latter part is a bit more difficult.
I'm going to have it framed above my desk.
The philosophy, thank you. Cheers.
Thank you. That's very clear.
We've got all unanswered questions. We refer you back to the Heineken Investor Relations team. I will now hand back to the Heineken team for any closing remarks.
Well, it has been a pleasure as ever to have you this morning for an hour. Thank you for the good collaboration we had during the past year. I'm just looking forward to see you maybe in other capacity. Thank you very much, all of you. Thank you, Operator, for having organized the thing. For every further questions, please refer to the people who will stay behind me and will be competent to answer all your questions when I sneak out.
Thank you so much.
Thank you. Well, now over to you. Thank you. Bye-bye, all.
Bye.
Ladies and gentlemen, thank you all for joining today's call. It has now concluded, and you may disconnect your lines.