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PANKAJ GHEMAWAT JORDAN MITCHELL SM – 1529 – E O – 308 – 029 Grolsch: Growing Globally In November 2007, SAB Miller, the world? s second largest brewer,1 announced the friendly takeover of the world’s 51st largest, Royal Grolsch N. V. of the Netherlands, for €816m in cash – 84% more than Grolsch’s value over the previous month. Nick Fell, SABMiller’s Marketing Director, explained the logic of the deal: “[Grolsch is] a fantastic brand. It’s North European, it’s a fantastic product, it’s got unimpeachable brewing credentials and authenticity and credibility.

And it’s a damn good product. So for anybody interested in developing their premium beer business, this is an absolute peach of a brand to get hold of… we see huge potential for it in our global footprint, particularly in markets like Latin America and Africa where we’ve got a strong route to market but where the premium beer business is still in its infancy. ”2 Grolsch had hitherto focused on developed markets, particularly the UK, US, Canada, Australia, New Zealand and France, in pursuit of its goal of becoming one of the world’s top 10 global beer brands.

Groslch was already the world’s 21st largest global brand, measured by international (nondomestic) volume (see Exhibit 1). International volume had grown to account for slightly over onehalf of total volume and, going forward, seemed to offer much more potential. Drinkers often rated Grolsch higher than larger brands, including Heineken, the top global brand as well as the leader in Grolsch’s home market (see Exhibit 2). And Grolsch had started up a state-of-the art brewery in 2004 that could be expanded at little incremental cost.

The acquisition closed and in February 2008, Grolsch became an independent subsidiary of SABMiller. Rob Snel, head of Grolsch International since 1999 and an employee since 1984, was named Grolsch’s new CEO shortly thereafter. He had to decide what changes, if any, to recommend to its global strategy. 1 This compares the relative positions of SABMiller with the two other major breweries, InBev and Anheuser-Busch as of the end of 2006. SABMiller’s fiscal year ends in March. 2 “Q&A with Nick Fell, Marketing Director, SABMiller,” SABMiller, www. abmiller. com. Accessed Nov. 30, 2007. ________________________________________________________________________________________________________________ This case was prepared by Professor Pankaj Ghemawat and Jordan Mitchell, Research Assistant, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. August 2008. Copyright © 2008, IESE. To order copies or request permission to reproduce materials, contact IESE PUBLISHING via the website, www. iesep. com.

Alternatively, call +34 932 534 200, send a fax to +34 932 534 343, or write IESEP, C/ Juan de Alos, 43 – 08034 Barcelona, Spain, or [email protected] com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise – without the permission of IESE. Last edited: 10/10/08 1 SM-1529-E Grolsch: Growing Globally Company Evolution Grolsch traced its history back to a brewery, in the Dutch town of Groenlo near the German border3 that was purchased by Willem Neerfeldt in 1615.

By the late 1800s, the brewery had come under the control of Theo J. De Groen. In 1897, he introduced Grolsch’s iconic – and trademarked ceramic swingtop bottle, which was advertised as easy to open and allowing storage of beer for later consumption. Marketing of the Grolsch brand began in 1918. In 1922, this operation merged with a brewery in nearby Enschede (see Exhibit 3 for a map of the Netherlands), but Grolsch was retained as the principal brand. By the 1960s, Grolsch had grown from a “regional” brand to become the country’s second most popular, behind Heineken.

After the death of the head of the De Groen family in 1982, the next generation of family members agreed to an initial public offering (IPO) on the Amsterdam Stock Exchange in 1984. 4 Subsequently, a non-family member was brought in to manage the company for the first time since the De Groens had assumed ownership. By the end of the 1980s, there were no De Groens on the company’s executive committee, but the family continued to own one-third of Grolsch’s shares and was represented on its supervisory committee.

Due to its stature in the Netherlands, the Dutch government honored the company with the coveted “Royal” title in 1995, and the company was renamed Royal Grolsch N. V. In 1997, Grolsch celebrated the 100th anniversary of its swingtop bottle; a company representative said, “After 100 years, the swingtop is a great differentiator and still makes the Grolsch brand famous today. ” In 1998, the company decided to build a modern brewery which, after disruptions and delays (see below under “Operations”), started up in 2004.

Grolsch had been incorporated as a two-tier company under Dutch law and had two major, fullyowned subsidiaries: Grolsche Bierbrouwerij Nederland, which handled sales and marketing of Grolsch in the Netherlands and also housed most production, logistics and facilities support except operations with foreign partners; and, Grolsch International, which was responsible for the worldwide sales and marketing of Grolsch (and other brands) outside the Netherlands and the UK and Ireland. The UK and Ireland were handled by a 51:49 sales and marketing joint venture with Coors called Grolsch (UK) Ltd. , which brewed Grolsch under license locally.

Exhibit 4 summarizes Grolsch’s recent financial and operating history. In 2007, Grolsch’s total volumes (including beers sold under exclusive distribution rights) increased by 3. 1% to 3. 3 million hectolitres (hl),5 with volumes derived specifically from Grolsch brands decreasing by 3. 4% to 2. 8 million hl. Revenues grew by 4. 8% from €317. 6m to €332. 9m and net profits edged forward from €19. 2m to €20m during the same period. Prior to the takeover by SABMiller, Grolsch had emphasized growing faster than its key markets while achieving a return on investment that exceeded its average cost of capital (estimated to be 7. % by one investment bank6), steadily increasing earnings and dividends per share, and maintaining a healthy balance sheet. It paid attention to non-financial stakeholders as well, especially employees 3 Groenlo means Green Forest in Dutch. The town was also known as Grol and Grolle. 4 Dominic Walsh, “Swing was the thing when popped tops reached Top of The Pops,” Times Online, Nov. 20, 2007, http://business. timesonline. co. uk/tol/business/industry_sectors/consumer_goods/article2903549. ece 5 1 hl = 100 litres. An average bottle holds 333 millilitres (0. 33 litres). Cases vary from 8 to 12 litres by volume. 6 “Grolsch: How much to pay for U. S. fantasy? ” Fortis Investment Bank, Feb. 23, 2007, p. 4. 2 SM-1529-E Grolsch: Growing Globally and its local community. Indicators of employee welfare ranged from an average payroll cost of €60,000 per employee (payroll accounted for 15% of revenues) to the complimentary case of Grolsch beer traditionally delivered every week to employees’ homes. About 850 of the 875 employees were based in the Netherlands, as were all members of the executive and supervisory committees.

The company had particularly strong ties to the eastern part of the Netherlands, especially Enschede (population 155,000), home to its headquarters and the new brewery. It did, however, seek managers and sales people with multiple language skills and international experience and education. To achieve its objectives, Grolsch had articulated the following vision and mission: Vision: The brewing industry has failed to keep pace with the changes in consumers’ preferences for drinks. This has created a mainstream category that is under pressure from other drinks. Grolsch believes in the strength of beer in the drinks market.

Mission: Grolsch is going to break through the mainstream and restore beer’s premium status. In its presentations to investors, Grolsch emphasized that it targeted a premium, differentiated position in the markets in which it competed. It also highlighted adaptation around its core products as its key strategy for achieving international growth (see Exhibit 5). Products Exhibit 6 shows the company’s product range, which was organized into two main brand families: Grolsch and Amsterdam (the company also distributed small amounts of imported Belgian beer such as Grimbergen).

The Grolsch brand was the centerpiece of the company’s strategy. Its flagship product, Grolsch Premium Lager, represented 90% of the company’s domestic volume, although nine variations were also marketed in the Netherlands. The Grolsch brand was the focus, as well, of the company’s UK joint venture and the brand accounted for two-thirds of all exports, with Grolsch Premium Lager being the only product sold in many markets. Grolsch Premium Lager was classed as a pale lager7 and the company emphasized that its malty, relatively bitter taste made it distinctively refreshing.

Groslch was brewed to one recipe, which was in strict conformance with German purity laws, and was aged for a minimum of six weeks, compared to two to four weeks for many of its competitors. One beer enthusiast described the aroma as a “peppery hop with a spritzy citric edge to it,” and its taste as “an obviously well-attenuated beer whose balance is toward the dry and bitter [that is] quite refreshing. ”8 Beer guru, Michael Jackson agreed: “it has a fresher, more herbal, hop character than most international lagers, and a cleaner malt background,” but provocatively asked, “is that enough? ” His conclusion? “Not today.

The differences between popular lagers are refinements. ”9 Grolsch management strongly disagreed. 7 A lager is a type of beer that is brewed by using a bottom-fermenting yeast in comparison to ales, which are brewed with a top-fermenting yeast. While the tastes of both lagers and ales vary greatly depending on the ingredients and process, lagers are generally lighter and crisper whereas ales tend to be darker and stronger. Lagers dominate the overall market for beer. 8 Blog, http://www. epinions. com/content_129738444420. Accessed April 2, 2008. 9 M. Jackson, “Behind the mystery of Grolsch,” originally published in The Observer, July 1, 2001, ttp://www. beerhunter. com/documents/19133-001561. html, July 9, 2001. Accessed April 1, 2008. 3 SM-1529-E Grolsch: Growing Globally In addition to its core Grolsch products, the company devoted considerable attention to packaging. The green swingtop bottle played a particularly key role in entering foreign markets. As Tom Wilms, Consumer and Market Insight Manager, put it: “We use the swingtop as a door opener especially in a market that is very crowded in the premium segment…Once the volume starts picking up, we introduce the crown cork (i. e. , regular bottle cap).

In nearly all of our key markets, most of the volume is in crown cork bottles. ” In 2007, a new, standardized green crown cork bottle, with a stylish look, an embossed Grolsch logo on flattened sides and an accompanying crate, was introduced with much fanfare worldwide, after a two-year development process. In early 2008, the company was also in the process of introducing a new green swingtop bottle globally. This marked a particularly significant change in the Netherlands, where the swingtop bottle had been brown for 111 years. Bottles for the Dutch market were mostly returnable whereas bottles sold elsewhere were non-returnable.

Bottles shipped out of the country were offered in more varied sizes and had country-specific labels. Aside from bottles, cans accounted for 30% of total volume and were more standardized, although there were two different designs (one for the domestic market and another for international markets). Kegs were significant as well, particularly at home in the Netherlands. Grolsch’s other product range centered on Amsterdam, positioned as a non-premium brand and sold mostly in tall 500-millilitre cans at supermarkets and smaller independent shops.

Amsterdam beers were available in five varieties and were considered to have a smooth but strong taste: the strongest, the Maximator, had 11. 9% alcohol content by volume (compared to 5% for Grolsch Premium Lager). Four markets – France, Russia, Australia and Africa – accounted for 95% of Amsterdam’s volume. Despite the company’s clear focus on the premium Grolsch brand, the brand’s total volume had actually declined from 3. 2 million hl in 2003 to 2. 8 million hl in 2007, as exports more or less stagnated while the Dutch and UK markets shrank.

Total volume (including Amsterdam and other smaller local brands under license) changed from 3. 4 million hl to 3. 3 million hl over the same period, with the growth of the Amsterdam brand making up for some of the decline in the Grolsch brand. Markets Although Grolsch dated back to the beginning of the 17th century, it began to look beyond the Dutch market only in the middle of the 20th century. Exports commenced after World War II and in 1946, amounted to 3,000hl or 10% of total production. (Indonesia, the largest foreign market, absorbed 1,000hl. ) However, exports were curtailed in the 1950s by buoyant domestic demand.

Interest in internationalization revived in the 1970s with domestic stagnation and shrinkage, and the example of Heineken, Grolsch’s larger Dutch rival, making impressive headway (see Exhibit 7 for comparative timelines). In the second half of the 1970s, Grolsch set up its own import organizations in the United States and the United Kingdom. Distribution deals in Canada, Australia and New Zealand followed in the mid-1980s. The 1990s saw investments, for the first time, in foreign production, starting in developed markets. In 1990, Grolsch acquired Wickuler, a regional German brewer, in a move that doubled its capacity.

And in 1992, after having grown Grolsch into the UK’s third largest premium lager brand, it bought Ruddles, a small UK brewer, as much for its distribution network as for its ale brands. But 4 SM-1529-E Grolsch: Growing Globally both moves were quickly unwound. It sold Wickuler in 1994 to one of Germany’s largest brewers, Brau and Brunnen, and signed an agreement to distribute Grolsch in Germany with the latter. That same year, it formed a joint venture partnership with Bass, under which the latter took over production and distribution for the UK. Ruddles was divested in 1997.

The opening up of Eastern Europe in particular prompted a shift in focus in the second half of the 1990s, towards emerging markets: Grolsch invested in Poland and Russia and set up representative offices in Brazil and China. In Poland, Grolsch acquired an indirect stake in a brewery in 1995 but sold it in 1998 because of poor profitability and an inability to build up its stake to a majority level. One Grolsch executive added, “The Polish brand Zywiec was bought by Heineken and there was no need for two Dutch players in the Polish market. ” A distribution agreement with the purchaser was later annulled.

In Russia, Grolsch paid in 10% of the capital for a small new brewery in 1999, but sold its stake to the majority owners in 2000. They, in turn, sold it to Turkish brewer Efes in 2004, whom Grolsch still licensed to brew and distribute the Amsterdam brand in Russia. The Asian financial crisis, had significant ripple effects in Eastern Europe, including a massive devaluation of the ruble in Russia, and pushed Grolsch back to focusing on developed markets. It entered France in 1999 by setting up its own distributorship – the only country with such an arrangement – which focused on selling the Amsterdam brand.

Grolsch stepped up efforts on the Iberian Peninsula with an investment in Portuguese distributor Cereuro and a distribution agreement with Spain’s La Cruz del Campo. The Cereuro investment was halved in 200510 and in Spain, Heineken bought out La Cruz del Campo. In addition to the markets mentioned above, Grolsch sold beer in many other countries, making a total of about 70 export markets. As of 2007, international volume accounted for 51. 5% of the company total. Grolsch did not systematically disaggregate sales or profits by market, but it did supply partial information that could be supplemented with analysts’ inferences.

Key Markets According to Grolsch, Western Europe accounted for 88% of its revenues and 94% of its contribution margins, i. e. , Western European markets’ average contribution margin was twice as high as others’ (23% vs. 11%). 11 If fixed production costs (13% of revenues) were allocated in proportion to revenues, Western Europe accounted for 103% of operating profit (EBIT). But in order to build international volume, beer exports from the Netherlands were actually transferred to Grolsch International at variable production cost.

Grolsch’s home market of the Netherlands accounted for close to one-half its total volume, an estimated 65% of revenues, and a much greater share of EBIT. That said, market shrinkage and discounting had put Dutch brewers under significant long-term profit pressure. Grolsch, with 13% of volume, was part of a second tier of competitors that included Bavaria (17%) and Interbrew (14%), behind market leader Heineken (46%), which controlled the country’s two largest brands, Heineken and Amstel. Grolsch was the third largest brand, and was particularly strong in the eastern Netherlands. 0 “Portugal Sumolis Boosts Stake in Cereuro to 90. 05 Pct,” Portuguese News Digest, April 15, 2005. 11 Grolsch Annual Report 2007, Dec. 31, 2007, p. 52. 5 SM-1529-E Grolsch: Growing Globally Grolsch’s second largest market was the United Kingdom, where it owned 51% of Grolsch (UK) Ltd. , a joint venture that brewed Grolsch under license, in partnership with MolsonCoors (which came in after Bass was taken over and broken up). The UK accounted for 25% of Grolsch’s total volume and 1. 5% of the UK market. Grolsch was ranked fifth in the premium lager market behind the top three brands: Stella Artois, Kronenbourg and Budweiser. 2 In 2007, Grolsch’s 51% stake in it generated about 12% of its operating profit, down from 18% the previous year because of market shrinkage and supermarket pricing pressures. Grolsch’s third largest market was the United States, to which – like virtually all other markets – it exported beer from the Netherlands. Analysts estimated that Grolsch’s US volume had stagnated at about 140,000hl – 4% of the company’s total and 0. 5% of US import volume (overall, imported beer represented close to 15% of total US consumption).

Grolsch was ranked 11th in the imported premium beer market (the top three brands were Corona, Heineken and Beck’s). 13 An agreement in 2006 with market leader Anheuser-Busch to distribute Grolsch in the US had been hailed as key to become a top 10 imported brand by quadrupling volume. But the acquisition by SABMiller, which owned Anheuser-Busch’s biggest US competitor, Miller, ended that arrangement. France was Grolsch’s fourth-largest market with volumes estimated to be around 100,000hl, almost all of which was made up by the Amsterdam brand.

The Amsterdam brand was ranked second in strong beers behind Bavaria. 14 Canada was the next in line (and the fourth-largest for the Grolsch brand), with volumes estimated to be about one-half those in the US. Grolsch had given its Canadian distributor, Sleeman, a license to brew Grolsch Premium Lager nationally. Grolsch was ranked fifth in imported premium beers (the top three were Heineken, Corona and Miller Genuine Draft). 15 The remaining markets – including the two other markets classified as “key,” Australia and New Zealand – individually represented less than 1% of Grolsch’s total volume.

In Australia, Grolsch occupied fifth place in the international premium segment behind the top three: Corona, Heineken and Stella Artois. 16 The MABA Framework Over time, Grolsch had developed a MABA (Market Attractiveness, Business Assessment) framework to assess international opportunities. The Market Attractiveness (“MA”) analysis included: total volume and volume growth in hectolitres of the international premium lager segment; the price premium between the international premium lager segment and the top volume lager brands; and, the geographic and cultural distance between the market and Grolsch’s home base in the Netherlands.

The distance measure had four components: differences in languages; non-membership vs. membership of the European Union (of which the Netherlands was a founding member); the landed cost of transport; and differences in GDP per capita. The Business Assessment (“BA”) involved the total volume and volume growth of Grolsch premium lager, variable commercial contribution 12 Grolsch Company Book, “Brewing for the Future,” 2006, p. 35. 13 Ibidem. 14 Ibidem. 15 Ibidem. 16 Ibidem. 6 SM-1529-E Grolsch: Growing Globally contribution margin minus the direct expenses associated with serving a market), and Grolsch’s share of the premium lager segment. Exhibit 8 provides more detail. Each year, the company worked through these calculations to assign aggregate scores to each market being considered. Markets with high scores were classified as “key,” those with somewhat lower scores as “seeding,” and those with low scores as “trading”. Exhibit 9 shows the output of the 2006 MABA analysis. A Grolsch executive commented that: “The MABA is a tool that informs us in our decisions.

At the end of the day, the senior management decides on whether a market is key, seeding or trading each year during the annual strategic planning sessions. ” Key/seeding markets were served by one of two main groups within the sales organization, Brand Builders, and trading markets by the other, Direct Export. The Grolsch policy for trading markets was to generate profits each year. The profitability was measured by ensuring that exports to trading markets covered at least variable costs and the direct expenses associated with management such as transportation, sales people, marketing and customer service. Operations

Grolsch followed German purity laws and emphasized the finest natural ingredients, the absence of additives such as stabilizers, the combination of two types of hops – an innovation dating back to the 1600s that was celebrated in the company’s logo – and a long maturation process. Some attention to procurement scale had recently been overlaid on the traditional emphasis on high-quality ingredients: in 2002, Grolsch formed a purchasing alliance with German brewer, Warsteiner. 17 And internal training programs reinforced the legacy of craft-like, high quality brewing by emphasizing the theme of “Craftsmanship is Mastery. In 1998, Grolsch began to plan for a large new brewery to consolidate its two relatively old facilities: the Groenlo brewery, which produced for export, and the Enschede brewery, which produced for the Dutch market. The two towns waited anxiously as Grolsch chose between them and finally opted for a location outside Enschede. During the planning phase, an explosion destroyed parts of the old Enschede brewery, forcing a major scramble to keep operations going. In 2001, after delays, Grolsch received governmental approval to build. When the new brewery opened in April 2004, it had cost €277m,18 and had a capacity of 3. million hl that could be increased to as much as 6 million hl. (In the short run, expansion to 3. 7 million hl was planned at an additional cost of €10m). Grolsch estimated that it would save €1m in operating costs annually by optimizing production, but no significant headcount reductions were anticipated. Pride in the new brewery – described as the most modern in the world – focused on its state-of-the-art, environmentally friendly technology. Grolsch’s new brewery was located on a major highway and was about 200 kilometers from the main Dutch shipping port, Rotterdam. Beer was ransported by truck to markets within the European Union, at costs estimated to range from about €1. 47 per hectolitre to Germany to €6. 68 per hectolitre to Spain. 19 Transportation to all other markets was by ship, in 20-foot, 40-foot or 45-foot20 containers at costs estimated to be €10-15 per hectolitre (see Exhibit 10 for more detailed estimates). 17 “Grolsch, Warsteiner boost alliance with Italy deal,” Reuters News, Jan. 28, 2003. 18 Grolsch Brewery, Proleit Website, http://www. proleit. com/en/Industries/BreweryGrolsch_Neubau. php. Accessed Sept. 13, 2007. 19 Estimated by case writer. 7 SM-1529-E Grolsch: Growing Globally

Marketing Grolsch’s other marketing policies, pricing, promotion and placement were meant to reinforce its positioning as a premium product. Pricing Grolsch was priced similarly to Heineken and was considered a standard lager brand within the Netherlands. Overseas, Grolsch positioned the brand at premium prices. In three of its six largest non-domestic markets – the US, Canada and Australia – Grolsch was priced at a discount to other leading European imports. Thus, in the US, the average off-premise21 retail price of Grolsch Premium Lager was about $3. 18 (€2. 53) per litre in 2006, compared to Heineken at $3. 48 (€2. 7) and Budweiser at $2. 13 (€1. 70). And prices in Canada approached standard rather than premium levels, with C$4. 50 (€3. 16) for Grolsch vs. C$6. 24 (€4. 38) for Heineken and C$4. 44 (€3. 11) for Budweiser. In the UK pricing was comparable to the leading premium lagers: Grolsch averaged ? 1. 90 (€2. 79) per litre versus ? 1. 93 (€2. 84) for Stella Artois, ? 2. 11 (€3. 10) for Budweiser and less than ? 1. 50 (€2. 20) for standard lagers. In France and Russia – the markets where the Amsterdam brand was the key driver of volume gains – Grolsch Premium Lager was priced substantially higher than other premium lagers.

Promotion Like most brewers, Grolsch undertook a wide array of promotional activities. For example, the launch of the new green bottle in 2007 was supported by advertising in print media, the Internet (to make special offers and build the customer base through music programs and fan clubs), outdoor and on-premise displays, sponsorships (e. g. , of football clubs), events (e. g. , music concerts) and television advertising. TV advertising, which had begun in the 1960s, nonetheless garnered the bulk of promotional expenditures.

In the Netherlands, Grolsch spent 4% to 6% of sales on advertising. Recent spots featured 30-somethings in cosmopolitan settings with tag lines like “One day you won’t drink beer anymore, you’ll drink Grolsch. ” In the UK, where Grolsch enjoyed access to an extensive network of on-premise locations through its relationship with MolsonCoors (the country’s second-largest brewer and the owner of the largest brand, Carling), advertising reinforced the “Green Light District” campaign in which customers were served Grolsch beer in locations saturated with Grolsch imagery.

UK TV advertising also played up Grolsch’s Dutch origins, often by poking fun at them, e. g. , with a Dutch spokesperson speaking English with an exaggerated Dutch accent. Dutch roots were also accentuated in TV advertising in other markets since Grolsch believed that its main locational advantage was the image of beer from Northern Europe and, especially, the Netherlands, which became a major exporter (to England) back in the 14th century and now exported more of its production about 50% – than any other major producer.

This country-of-origin advantage had been validated by Heineken, which imported its beer into the United States instead of producing it locally and, as the second largest import, behind Corona, sold more than 5 million hl of it there a year, at the highest prices in the market. But Dutch origins had to be pitched differently in countries less familiar with the Dutch: as one 20 20-foot containers were a shipping standard and were 8 feet high x 8. 5 feet wide and 20 feet long. 40-and 45-foot containers had the same height and width as 20-foot containers with the only difference being length. 1 Off-premise was also called off-trade and referred to supermarkets, specialty stores and other shops. On-premise (or on- trade) signified restaurants, bars, hotels and catering. 8 SM-1529-E Grolsch: Growing Globally executive put it, “Few people in the US have specific knowledge about the Netherlands. ” In addition, while UK and US advertising ostensibly shared the English language, the content of the ads had to be varied greatly to reflect other large cultural differences between the two markets (see Exhibit 11).

In the US, the allure of the Grolsch swingtop bottle featured prominently in a new commercial, “Got that Swing” aired during the professional (US) football playoffs and throughout the year in New York’s Times Square. This differed markedly from Grolsch’s edgier UK commercials. The broader approach, in both the US and Canada, was to use targeted advertising and promotional campaigns to reach trendsetters in select regions of the country. Promotional efforts in other, smaller markets, were much more modest.

Placement/Distribution Grolsch emphasized that it selected the best route to the consumer by market, in cooperation with importers, distributors, brewers and retailers. Placement or distribution arrangements in the Netherlands had had the most time to mature. In off-premise channels, Grolsch resisted aggressive price promotions (by supermarkets, particularly) and emphasized its premium products, packaging and ancillaries such as the PerfectDraft®22 dispenser system. 3 Grolsch relied on on-premise channels more than its rivals and owned six beverage wholesalers that handled half its sales, guaranteed financing of premises and equipment by bar-owners and owned properties operated as bars and restaurants. 24 Distribution in the United Kingdom had also been in place for some time – since 1994, despite the change in the joint venture partner from Bass to MolsonCoors (Grolsch was MolsonCoors’s second largest lager brand in the UK after Carling). But elsewhere, there had been more turnover.

In the US, Canada, Australia and New Zealand, Grolsch was on its third or fourth set of distributorships since the mid-1990s (see Exhibit 12 for details). Except for France, where Grolsch owned its own local distribution and Russia, where Efes was licensed to brew Amsterdam beer, most other countries had seen similar changes. Industry Dynamics In 2005, global beer volumes were 1. 5 billion hl (155. 2 billion litres) and total retail value – including, in many countries, a very sizeable tax component – amounted to €354 billion. 5 Globally, volumes had grown at 2. 7% per year while global value had increased by 4. 7% per year between 2000 and 2005. 26 Beer markets in developed regions such as North America, Western Europe and Japan had recently been flat or had suffered slight decreases in volume between 2000 and 2005. Global volume growth was driven by developing regions such as Eastern Europe and Asia Pacific, in both of which volume had grown by more than 5% per year. Exhibit 13 shows information on past and projected volumes in the 20 largest country markets.

Overall, lagers accounted for nearly 95% of market volume and 90% of value, and ales, stouts and no/low-alcohol beer for the remainder. 22 The PerfectDraft® system was an appliance developed by Philips and was an appliance designed to replicate draft beer served at bars and restaurants. Several major beer brands marketed 6-litre kegs suitable for the appliance. 23 Grolsch Annual Report 2006, Dec. 31, 2006, p. 12. 24 Ibidem. 25 “The World Market for Alcoholic Drinks,” Euromonitor, p. 5. 26 Ibidem. 9 SM-1529-E Grolsch: Growing Globally Partly because of the low price-elasticity of demand for beer (estimated at -0. for the Netherlands, for instance), brewers responded to volume pressures by trying to build up the premium part of their portfolios, often by launching premium line extensions to recognized brands. 27 Worldwide, premium lager represented 16% of volume and 28% of lager value in 2005, up from 15% and 23% respectively in 2000. Standard lagers accounted for 53% of volume and 58% of value – both figures down a few percentage points from 2000 – and economy lagers for the rest. Exhibit 14 tracks the premium lager segment by region over time.

Total imports – mostly of premium beers – represented 5% of global volume and 10. 6% of global sales in 2005 (up from 4. 3% and 8% respectively in 2000). 28 Exhibit 15 disaggregates imported versus domestic sales by region. In addition, foreign brands were sometimes brewed under license for a local market. For example, Budweiser was brewed by Guinness for sales in Ireland. Heineken granted licenses to breweries in which it had stakes and also forged license-to-brew agreements with small breweries such as a deal with the Danish Brewing Group to brew Heineken for Denmark. 9 Typical royalty/licensing fees depended on the beer’s price point, volume and promotional support; royalty/licensing fees ranged from €1 per hectolitre to €6 per hectolitre. Nevertheless, in markets such as the US (by far the world’s largest importer), nearly all successful foreign brands were shipped from the brewery of origin because of the perceived importance that US consumers placed on “getting a real import. ” Some of the successes had been truly spectacular, as in Corona’s ascent, past Heineken, to the ranks of the largest import and the second largest premium brand in the US market.

But brand shares were generally stable in most developed markets, especially in Europe, in spite of significant advertising competition that swallowed up 4 to 8% of revenues for most major brewers. And at a global level, the combined market share of the top ten brands stood at 18% in 2005, versus 19% in 1995. 30 Most of the top ten brands generated the majority of their volume from a single market such as Budweiser and Miller from the US (although SABMiller did brew Miller outside the US as well) or Skol from Brazil.

Some brands, however, did have a large and broad presence outside their home markets (see Exhibit 1). Where concentration had taken place was at the company level. Because of acquisitions and, to a lesser extent, joint ventures and organic growth, the five largest brewers had come to account for 38% of global volumes, up from 24% in 1996. 31 As of 2006, the largest brewers were: Inbev, SABMiller, Anheuser-Busch, Heineken and Carlsberg (for comparisons, see Exhibit 16). InBev resulted from an €8 billion merger between Belgium’s Interbrew and Brazil’s AmBev in 2004, and had a broad presence, with particular strengths in Europe and Latin America and significant weakness only in North America. 32 27 “The World Market for Alcoholic Drinks,” Euromonitor International, Dec. 2006, p. 12. 28 Ibidem. , Dec. 2006, pp. 76-77. 29 Drinks Marketing Director, Heineken, Euromonitor 2005, p. 2. 30 Internal Grolsch Company Presentation, “Consolidation in the Global Beer Industry,” Management Team Meeting, Feb. 6, 2007, slide 18. 31 SABMiller Annual Report 2007, Online Edition, http://www. annual2007. sabmiller. com/2_gfootprint/gbeermarket. html. Accessed Aug. 23, 2007; and, The Brewing Industry, PaineWebber Analyst Report, Feb. 25, 1998, pp. 31-32. 32 Gilles Castonguay and Nicholas Winning, “Interbrew buy of AmBev wins shareholder approval,” Reuters News, Aug. 27, 2004. 10 SM-1529-E Grolsch: Growing Globally • SABMiller had been formed when SAB (South African Breweries) acquired Miller from Phillip Morris in 2002 for €6 billion.

It was strong in Africa and Eastern Europe; because of Miller, the share of its sales accounted for by North America was even larger, but the share of profits much smaller (see Appendix A for additional information). Anheuser-Busch’s footprint was the mirror image of InBev’s: very focused on North America (in addition to its leadership in the US, it owned 50% of Mexico’s Modelo, the producer of Corona). Heineken, despite its reputation as the global brand, derived nearly 70% of its revenue from Western and Eastern Europe.

This figure would increase as it absorbed the market-leading UK operations of Scottish and Newcastle (S&N, previously the thirteenth largest brewer by volume), which it, along with Carlsberg, had taken over and broken up in the first half of 2008. Carlsberg was much smaller and even more dependent on Europe, especially Western Europe, but would end up with a more balanced European presence after absorbing S&N’s half of their erstwhile Eastern European joint venture, Baltic Beverages Holding. • • • Rumors of additional deals were rife in the brewing industry.

The one most talked about in early 2008 was a possible merger between In-Bev and Anheuser-Busch. The two had already moved to take advantage of their complementary geographic positions by announcing that Anheuser Busch would import InBev’s leading brands – Stella Artois, Beck’s, Bass Ale – to the US (casting a pall over Grolsch’s tie-up with Anheuser-Busch for the same purpose). Some analysts were predicting that the probability of a merger was high due to “growth in emerging economies, cost savings and complementary geographies. 33 Despite feverish consolidation activity, evidence on its profitability was mixed. An academic study of short-run stock market reactions to the announcement of 21 major mergers and acquisitions in brewing between 2000 and 2005 found that 11 elicited negative reactions. 34 It also concluded that cumulated reactions of this sort were negative across transactions by Interbrew and Heineken, and positive for SABMiller. But SABMiller’s positive record was due to just one deal: the purchase of Bavaria, the market leader in Colombia, for much less than expected.

And the stock market’s negative reaction to the Interbrew-AmBev mega-merger, for example, seemed not to anticipate the efficiency increases that the new management team from AmBev subsequently squeezed out of the old Interbrew operations. Looking at the positions that resulted from such moves suggested some additional conclusions. According to the same academic study, the relationship between the geographic spread of 48 large listed brewers and measures of their accounting profitability was negative and statistically significant, and there was no simple relationship between overall company size and profitability. 5 Instead, the brewers who earned the highest margins per hl seemed to combine high levels of revenue per hl with strong scale within key national markets (see Exhibit 17). There was also evidence 33 Jonathan Ratner, “Brewers to merge, analyst says,” Financial Post, National Post, July 24, 2007, p. FP6. 34 Oliver Johannes Ebneth, “Internationalisierung Und Unternehmenserfolg Borsennotierter Braukonzerne,” Gottingen, May 2006, p. 141. 35 Ibidem. 11 SM-1529-E Grolsch: Growing Globally of a strong correlation between market concentration and profitability at the national level (see Exhibit 18). 6 Outside of the major brewers, there were thousands upon thousands of commercial breweries worldwide. Smaller brewers typically competed on the strength of their local reputation, history and advertising voice. But even some of the smaller operations were, often with the help of major brewers as well as resources generated by strong domestic positions, beginning to globalize. For example, Baltic Beverages Holdings, the object of the tussle between S&N and Carlsberg, had begun an aggressive pan-European export and distribution drive with its Russian Baltika brand.

As Baltika’s president put it: “The international interest in Russia and Russian business is great, and in my opinion it would only be natural for foreigners interested in Russia to try some Russian beer. And once they’ve tried it, the product’s quality will eventually win out – just as was the case with Corona beer, which was originally a Mexican brand. ”37 Exhibit 1 Top 25 Beer Brands: Total Volume and International Volumes Top 25 World’s Brands TOTAL VOLUMES Brand Top 25 World’s Brands NON-DOMESTIC (INTERNATIONAL) VOLUMES ONLY Brand Brewer Brewer 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Bud (Light) Budweiser Skol Corona SNOW Heineken Brahma Chopp Coors Light Miller Lite Super Dry Tsingtao Beijing Beer Busch (range) Carling Black label (Africa) Carlsberg Amstel Baltika(range) Schincariol/Nova Schin Antarctica Zhujiang Polar (range) Guinness Stella Artois Foster’s Chang Anheuser-Busch Anheuser-Busch InBev Modelo SABMiller Heineken InBev MCBC SABMiller Asahi Tsingtao Beijing Yanjing Anheuser-Busch SABMiller Carlsberg Heineken BBH Schincariol InBev Zhujiang Polar Guinness InBev Foster’s/S&N Beer Thai

Volume Millions of HL (2006E) 50. 4 47. 0 34. 2 32. 7 26. 0 25. 8 24. 2 22. 7 21. 2 17. 5 15. 6 15. 3 15. 2 12. 8 12. 2 12. 2 12. 0 11. 8 10. 8 10. 7 10. 4 10. 1 9. 9 9. 8 9. 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Heineken Corona Carlsberg Budweiser Amstel Stella Artois Guinness Foster’s Brahma Tuborg Beck’s Pale Pilsen Kronenbourg Coors Light Bavaria Tiger Miller Genuine Draft Labatt Holsten Tecate Grolsch Baltica Obolon Kozel Modelo Especial

Heineken Modelo Carlsberg Anheuser-Busch Heineken InBev Guinness Foster’s/S&N InBev Carlsberg InBev San Miguel Phillipines S&N MolsonCoors SABMiller Asia Pacific Breweries SABMiller InBev Carlsberg FEMSA Grolsch BBH Obolon SABMiller Modelo Volume Millions of HL (2006E) 20. 1 11. 9 10. 8 9. 9 9. 6 9. 0 8. 6 8. 6 6. 6 4. 9 3. 6 3. 0 2. 5 2. 3 1. 9 1. 9 1. 7 1. 7 1. 5 1. 4 1. 4 1. 4 1. 3 1. 3 1. 2 Note: The information in “Total Volumes” excludes local brands in China. Source: Company documents 36 Ibidem, p. 42. 37 Galina Stolyarova, “New Ambitions for Russian Beer,” Business Week, July 3, 2007, ttp://www. businessweek. com/globalbiz/content/jul2007/gb2007073_616975. htm? chan=search. Accessed Aug. 23, 2007. 12 SM-1529-E Grolsch: Growing Globally Exhibit 2 Quality Ratings and Market Share Volumes and Average Quality Rating of Leading Beer Brands 4. 50 Grolsch 4. 00 3. 50 Quality Rating (1-5) 3. 00 2. 50 2. 00 1. 50 1. 00 0. 50 Heineken 5. 0 10. 0 15. 0 Volumes (millions of hl) 20. 0 25. 0 Heineken Corona Carlsberg Budweiser Amstel Light Stella Artois Guinness Foster’s Tuborg Beck’s San Miguel Coors Light Miller Labatt Tecate Grolsch Volumes (millions hl) 20. 1 11. 9 10. 8 9. 9 9. 9. 0 8. 6 8. 6 4. 9 3. 6 3. 0 2. 3 1. 7 1. 7 1. 4 1. 4 Avg. Quality Rating 3. 17 3. 37 3. 46 2. 72 3. 33 3. 66 3. 93 2. 94 3. 56 3. 38 3. 73 2. 69 3. 04 3. 22 3. 50 3. 82 13 SM-1529-E Grolsch: Growing Globally Explanation: This chart places leading beer brands (based on non-domestic volume) by volume in millions of hl (shown on the x-axis) and quality rating (shown on the y-axis). Average quality ratings are subjective in nature and were gathered by users of the website (rateitall. com) rating the taste of each beer. The scale was: Terrible (1), Bad (2), Ok (3), Good (4), and Great (5).

Source: Compiled by case writers based on volume information presented in Exhibit 1 and quality rating averages by searching on rateitall. com. Accessed May 28, 2008. 14 SM-1529-E Grolsch: Growing Globally Exhibit 3 Map of the Netherlands 0 0 25 25 50 km 50 mi Delfzijl Leeuwarden Groningen Assen Den Helder North Sea IJmuiden Haarlem The Hague Zwolle AMSTERDAM Enschede Europoort Nijmegen Dordrecht Tilburg Terneuzen Eindhoven Utrecht Rotterdam Amhem GERMANY BELGIUM Maastricht Source: Map from CIA World Factbook. 15 SM-1529-E Grolsch: Growing Globally Exhibit 4 Grolsch Financial History 000 Volumes (millions of hl) Worldwide sales of the Grolsch brand Worldwide sales of all owned brands and beer sold under license % of total volume sold outside the Netherlands P&L Statement (EUR millions) Net Sales EBITDA EBIT Net profit Balance Sheet (EUR millions) Assets Net intangible fixed assets Net tangible fixed assets Financials fixed assets (FFA) Inventories Receivables Cash, cash equivalents & securities Total Assets Equity and Liabilities Shareholders’ equity Provisions Long-term interest bearing debt Short-term interest bearing debt Trade creditors Other non-interest bearing liabilities Shareholders’ Equity and Liabilities 2. 2. 9 not avail 255. 4 56. 6 36. 9 27. 0 2001 2. 9 3. 1 not avail 272. 6 58. 7 38. 6 28. 6 2002 3. 1 3. 3 45. 9% 296. 5 61. 4 42. 9 30. 1 2003 3. 2 3. 4 50. 4% 301. 4 61. 0 42. 4 30. 4 2004 3. 2 3. 4 50. 0% 314. 8 58. 3 32. 1 20. 6 2005 3. 0 3. 3 48. 5% 312. 3 54. 9 25. 2 18. 0 2006 2. 9 3. 2 50. 0% 317. 6 56. 2 25. 7 19. 2 2007 2. 8 3. 3 51. 5% 332. 9 58. 8 28. 6 20. 0 0. 0 77. 4 27. 1 13. 8 48. 1 91. 2 257. 5 158. 6 16. 6 1. 1 0. 0 16. 8 63. 5 257. 5 0. 0 86. 1 50. 9 15. 1 36. 7 93. 9 282. 6 187. 2 13. 6 0. 0 0. 0 24. 7 56. 3 282. 6 0. 7 134. 7 54. 3 16. 2 41. 6 51. 0 298. 5 204. 12. 3 1. 5 0. 0 24. 4 54. 9 298. 5 1. 78 0. 76 20. 66 24. 30 19. 49 16,921,507 882 0. 5 261. 1 41. 8 14. 6 39. 5 11. 8 369. 2 230. 1 11. 4 53. 4 3. 6 12. 6 57. 7 369. 2 1. 80 0. 77 22. 56 23. 48 16. 85 16,921,507 873 1. 5 316. 1 46. 7 17. 7 46. 5 12. 8 441. 3 239. 9 18. 1 101. 9 4. 0 17. 4 60. 1 441. 3 1. 22 0. 59 23. 15 25. 00 20. 90 16,921,507 895 5. 1 312. 9 46. 5 16. 7 56. 9 14. 4 452. 4 244. 8 19. 8 104. 3 9. 9 16. 8 56. 8 452. 4 1. 06 0. 63 21. 85 26. 10 21. 28 16,921,507 880 3. 6 299. 0 40. 8 16. 5 57. 1 49. 8 466. 9 255. 8 24. 1 76. 7 34. 0 19. 6 56. 7 466. 9 1. 13 1. 00 31. 0 33. 59 21. 15 16,921,507 868 2. 2 307. 8 45. 8 19. 8 80. 6 14. 5 470. 7 258. 5 23. 0 111. 5 4. 1 20. 7 52. 9 470. 7 1. 18 47. 88 48. 00 24. 20 16,921,507 875 Performance Per Share (in EUR/share except for number of shares) Net profit per share 1. 60 1. 69 Dividends* 0. 68 0. 72 Share price – year end closing 23. 80 22. 01 Share price – high 25. 20 24. 20 Share price – low 18. 20 15. 50 Weighted average number of ordinary shares** 16,921,507 16,921,507 Other Data Number of Employees 862 902 *Note: In 2006, a plus dividend of 0. 33 was paid on top of the basic dividend of 0. 67.

In 2007, no dividend was paid due to the sale of the company. **The number of shares entitled to dividends at year end were 16,921,507 shares for the entire period (these refer to the number of shares held by third parties). Source: Grolsch Analyst Report, Fortis, February 23, 2007, p. 9 with additions by case writer based on Grolsch Annual Report 2007, pp. 35-37. Volumes (2000-2003) taken from Annual Report 2003, p. 5 and volumes (2004-2007) taken from Annual Report 2007, p. 7. 16 SM-1529-E Grolsch: Growing Globally Exhibit 5 Presentation to Investors showing Strategic Adaptation

Adapted focus and growth target core markets Expansive on-trade policy Adapted market Investments:Increases in Marketing budgets, costs of Development and investment in core market Adapted organizational structure: Business teams, innovation department, R&D brewery Adapted vision/mission Adapted market position Adapted brand strategy – Advertising campaign Top-line: Focus on growth in full-grown beer markets Adapted product Proposition -New design -New concepts Adapted production and internal logistics: Flexible labor Bottom-line: Focus on cost structure and efficiency

Enhancing the efficiency of the new facilities: Efficiency in brewing process and efficiency in filling lines Decreases in overhead expenses Decrease in cost price: Procurement, economic alliances Source: Grolsch IR Presentation, July 2006, Combined slides 24 and 26. 17 SM-1529-E Grolsch: Growing Globally Exhibit 6 Range of Grolsch Products Grolsch Premium Lager Swingtop Bottle New Bottle Cans Other Products Amber Ale Premium Weizen Premium Blonde Amsterdam Range Source: Company Documents. 18 SM-1529-E Grolsch: Growing Globally Exhibit 7 Historical International Expansion Timeline: Grolsch vs.

Heineken 1976-Grolsch 1897-The Swingtop is introduced 1946-Grolsch begins exporting to Egypt, Curacao, Surinam, Gold Coast, India, 1876-Builds a new brewery 1895-The De Groen family takes over 1922-Two breweries merge Sri Lanka, China, Malta and Indonesia importers set up in the US. 1977-Importers set up in the UK Early 1990s Acquisitions in Germany & UK 2004-New Factory Mid-1990s: Push into Eastern Europe & Latin America 2007-SABMiller Acquisition of Grolsch GROLSCH 1615 Willem Neerfeldt Starts brewing In Grolle HEINEKEN 1592-The first incamation of the Haystack in Amsterdam is established 1864-Gerard Heineken buys the Haystack brewery 889-Heineken presented at World Fair in Paris Early 1980s1914Reach volumes of 300,000hl 1927-First International Belgium 1917-First exports to the US 1932-Establishes Malayan Breweries with other investors: 1933-Re-enters the US after prohibition 1935-Acquires breweries in Indies & Belgian Congo 1939-Heineken 1948-Freddy Heineken returns goes public from 2 years in the US as a manager at the company 1954-New green label and logo with the “smiling e’s” 1970sBuys breweries in Europe, Opens new brewery in Holland 1968-Heineken merges with Amstel: 50% of the Dutch market and 70% of exports Consistent colour is used.

Amstel Light introduced to US Early 1990sPush into Eastern Europe. Mid 1990s: Buys European brands 2000s-Buys breweries in Latin America, Russia, Egypt & Lebanon, 2004-JV with Asia Pacific Breweries for China acquisition in Egypt, Dutch East Source: By case writer based on images and data from Grolsch and Heineken’s websites. 19 SM-1529-E Grolsch: Growing Globally Exhibit 8 MABA Framework Market Attractiveness (“MA”) Criteria

MARKET ATTRACTIVENESS (MA) Volume of International Premium Lager Segement in Hectolitres Volume Growth of International Premium Lager Segment in Hectolitres (last three years) Price Differentiation Between International Premium Lager Segment and Top Lager Brand Measures Distance Rated 1 to 5 from to RANGE: 0 hl over 10 million hl RANGE: 0 hl over 1,000 hl RANGE: 0% over 40% See the four distance specific measures below

DISTANCE SPECIFIC MEASURES DISTANCE MEASURES Rated 1 to 5 from Language RANGE: from languages based on other scripts to English, German or Dutch EU Relation RANGE: from non-western country to EU country Transport in EUROS RANGE: from over 1,500 euros GDP per capita RANGE: from less than $10,000 to over $25,000 to less than 500 euros to Note: Each measure is rated from 1 to 5. The ranges are shown under each heading. Source: Drawn by case writer. Based on company documents. Business Assessment (“BA”) Criteria

BUSINESS ASSESSMENT (BA) Volume of Grolsch Premium Lager in Measures Hectolitres Volume Growth of Grolsch Premium Lager in Hectolitres (last five years) Measured in hl Variable Commercial Contribution in euros per Hectolitre Premium Lager Segment Share of Grolsch Premium Lager Measured in hl Rated 1 to 5 Measured in hl Measured in euros Source: Drawn by case writer. Based on company documents. SM-1529-E Grolsch: Growing Globally Exhibit 9 MABA Input and Scores UK France USA Canada Australia New Zealand Sweden Russia Poland 2000 Key Seeding Key Key Key Key Trading Seeding Key 2006 Key Key Key Key Key Key Seeding Seeding Trading

MABA Graph 2006 High USA Canada Market Attractiveness UK Medium Australia Sweden New Zealand Low France Poland Russia Spain China Strong Source: Company Documents. Average Business Assessment Weak SM-1529-E Grolsch: Growing Globally Exhibit 10 Shipping Cost Estimates from Grolsch’s Enschede Plant Estimates of Transport cost/hl by Country (in Euros) 18. 00 16. 00 14. 00 12. 00 10. 00 8. 00 6. 00 4. 00 2. 00 – 16. 52 13. 39 12. 06 10. 54 8. 43 6. 68 6. 10 5. 93 5. 47 4. 21 1. 94 1. 60 1. 47 0. 63 Source: Estimated by case writer based on different shipping formats. Exhibit 11

Cultural Differences in Advertising: UK and US (in percentage) TV Commercials for Beer: the US vs. the UK Value Individualism Modernity Achievement Tradition Eccentricity US 70. 8 45. 8 70. 8 4. 2 4. 2 UK 15. 8 0. 0 10. 5 44. 7 81. 6 Rhetoric Direct Speech Emotional/Sexual Appeal Humorous Appeal Special Occasion? US UK 91. 7 2. 6 78. 9 8. 1 21. 1 91. 9 85. 7 16. 2 (24 TV ads) (38 TV ads) Source: Zahna Caillat and Barbara Mueller, “The Influence of Culture on American and British Advertising: An Exploratory Comparison of Beer Advertising,” Journal of Advertising Research, Vol. 36, 1996.

Be lg iu m G er m R an ot y te rd am ,N L Ze al an d Au st ra lia Sw ed en C an ad a N ew Po la nd Fr an ce R us si a C hi na Sp ai n U S U K SM-1529-E Grolsch: Growing Globally Exhibit 12 Grolsch’s Distribution in Selected Markets Country United States Distribution Agreements 1976-1995 1996-2001 2001-2006 2006-present Imported under its own company, Grolsch Importers Inc. in Atlanta, Georgia Sales, distribution and marketing by Canada’s Seagram Company Sales, distribution and marketing by United States Beverage (USB) Sales, distribution and marketing by Anheuser-Busch United Kingdom 1977-1979 1979-1994 1994-2001 2001-present

Distribution by small independent UK-based distributor Imported through its own company, Grolsch (UK) Ltd. Joint venture with Bass Brewers to brew, distribute and market Grolsch Joint venture partner changed to Coors Canada 1984-1997 1997-2002 2002-present Distribution by Cordevin (later named Rymax) Distribution by Rollick Beverage Company License to brew, distribution and marketing by Sleeman Germany 1991 1994 1994-present Purchase of two regional breweries under a single structure (Rheinisch-Bergische Brauerei) Sale of one of the breweries (Wickueler) to Brau and Brunnen Distribution by Brau and Brunnen

Poland 1995 1996 1998 1998-2003 2003-present Acquisition of indirect stake in Elbrewery (EB) and Hevelius Brewery Purchase of 25% of Australian equity firm Brewpole (which owned 51% of EB and Hevelius Brewery. The other 49% was owned by the Polish government) Sale of its 25% stake of Brewpole Distribution by Brewpole Distribution by Carey Agri Russia 1999 2000 2006-present Investment of €115,000 in the building of a new brewery in Ufa, Bashkortostan Sale of stake in the brewery Alliance with Efes to brew and distribute the Amsterdam brand Portugal 2000-present 2001 2005

Distribution by Sumolis’ unit Cereuro Purchase of a 20% stake in Cereuro Sale of stake in Cereuro Australia/NZ 1985-1991 1991-1998 1998-2006 2006-2007 2007-present Distribution by S. Smith and Son Distribution by Cascade Brewery Co Ltd. Distribution by Tucker Seabrook Distribution by New Zealand’s Independent Liquor Distribution by Premium Beverages France 1999-present Distribution under its own company, Bieres d’Europe with a focus on the Amsterdam brand Source: Created by case writers. SM-1529-E Grolsch: Growing Globally Exhibit 13 Top 20 Countries Consumption

TOP 20 COUNTRIES CONSUMPTION 2000-2011F 000s hectolitres CHINA USA GERMANY BRAZIL RUSSIA JAPAN UK MEXICO SPAIN POLAND SOUTH AFRICA VENEZUELA CANADA UKRAINE FRANCE THAILAND ITALY COLOMBIA AUSTRALIA SOUTH KOREA TOTAL TOP 20 2000 223,116 235,047 103,309 81,836 55,174 71,764 58,550 50,297 29,153 25,072 23,481 18,100 20,709 10,392 21,467 10,664 16,258 15,498 17,400 16,499 1,103,786 2001 227,145 236,654 101,042 83,880 62,987 71,547 58,250 50,939 31,083 25,204 23,015 19,910 21,213 12,247 20,807 11,720 16,672 14,288 17,300 17,787 1,123,689 2002 241,420 239,676 100,564 84,850 70,713 69,780 58,750 51,183 30,870 27,121 23,349 17,550 21,335 14,043 20,629 12,682 16,330 15,313 17,150 18,274 1,151,581 2003 255,626 237,484 97,183 82,876 76,252 65,817 59,120 53,311 33,450 28,318 24,050 15,334 21,491 15,701 21,168 15,788 17,440 15,217 17,000 17,722 1,170,347 2004 286,348 234,969 95,639 85,494 84,790 66,344 58,999 54,684 34,621 28,865 24,940 21,234 22,094 17,490 20,224 16,191 17,194 15,553 16,900 17,629 1,220,203 2005 309,255 232,582 94,994 90,623 90,225 63,708 57,674 57,133 35,590 30,363 25,600 22,565 22,178 21,503 20,354 17,290 17,262 17,006 16,850 16,663 1,259,418 2006F 330,039 230,721 94,200 94,248 95,650 63,106 58,060 59,373 36,480 31,650 26,638 23,852 22,535 24,133 20,252 18,417 17,318 17,762 16,800 16,533 1,297,767 2008F 368,326 225,901 93,094 100,474 105,257 60,562 57,505 63,540 38,065 33,800 28,000 25,748 23,020 27,888 20,009 20,950 17,492 19,569 16,550 16,483 1,362,233 2011F 426,382 220,522 91,232 108,724 115,908 56,063 56,500 68,626 40,792 36,000 30,500 28,575 23,739 32,591 19,711 24,675 17,755 21,352 16,250 16,475 1,452,373 Source: Canadean, Oct. 2006. SM-1529-E Grolsch: Growing Globally Exhibit 13 (continued)

TOTAL CONSUMPTION Ranked by data from 2005 000s hectolitres 2000 WEST EUROPE (Top 10) GERMANY UK SPAIN FRANCE ITALY NETHERLANDS BELGIUM AUSTRIA PORTUGAL IRELAND Others TOTAL EAST EUROPE (Top 5) RUSSIA POLAND UKRAINE CZECH REPUBLIC ROMANIA Others TOTAL 2005 litres PER CAPITA Ranked by data from 2005 2000 2005 103,309 58,550 29,153 21,467 16,258 13,227 10,064 8,964 6,477 5,675 25,736 298,880 94,994 57,674 35,590 20,354 17,262 12,747 9,475 9,087 6,662 5,470 24,899 294,214 WEST EUROPE (Top 10) IRELAND GERMANY AUSTRIA UK BELGIUM FINLAND DENMARK SPAIN NETHERLANDS PORTUGAL TOTAL EAST EUROPE (Top 5) CZECH REPUBLIC ESTONIA LITHUANIA SLOVENIA CROATIA TOTAL 149 126 111 98 98 79 102 71 83 63 77 133 115 111 96 91 87 87 81 78 63 74 55,174 25,072 10,392 16,517 11,470 42,338 160,963 90,225 30,363 21,503 16,205 14,575 45,746 218,617 161 63 63 88 86 40 159 93 91 82 81 55

CENTRAL & SOUTH AMERICA (Top 5) BRAZIL 81,836 MEXICO 50,297 VENEZUELA 18,100 COLOMBIA 15,498 ARGENTINA 12,281 Others 32,811 TOTAL 210,823 NORTH AMERICA USA CANADA TOTAL ASIA (Top 5) CHINA JAPAN THAILAND SOUTH KOREA PHILIPPINES Others TOTAL 90,623 57,133 22,565 17,006 14,195 39,730 241,252 CENTRAL & SOUTH AMERICA (Top 5) ARUBA 98 BRITISH VIRGIN ISLES 110 CAYMAN ISLANDS 118 NETHERLANDS ANTILLES 77 VENEZUELA 74 TOTAL 41 NORTH AMERICA USA CANADA TOTAL ASIA (Top 5) FRENCH POLYNESIA GUAM NEW CALEDONIA JAPAN AMERICAN SAMOA CHINA TOTAL 113 91 89 86 85 43 235,047 20,709 255,756 232,582 22,178 254,760 83 67 82 78 69 78 223,116 71,764 10,664 16,499 11,309 28,277 361,629 309,255 63,708 17,290 16,663 13,976 41,545 462,437 78 68 72 57 53 18 10 69 59 58 50 46 24 13 AUSTRALASIA AUSTRALIA NEW ZEALAND TOTAL 17,400 3,056 20,456 16,850 3,159 20,009

AUSTRALASIA AUSTRALIA NEW ZEALAND TOTAL MIDDLE EAST/NORTH AFRICA (Top 5) BAHRAIN ISRAEL TUNISIA UNITED ARAB EMIRATES LEBANON TOTAL REST OF AFRICA (Top 5) SEYCHELLES GABON SOUTH AFRICA BOTSWANA MAURITIUS Others TOTAL 91 80 89 83 78 82 MIDDLE EAST/NORTH AFRICA (Top 5) EGYPT 1,007 ALGERIA 491 TUNISIA 1,070 MOROCCO 811 ISRAEL 1,100 Others 1,005 TOTAL 5,484 REST OF AFRICA (Top 5) SOUTH AFRICA NIGERIA CAMEROON KENYA ANGOLA Others TOTAL 1,989 1,416 1,001 942 926 1,208 7,482 28 17 11 10 3 2 28 13 10 8 5 2 23,481 5,500 3,606 2,463 1,663 20,129 56,842 25,600 10,180 4,240 3,430 3,321 22,137 68,908 94 67 53 29 33 9 84 64 55 29 29 10 Source: Compiled from Global Beer Trends, Canadean, Oct. 2006. 25 SM-1529-E Grolsch: Growing Globally Exhibit 14

Lager by Type: Premium, Standard and Economy Global Sales of Lager by Price Segement: % Total Volume Breakdown 2000-2005 Billion litres Lager by price platform – Premium Lager – Standard Lager – Economy Lager Total 2000 19. 3 71. 9 35. 7 126. 9 2001 20. 1 72. 4 38 130. 5 2002 21. 1 72. 1 40. 4 133. 6 2003 22. 1 72. 4 42. 1 136. 7 2004 23. 2 74. 3 44. 1 141. 5 2005 23. 9 75. 6 46 145. 5 % total volume Lager by price platform – Premium Lager – Standard Lager – Economy Lager Total 2000 15. 2 56. 7 28. 1 100. 0 2001 15. 4 55. 5 29. 1 100. 0 2002 15. 8 54. 0 30. 2 100. 0 2003 16. 2 53. 0 30. 8 100. 0 2004 16. 4 52. 5 31. 1 100. 0 2005 16. 4 52. 0 31. 6 100. 0

US billions Lager by price platform – Premium Lager – Standard Lager – Economy Lager Total 2000 72. 1 205. 3 40. 5 317. 9 2001 73. 7 193. 2 42. 5 309. 4 2002 80. 2 189. 2 44. 8 314. 3 2003 93. 7 203. 8 48. 3 345. 8 2004 105. 3 219. 1 52. 0 376. 4 2005 112. 1 229. 2 54. 1 395. 4 % value Lager by price platform – Premium Lager – Standard Lager – Economy Lager Total 2000 22. 7 64. 6 12. 8 100. 0 2001 23. 8 62. 5 13. 7 100. 0 2002 25. 5 60. 2 14. 2 100. 0 2003 27. 1 58. 9 14. 0 100. 0 2004 28. 0 58. 2 13. 8 100. 0 2005 28. 4 58. 0 13. 7 100. 0 Source: The World Market for Alcoholic Drinks, Euromonitor International, Dec. 2006, pp. 68-69. 26 SM-1529-E Grolsch: Growing Globally Exhibit 15 Sales of Imported vs. Domestic Lager

SALES OF LAGER BY IMPORT VS DOMESTIC SPLIT BY REGION VOLUMES (in billion litres) Western Europe Imported Domestic Eastern Europe Imported Domestic North America Imported Domestic Latin America Imported Domestic Asia Pacific Imported Domestic Australasia Imported Domestic Africa and Middle East Imported Domestic TOTAL Imported Domestic 2000 24. 9 1. 8 23. 1 14. 5 0. 5 14 24. 7 2. 3 22. 4 21 0. 1 20. 9 34. 8 0. 4 34. 4 1. 7 0 1. 6 5. 3 0. 3 5 126. 9 5. 4 121. 4 2001 24. 9 1. 8 23 15. 4 0. 5 14. 9 24. 7 2. 5 22. 1 21. 6 0. 1 21. 4 36. 9 0. 4 36. 5 1. 7 0. 1 1. 6 5. 4 0. 3 5. 1 130. 6 5. 7 124. 6 2002 24. 9 1. 8 23 16. 3 0. 5 15. 8 24. 8 2. 7 22. 1 21. 5 0. 1 21. 4 38. 8 0. 5 38. 3 1. 6 0. 1 1. 6 5. 7 0. 4 5. 3 133. 6 6. 1 127. 5 2003 25 2 23 17. 3 0. 6 16. 7 24. 8 2. 8 22 21. 4 0. 1 21. 3 40. 7 0. 5 40. 1 1. 6 0. 1 1. 5 5. 9 0. 4 5. 5 136. 7 6. 5 130. 2004 24. 9 2. 1 22. 8 18. 3 0. 7 17. 7 25. 1 2. 9 22. 1 22. 7 0. 2 22. 5 42. 9 0. 6 42. 3 1. 7 0. 1 1. 6 6 0. 4 5. 6 141. 6 7 134. 6 2005 24. 8 2. 1 22. 7 19. 1 0. 7 18. 4 24. 9 3. 1 21. 8 24 0. 2 23. 8 44. 8 0. 6 44. 2 1. 7 0. 1 1. 6 6. 3 0. 5 5. 8 145. 6 7. 3 138. 3 VALUES (in US billion dollars) Western Europe Imported Domestic Eastern Europe Imported Domestic North America Imported Domestic Latin America Imported Domestic Asia Pacific Imported Domestic Australasia Imported Domestic Africa and Middle East Imported Domestic TOTAL Imported Domestic 2000 83. 7 8. 4 75. 3 17 1. 6 15. 4 69. 1 10. 2 58. 9 34 0. 5 33. 5 95. 2 3. 3 91. 9 7 0. 3 6. 7 11. 1. 1 10. 8 317. 9 25. 4 292. 5 2001 82 8. 6 73. 5 18. 6 1. 7 16. 9 70. 7 11. 4 59. 3 33. 7 0. 5 33. 2 86. 8 3. 3 83. 5 6. 3 0. 3 6 11. 3 1. 3 10 309. 4 27. 1 282. 4 2002 87. 6 9. 3 78. 3 20. 6 1. 9 18. 7 73 12. 6 60. 4 30. 6 0. 4 30. 1 84. 5 3. 7 80. 8 6. 7 0. 4 6. 4 11. 3 1. 4 9. 9 314. 3 29. 7 284. 6 2003 103. 9 12 91. 9 23. 6 2. 2 21. 4 75. 3 13. 6 61. 7 32. 1 0. 5 31. 6 88. 2 3. 9 84. 3 8. 2 0. 5 7. 7 14. 5 1. 7 12. 8 345. 8 34. 4 311. 4 2004 115. 3 14. 9 100. 5 26. 4 2. 5 23. 9 79. 2 14. 6 64. 6 35. 1 0. 5 34. 5 94. 1 4. 2 89. 9 9. 7 0. 6 9. 1 16. 7 1. 9 14. 7 376. 5 39. 2 337. 2 2005 119. 9 15. 4 104. 5 29. 4 2. 7 26. 7 81. 5 15. 8 65. 41. 3 0. 7 40. 7 95. 1 4. 4 90. 8 10. 6 0. 7 9. 8 17. 5 2. 1 15. 4 395. 3 41. 8 353. 6 Note: Totals were calculated by case writer and may not exactly tie to other figures mentioned in the report due to rounding. Source: The World Market for Alcoholic Drinks, Euromonitor International, Dec. 2006, pp. 76-77. 27 SM-1529-E Grolsch: Growing Globally Exhibit 16 Major Brewers Company Headquarters Global Market Share 2006 (Volume) Total Volume (hl million) – 2007 5-Year Volume Growth Revenues 2007 (Euro million) Revenues/hl in Euros 5-Year Revenue Growth EBITDA 2007 (Euro million) EBITDA/hl in Euros 5-Year EBITDA Growth InBev Belgium 12. 7% 271. 0 20. % 14,430 53. 25 15. 6% 5,324 19. 65 28. 9% SABMiller* UK 8. 9% 216. 0 13. 3% 13,608 63. 00 17. 9% 2,946 13. 64 22. 1% AnheuserBusch US 8. 8% 189. 6 3. 0% 12,194 64. 30 3. 4% 3,647 19. 23 11. 2% Heineken Netherlands 6. 3% 119. 8 7. 1% 12,564 104. 87 6. 3% 2,292 19. 13 4. 2% Carlsberg** Denmark 5. 2% 115. 2 7. 2% 6,007 52. 14 5. 3% 1,092 9. 48 7. 4% Modelo Mexico 2. 9% 51. 6 4. 2% 4,879 94. 64 9. 0% 1,564 30. 35 9. 8% Molson Coors US/Canada 2. 7% 49. 3 5. 1% 4,524 91. 68 9. 1% 721 14. 62 12. 6% Geographic Distribution of Volume Sales (2006), in percentages Central & South America 42. 0 21. 8 North America 4. 5 29. 4 Asia 18. 7 2. 4 Australasia 0. 2 0. West Europe 15. 1 4. 2 East Europe 19. 5 21. 1 Middle East & North Africa 0 0. 0 Rest of Africa 0 21. 1 0. 9 82. 6 14. 4 0. 0 2. 0 0. 0 0. 0 0. 0 2. 4 7. 4 3. 9 0. 7 35. 9 33. 6 1. 6 14. 6 0. 1 0. 3 7. 6 0. 0 31. 1 59. 6 0. 3 1. 0 68. 9 28. 0 0. 6 0. 7 1. 9 0. 0 0. 0 0. 0 2. 2 73. 8 0. 2 0. 0 23. 8 0. 0 0. 0 0. 0 Major Brands (Percentage in parentheses refers to how much the brand makes up of the company’s overall volume) Skol (15%), Brahma Chopp (10%), Antarctica Pilsen (6%), Stella Artois (4%), Quilmes Cristal (3%), Others – over 200 brands (62%). MillerLight (15%), Carling Black Label (8%), Castle (5%), Miller Genuine Draft (4%), Others (68%)

BudLight (33%), Budweiser (27%), Harbin (9%), Natural (7%), Busch Light (5%), Others (19%) Heineken (11%), Amstel (4%), Star (2%), Cruzcampo (3%), Others (80%) Carlsberg only (excluding BBH): Carlsberg (25%), Tuborg (15%), Super Bock (6%), Holsten (6%), Others (46%) Corona Extra (60%), Modelo Especial (14%), Victoria (7%), Pacifico (6%), Others (13%) Coors Light (49%), Carling (20%), Keystone Light (8%), Coors (3%), Others (20%) All exchange rates were assumed as the 365-day interbank average from Oanda. com Where EBITDA was not reported in annual reports, depreciation and amoritzation was added back to EBIT/Operating profit. *SABMiller’s fiscal year end is in March 31. *Carlsberg includes Baltic Beverage Holding (BBH), which was a 50-50 joint venture with Scottish & Newcastle throughout the period. Source: Compiled by case writer with information from Canadean and company annual reports. 28 SM-1529-E Grolsch: Growing Globally Exhibit 17 Brewers: EBITDA per hectolitres in Euros (2004) Strong scale combined with extreme rev/hl 50,00 45,00 40,00 35,00 30,00 25,00 20,00 15,00 10,00 5,00 0,00 43,40 37,30 35,60 Strong scale combined with extreme rev/hl Benefiting from scale or high rev/hl Lack of scale, low rev/hl or both 25,30 25,20 23,70 21,50 17,90 17,50 17,00 15,70 15,30 12,90 12,80 12,50 12,10 11,50 9,60 8,20 ,20 2,80 Anheuser Busch Femsa Foster’s AmBev CCU S&N Kirin SABMiller Bavaria Modelo Carlsberg InBev MolsonCoors Sapporo Efes Lion Nathan Heineken Source: Oliver Johannes Ebneth, “Internationalisierung Und Unternehmenserfolg Borsennotierter Braukonzerne,” Gottingen, May 2006, p. 126. San Miguel Tsingtao Diageo Asahi 29 SM-1529-E Grolsch: Growing Globally Exhibit 18 Profitability and Concentration in Different Countries 30 % South Africa Brazil 20 % R2 25 % EBITA Margin Canada Russia 15 % Czech Republic Australia Ireland Poland UK 10 % Germany Italy 5% China 0% 0 2000 Netherlands France South Korea Belgium Japan Mexico 4000 6000 8000 10000 HHI

Explanation: The Herfindahl index (HHI) is widely used to measure the degree of industry concentration and is calculated by summing the squares of the market shares of all firms in an industry. The Herfindahl index is higher if a few key players have high market shares than if market shares are spread more evenly across a larger number of firms. Thus, three companies splitting 100% of a market evenly implies a Herfindahl index of 3,333, whereas ten companies splitting 100% of a market evenly implies an index of 1,000. The maximum value of the Herfindahl index – in the case of monopoly – is 10,000. Source: Oliver Johannes Ebneth, “Internationalisierung Und Unternehmenserfolg Borsennotierter Braukonzerne,” Gottingen, May 2006, p. 42. 30 SM-1529-E Grolsch: Growing Globally Appendix A Information on SABMiller 1. Strategic Priorities

Strategic Priority Strategic Priority Creating a balanced and attractive global spread of businesses Explanation Explanation Our geographical spread of operations enables us to capture growth in beer volumes in the developing markets, and value growth as consumers around the world trade upwards from economy to mainstream and from brands. mainstream to premium brands Our aim is to develop an attractive brand portfolio that meets consumers’ needs in each of our markets. In many markets, because the growth is fastest at the top end, we’ve been focusing therefore on our international premium brands, such as Peroni Nastro Azzurro and regional brands such as Kozel in Europe. Good operational performance has always been a SABMiller strength.

While operational standards are already high we are continually pushing them higher as evidenced by growing EBITA and higher margins. We are leveraging our global scale to grow the business. Our business platform enables us, for example, to distribute our international premium brands and build our regional brands. In addition we are using our scale to transfer skills, methods and technologies around the group, improving our operational performance and efficiency. Targets Targets 10% organic volume growth 11% group revenue growth (organic constant currency) Developing strong, relevant brand portfolios in the local market 47% international growth of Peroni Nastro Azzurro 5% growth in premium volume in Europe Constantly raising the performance of local businesses 12% EBITA growth (organic constant currency) 20 basis points increase ingroup EBITA margin Leveraging our global scale 18% revenue CAGR for the last three years 17% improvement in overall equipment effectiveness at Miller over the last 4 years Source: SABMiller plc Annual Report 2007, March 31, 2007, p. 8. 2. Geographic Split of SABMiller’s Business (in percentages) Revenues 2007 Latin America Europe North America Africa and Asia South Africa Corporate Group 23. 5 21. 9 26. 2 7. 8 20. 6 0. 0 100. 0 Revenues 2006 14. 1 21. 3 32. 1 7. 9 24. 7 0. 0 100. EBITA 2007 25. 5 20. 4 10. 4 13. 0 33. 5 -2. 8 100. 0 EBITA 2006 14. 8 19. 3 15. 4 14. 3 39. 0 -2. 9 100. 0 Source: SABMiller plc Annual Report 2007, March 31, 2007, pp. 75-76. 31 SM-1529-E Grolsch: Growing Globally Appendix A (continued) 3. SABMiller’s Notable Brands Pilsner Urquell (Country of Origin: Czech Republic) Pilsner Urquell litreally means “Pilsner from the original source”. It is famous throughout the world for its unique flavor and superior quality. It owes its exceptional qualities to the original production process, finest ingredients and the experience of Czech brewers passed on from generation to generation for over 160 years.

Peroni Nastro Azzurro (Country of Origin: Italy) Peroni Nastro Azzurro is an intensely crisp and refreshing lager, with an unmistakable touch of Italian style, brewed in Italy to the original recipe, since 1963. This premium beer is 5. 1% alcohol by volume and expertly brewed using the finest variety of spring planted barley and the highest quality maize, malts and hops. Its unique taste is refreshing and dry, with a clear-cut, clean character and clarity, achieved through the exclusive brewing process. This ensures that the beer has both a fresh and natural quality. Miller Genuine Draft (Country of Origin: South Africa) Miller Genuine Draft is the authentic international cold filtered bottled draft beer.

Its cold filtering brewing process removes impurities in the beer and enhances its drinkability. Miller Lite (Country of Origin: US) Introduced in America in 1975, Miller Lite created the beer industry’s low-calorie segment. Miller Lite is specially brewed from the finest malted barley, select cereal grains and choicest hops for superior taste in a lessfilling beer. It contains 96 calories per 12 oz. serving. Miller Lite won gold medals in the American-Style Light Lager category at the 1996, 1998, 2002 World Beer Cup competitions. Castle Lager (Country of Origin: South Africa) It is a standard-strength lager with a special taste, somewhat dry, somewhat bitter, never sweet taste.

Snow Beer (Country of Origin: China) The brand is positioned for the premium sector of the market and will be packaged in green non-returnable bottles. The beer itself is bright, almost transparent in nature, with a tight, pure white foam that clings to the glass right to the last drop. The aromatic characteristics of the brand are imparted using only pure imported Satz hops from the Czech Republic. This full-bodied beer is balanced by a high carbonation level and gentle bitterness. ” 32 SM-1529-E Grolsch: Growing Globally Source: Taken directly from SABMiller’s Website, http://www. sabmiller. com/sabmiller. com/en_gb/Our+brands/Brand+information/International+brands/. Accessed December 2, 2007. 33

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