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2009<br />
annual report
On March 25, after accountants<br />
approval of the 2009 figures, the<br />
owners of <strong>Refresco</strong> and 3i, the in-<br />
ternational private equity company,<br />
announced that 3i acquired newly issued<br />
<strong>Refresco</strong> shares, representing a 20% stake in<br />
the share capital of <strong>Refresco</strong>. The total value of the<br />
capital injection amounts to € 84 million and will be fully utili-<br />
zed to realize further growth of <strong>Refresco</strong>. The existing sharehol-<br />
<strong>de</strong>rs, an Icelandic consortium of investors led by Stodir, and the<br />
management of <strong>Refresco</strong>, maintain their shareholdings and fully<br />
support the transaction.<br />
The transaction marks the second time that 3i invests in<br />
<strong>Refresco</strong>, having supported a management buyout in 2003.<br />
After a period of active management, geographic expansion<br />
and significant profitable growth for the company, 3i generated<br />
an excellent return on its investment when in April 2006 3i’s<br />
<strong>Refresco</strong> stake was divested.<br />
Stodir led the buyout of <strong>Refresco</strong> in April 2006 with<br />
Kaupthing Bank and Vifilfell, backing the management team<br />
in a strategy that combined acquisition-based growth with<br />
capital investment for organic growth. After the new capital<br />
New<br />
capital injection<br />
of 84 million<br />
increase, the Icelandic consortium<br />
of investors holds a 62%<br />
share in <strong>Refresco</strong>.<br />
The transaction will enable <strong>Refresco</strong><br />
to realize its growth ambition for the<br />
near future. Through its Buy & Build strategy<br />
<strong>Refresco</strong> can now further extend its presence<br />
in the European market through acquisitions as well as by<br />
internal growth.<br />
For <strong>Refresco</strong>, 3i is a reliable and <strong>de</strong>dicated partner that will<br />
support the company in achieving its goals.<br />
For 3i the investment in <strong>Refresco</strong> provi<strong>de</strong>s an excellent<br />
opportunity to back a clear European market lea<strong>de</strong>r to fulfill<br />
its growth potential. 3i’s advanced knowledge of the business,<br />
combined with an excellent working relationship with the<br />
<strong>Refresco</strong> management team, presents exactly the kind of active<br />
partnership which 3i’s Growth Capital team is attracted to.<br />
Stodir welcomes 3i as an additional sharehol<strong>de</strong>r and believes 3i<br />
to be an excellent strategic partner with an outstanding track<br />
record and high credibility. The transaction confirms the strong<br />
performance of <strong>Refresco</strong> in the recent years, and enables Stodir<br />
to further pursue <strong>Refresco</strong>´s growth strategy.
2009<br />
annual report
The Chinese use two brush strokes<br />
to write the word ‘crisis’.<br />
One brush stroke stands for danger;<br />
the other for opportunity.<br />
In a crisis, be aware of the danger<br />
- but recognize the opportunity.<br />
John F. Kennedy, April 12, 1959
Contents<br />
Highlights 2009 6<br />
<strong>Refresco</strong> at a glance 8<br />
Our locations in Europe 10<br />
Growing strong 12<br />
Business review 2009 14<br />
Strategic <strong>de</strong>velopment 16<br />
Governance 22<br />
Risk management and internal control 22<br />
Corporate governance 26<br />
Supervisory Board Report 2009 28<br />
Sustainable growth 30<br />
Roots & values 30<br />
People & organization 32<br />
Preferred partner 33<br />
Environment 34<br />
Results 2009 36<br />
Outlook 2010 38<br />
Market review 2009 40<br />
Trends in the soft drink & juice market 42<br />
Battle or balance? Developments in private label and A-brands 46<br />
Retailers’ private label growth 53<br />
Building brand equity 55<br />
Financial review 2009 60<br />
Financial statements 64<br />
Auditor’s report 121<br />
Ten years <strong>Refresco</strong> 123<br />
Contact 124<br />
page _ 4 / 5
Highlights<br />
<strong>Refresco</strong> is a leading<br />
European manufacturer<br />
of soft drinks and juices
2009<br />
Our strategic achievements<br />
Strong autonomous growth in Iberia, UK and Nordics.<br />
A continued rationalization process in Germany.<br />
Reinforced focus on operational excellence: a cost-reduction<br />
program started in 2008 paid off in 2009.<br />
The acquisition of Schiffers Foods in the Netherlands<br />
in April 2009 strengthens our position in the Benelux<br />
market.<br />
Closure of a cooperation agreement with Leche Pascual in<br />
April 2009 leads to expansion of the juice business in Spain.<br />
Increased focus on our supply chain to safeguard the<br />
quality of our products.<br />
Our efforts rewar<strong>de</strong>d<br />
Revenue EBITDA<br />
EUR’000 1,400,000 EUR’000<br />
557,626<br />
2004<br />
606,001<br />
2005<br />
660,139<br />
2006<br />
951,613<br />
1,146,082<br />
2007 2008<br />
1,139,574<br />
2009<br />
1,300,000<br />
1,200,000<br />
1,100,000<br />
1,000,000<br />
900,000<br />
800,000<br />
700,000<br />
600,000<br />
500,000<br />
400,000<br />
300,000<br />
200,000<br />
100,000<br />
Revenue 2009 .......................................... EUR 1.14 billion<br />
Volume in liters ........................................ 3.4 billion (+8% vs 2008)<br />
Profit ......................................................... EUR 7.7 million<br />
EBITDA ...................................................... EUR 119.6 million<br />
EBITDA ratio ............................................. 10.5%<br />
Net cash from operating activities ........... EUR 94.9 million<br />
Return on capital employed ..................... 19.8%<br />
62,230<br />
2004<br />
64,112<br />
Note: Figures for 2008 have been restated to comply with IFRS. 2004-2007 are reported un<strong>de</strong>r Dutch GAAP.<br />
2005<br />
63,889<br />
2006<br />
77,451<br />
109,793<br />
2007 2008<br />
119,590<br />
2009<br />
140,000<br />
130,000<br />
120,000<br />
110,000<br />
100,000<br />
90,000<br />
80,000<br />
70,000<br />
60,000<br />
50,000<br />
40,000<br />
30,000<br />
20,000<br />
10,000<br />
page _ 6 / 7
We established a balanced platform<br />
for further growth
<strong>Refresco</strong><br />
at a glance
<strong>Refresco</strong> at a glance<br />
15<br />
14<br />
13<br />
12<br />
19<br />
10<br />
2<br />
H 1<br />
4 3<br />
9<br />
11<br />
5<br />
6<br />
8<br />
7<br />
16<br />
17<br />
18
Our locations in<br />
europe<br />
1 The Netherlands<br />
10<br />
Maarheeze<br />
2 The Netherlands<br />
Bo<strong>de</strong>graven<br />
3 The Netherlands<br />
Hoensbroek<br />
4 Belgium<br />
Ninove<br />
5 Germany<br />
Herrath<br />
6 Germany<br />
Uelzen<br />
7 Germany<br />
Dachwig<br />
8 Germany<br />
Grünsfeld<br />
9 France<br />
St. Donat<br />
France<br />
St. Alban<br />
11<br />
France<br />
Nuits St. Georges<br />
12 Iberia<br />
Oliva<br />
13 Iberia<br />
Marcilla<br />
14 Iberia<br />
Alcolea<br />
15 Iberia<br />
Palma <strong>de</strong>l Río<br />
16 Poland<br />
Kêty<br />
17 Poland<br />
Slemien<br />
18 Finland<br />
Kuopio<br />
19 United Kingdom<br />
Durham<br />
H <strong>Refresco</strong> Holding<br />
Dordrecht<br />
page _ 10 / 11
<strong>Refresco</strong> at a glance<br />
MBO of Menken<br />
Drinks and<br />
<strong>Refresco</strong>s<br />
<strong>de</strong> Sur Europa<br />
from Menken<br />
Holding<br />
85,000<br />
Acquisitions<br />
Krings<br />
Strengthened position in<br />
the Benelux market and<br />
access to the German<br />
market in private label<br />
juices and still drinks<br />
March 30<br />
<strong>Refresco</strong> Holding<br />
foun<strong>de</strong>d<br />
274,638<br />
Growing<br />
strong<br />
269,540<br />
Acquisitions<br />
Délifruits<br />
Access to strong aseptic<br />
PET capabilities and<br />
direct exposure to the<br />
French market<br />
Hardthof<br />
Strengthened position<br />
in Germany and<br />
relationship with hard<br />
discounters<br />
450,229<br />
Acquisitions<br />
Interfruit Vital<br />
Reinforced position in<br />
Iberia and in the hard<br />
discounter channel<br />
Acquisition of<br />
<strong>Refresco</strong> Holding<br />
by 3i<br />
544,463<br />
Acquisitions<br />
VIP-Juicemaker<br />
Footprint in Scandinavia<br />
and platform for the<br />
Baltic States<br />
557,626<br />
1999 2000 2001 2002 2003 2004
606,001<br />
Acquisition of <strong>Refresco</strong><br />
by FL-led consortium<br />
660,139<br />
Acquisitions<br />
Kentpol<br />
First entrance into the<br />
Polish market, company<br />
in carbonated<br />
soft drinks (CSDs) and<br />
mineral water<br />
Histogram<br />
Juice company in<br />
the UK, focused on<br />
contract manufacturing<br />
Nuits St. George<br />
2nd aseptic PET plant<br />
in France, our 1st one is<br />
fully utilized<br />
Sun Beverage Company<br />
Very strong in CSDs and<br />
mineral water in France<br />
and the Benelux<br />
951,613<br />
1,146,082 1,139,574<br />
Acquisitions<br />
Leche Pascual<br />
Rental agreement of the<br />
plant and cooperation<br />
agreement in packaging<br />
Schiffers Food<br />
Achieve No. 1 position in<br />
the Benelux market for<br />
private label soft drinks<br />
and juices<br />
Revenue in eur’000<br />
2005 2006 2007 2008 2009 2010<br />
page _ 12 / 13
We will remain mindful of our vision, to<br />
of soft drinks and juices, whilst speeding up the
ecome Europe’s No. 1 manufacturer<br />
execution of our Buy & Build strategy again<br />
Business review<br />
2009
Hans Roelofs<br />
Aart Duijzer
Strategic <strong>de</strong>velopment<br />
Since its foundation in 2000, <strong>Refresco</strong>’s focus over the years has been on growth by means of a Buy & Build strategy,<br />
both through acquisitions and organically. We recognize that in this business - where consolidation is the trend both on<br />
the supplier’s and the customer’s si<strong>de</strong> - size is crucial to success. Year after year <strong>Refresco</strong> has shown significant growth.<br />
In 2009 the economic situation was challenging for many<br />
companies. Consumer buying behavior has changed and has<br />
become more unpredictable. Spending per head has gone<br />
down in every single category, also in food and beverage.<br />
<strong>Refresco</strong> has been helped by consumers showing an increased<br />
interest in private label products. The volume in liters <strong>Refresco</strong><br />
produced in 2009 grew with 8% to 3.4 billion liters. It was<br />
only due to raw material price drops that the revenue slightly<br />
<strong>de</strong>creased to EUR 1.14 billion.<br />
Conditions on the financial markets are expected to further<br />
improve in the coming twelve months. We are confi<strong>de</strong>nt about<br />
the prospects of our business and we will remain mindful of<br />
our vision, to become Europe’s No. 1 manufacturer of soft<br />
drinks and juices, whilst speeding up the execution of our Buy<br />
& Build strategy again.<br />
Focus on building<br />
This year has been challenging for <strong>Refresco</strong> in the sense that<br />
the financial market did not allow us to execute our acquisition<br />
strategy in the way we inten<strong>de</strong>d. After years of rapid and solid<br />
growth through buying strong companies, the ‘build’ in our<br />
strategy has regained new focus in 2009. We were able to<br />
strengthen our business by setting up <strong>de</strong>dicated programs to<br />
reduce costs and by looking for organic investments that would<br />
make the business grow.<br />
We have been reviewing our European production footprint.<br />
This has resulted in the closure of a production site in Germany<br />
(Burgstetten) and the transfer of various lines between<br />
companies within the Group in or<strong>de</strong>r to optimize utilization of<br />
existing capacities. A cost-reduction program, together with<br />
investments in high-speed production lines, has strengthened<br />
the path towards full cost-price lea<strong>de</strong>rship in the industry. The<br />
focus on cost-price beneficial investments will be kept very<br />
alive in the Group. Every single <strong>de</strong>cision in the total supply<br />
chain of our products has been reviewed and rebalanced. The<br />
current market situation means that we cannot, more than ever<br />
before, allow unnecessary costs in our system.<br />
“It is very often not just about doing things better<br />
or cheaper, but daring to do things differently.”<br />
It is very often not just about doing things better or cheaper,<br />
but daring to do things differently. This challenge to our total<br />
organization has ma<strong>de</strong> us more professional and given us<br />
flexibility in mindset as well as competitive strength.<br />
page _ 16 / 17
Business review 2009<br />
Investments in 2009<br />
As anticipated in the annual report of 2008, <strong>Refresco</strong>’s<br />
investments in 2009 were above the 2008 level. In total<br />
EUR 48.5 million was invested at the nineteen production sites.<br />
Part of the total investments was spent on the expansion of<br />
capacity in the Benelux, France and Iberia. Also in the UK and<br />
Nordics we have been spending capex on new production<br />
lines. All these investments should be seen as the fundament<br />
for further organic growth in 2010. The remain<strong>de</strong>r was spent<br />
on replacement projects, refurbishing and mo<strong>de</strong>rnizing our<br />
manufacturing setup to the required standards. Special focus<br />
was put on cost reduction. Capex projects with clear cost<br />
advantages were ranked as top of the list throughout 2009.<br />
We expect the level of investment in 2010 to be slightly<br />
below the 2009 level.<br />
Acquisition strategy<br />
Since 2000 <strong>Refresco</strong> has successfully realized 10 acquisitions<br />
of strong regional soft drink and juice manufacturers in eight<br />
countries. Because of the turbulent financial markets, which<br />
also impacts <strong>Refresco</strong>’s sharehol<strong>de</strong>rs, we were limited in<br />
carrying out our acquisition strategy in 2009.<br />
Since the end of 2009, the ‘Buy’ in our Buy & Build strategy<br />
regained its focus because the required financial support for<br />
all sizes of acquisition projects became available again in the<br />
market. We will re-accelerate the Buy & Build strategy in the<br />
coming years, where potential targets will have our interest<br />
and will be reviewed. The acquisition strategy for 2010 will<br />
focus on further expansion of our business within our current<br />
geographic presence and adjacent countries.<br />
Within the classical Buy & Build acquisition strategy we<br />
distinguish three acquisition areas that will jointly enable the<br />
accomplishment of our mission: to complete our portfolio, to<br />
expand our presence in new markets, and finally, to increase<br />
throughput of production sites acquired from A-brands. First,<br />
we aim to complete our product portfolio by buying companies<br />
with portfolios of products that strengthen our presence in<br />
existing markets. This way we can realize operational, cost and<br />
purchasing synergies and improve our offerings to customers.<br />
Second, we will acquire companies to expand our presence in<br />
new markets. This will give us access to large markets like the<br />
UK and fast-growing markets such as Eastern Europe. It will<br />
also enable us to realize revenue synergies through cross-selling<br />
products and purchasing synergies; it supports customer growth<br />
too. This will provi<strong>de</strong> a platform for additional international<br />
acquisitions in or<strong>de</strong>r to <strong>de</strong>velop the business further. Third, we<br />
will acquire manufacturing facilities from A-brand companies to<br />
drive earnings uplift by increasing throughput of the acquired<br />
plant. This will also strengthen the relationship with the<br />
A-brand vendor. The combined customer base of retailers and<br />
A-brand companies will allow us to improve plant utilization<br />
without creating conflicts of interest. Because of the worsened<br />
economic situation in 2008 and 2009 and the subsequent drop in<br />
financial back-up we nee<strong>de</strong>d to find alternative ways of growing<br />
our business. We were able to expand our business in another<br />
manner than by acquisitions: through a cooperation agreement.<br />
Acquisitions in 2009<br />
In 2009 two <strong>de</strong>als were closed. A sales and purchase agreement<br />
was closed in the Netherlands in April 2009 with Bavaria N.V. to<br />
acquire the soft drink production site of Bavaria - Schiffers Food<br />
- in Hoensbroek (The Netherlands). Schiffers Food produces<br />
carbonated soft drinks (CSDs) and mineral water in PET, mainly<br />
as a private label for major retailers. This company has become<br />
part of the <strong>Refresco</strong> Benelux business unit, expanding the<br />
portfolio of <strong>Refresco</strong> Benelux with PET for the Dutch market.<br />
It provi<strong>de</strong>s greater opportunities to optimize production in the<br />
Benelux as well as to service the market better.<br />
“This year’s business focus
To expand our juice business in Spain, we closed a cooperation<br />
agreement with Zumos Pascual (part of Grupo Leche Pascual)<br />
in Palma <strong>de</strong>l Río, Córdoba. We rent the production plant at<br />
Palma <strong>de</strong>l Río – excluding the Not From Concentrate (NFC) fresh<br />
orange pressing area – and have closed a co-manufacturing<br />
contract to produce and pack Pascual juices and fruit drinks at<br />
the Palma <strong>de</strong>l Río location. Also, we have ad<strong>de</strong>d manufacturing<br />
activities to the plant to supply our customers in Spain as well<br />
as in Portugal. Finally, we can purchase the yearly surplus of<br />
Vision<br />
To become Europe’s<br />
No. 1 in soft drink<br />
and fruit juice<br />
manufacturing<br />
direct juice (NFC) pressed by Zumos Pascual in Palma <strong>de</strong>l Río.<br />
The rental agreement for the Palma <strong>de</strong>l Rio plant creates<br />
additional capacity in carton and aseptic PET, therefore<br />
contributing to the further organic growth of <strong>Refresco</strong> Iberia.<br />
The contribution of Schiffers Food and Leche Pascual to<br />
<strong>Refresco</strong>’s performance was already nicely visible in 2009<br />
(see note 6.1 of the consolidated financial statements)<br />
and will further increase in 2010.<br />
Mission<br />
To build a European<br />
platform of soft drink<br />
and fruit juice<br />
manufacturers<br />
has been on stabilizing autonomous growth<br />
through implementation of best practices,<br />
consequently creating additional synergies.”<br />
page _ 18 / 19
Business review 2009<br />
Strategic raw material positions<br />
Over the past few years <strong>Refresco</strong> has been building a strong<br />
position as a supplier of direct juice, also know as NFC (Not<br />
produced From Concentrate) juice. Recognizing the ten<strong>de</strong>ncy<br />
of the consumer to prefer NFC juice as opposed to juice from<br />
concentrate compelled us to expand our position further than<br />
our own NFC orange juice facility in Oliva (Spain). <strong>Refresco</strong><br />
entered into a strategic partnership with some of its Brazilian<br />
suppliers and became inspired to create a close cooperation<br />
on NFC with Grupo Leche Pascual in Spain. Backward integration<br />
has not been, and will not be, part of <strong>Refresco</strong>’s strategy.<br />
However, having the ability to guarantee raw material positions<br />
in growing markets is crucial for us to provi<strong>de</strong> the best service<br />
to our customers across Europe.<br />
The availability of Brazilian and Spanish NFC orange juice is<br />
seen as an important tool for <strong>de</strong>veloping one of our core markets.<br />
In many markets, our profile in relation to our customer<br />
base is much more supply-chain oriented than it was in the last<br />
few years. Next to managing cost price, quality and <strong>de</strong>livery<br />
performance, optimization of the total supply chain is increasingly<br />
important.<br />
Realignment of our portfolio<br />
Over the past few years, <strong>Refresco</strong> has increasingly moved<br />
from being mainly a juice producer to being a producer of all<br />
non-alcoholic beverages. This shift was most clearly visible in<br />
the last two years. Although juices still occupy a large share<br />
of the portfolio, with the acquisition of Schiffers Food in 2009,<br />
the presence of carbonated soft drinks (CSDs) and still drinks<br />
has grown and has consi<strong>de</strong>rably strengthened the portfolio.<br />
The acquisition also gives <strong>Refresco</strong> the opportunity to increase<br />
its private label propositions with regard to international<br />
retailers. What is more, it offers the company a more evenly<br />
spread risk profile from a purchasing perspective and enables<br />
us to leverage on purchasing and manufacturing synergies.<br />
The platform for further growth in the total portfolio of nonalcoholic<br />
beverages has been established.<br />
“We will stay focused<br />
on producing non-alcoholic beverages<br />
in all kinds of one-way packaging types for our customers in Europe.”<br />
Matching our strategy, we will stay focused on producing<br />
non-alcoholic beverages in all kinds of one-way packaging<br />
types for two types of customers in Europe – in manufacturing<br />
private label for retailers and co-manufacturing for A-brands.<br />
Throughout the entire supply chain we will invest in relations<br />
to optimize costs and consequently to improve our supply<br />
chain management.
2009 revenue<br />
A focused, well-balanced total portfolio<br />
other 7%<br />
waters 4%<br />
functional/still drinks 6%<br />
ready to drink (RTD) tea 15%<br />
carbonated soft drinks (CSDs) 18%<br />
fruit juices 49%<br />
A broa<strong>de</strong>ned customer base<br />
value brands and others 11%<br />
contract manufacturing 27%<br />
private label 63%<br />
<strong>Refresco</strong> invested in strengthening its relationships with<br />
A-brand customers in 2009. The relationships with Coca-Cola,<br />
Heinz, Orangina Schweppes, PepsiCo and Unilever have evolved<br />
into international strategic supply chain positions. Combining<br />
the production of private label with the co-production of<br />
A-brands gives an opportunity for the customer, as well as for<br />
<strong>Refresco</strong>, to better control the cost price of the final product.<br />
The coming years offer a window of opportunity to enlarge<br />
production and distribution for these customers. The stateof-the-art<br />
status of our plants and level of accreditation of<br />
our companies enable us to be a key supplier for high-end<br />
positioned brands.<br />
aseptic PET 14%<br />
PET 22%<br />
cans 25%<br />
cartons 40%<br />
CEE 2%<br />
UK 3%<br />
Nordic 4%<br />
Iberia 16%<br />
France 20%<br />
Germany 21%<br />
Benelux 34%<br />
Products Channels Packaging Business units<br />
Investments linked to this ability to combine private label<br />
production with production for A-brand manufacturers are<br />
now being leveraged upon. The increased interest for private<br />
label by the consumer further intensified the cooperation with<br />
our (international) retail customer base. Product <strong>de</strong>velopment<br />
of ‘good value for money’ alternatives has played a leading<br />
role in broa<strong>de</strong>ning the shelf space for private label. <strong>Refresco</strong><br />
businesses are increasingly expected to offer a complete<br />
supply chain solution instead of only offering the final product.<br />
This fits in perfectly with our business mo<strong>de</strong>l where we put a<br />
strong focus on long-term relationships with our stakehol<strong>de</strong>rs/<br />
customers.<br />
page _ 20 / 21
Business review 2009<br />
Governance<br />
<strong>Refresco</strong> is committed to run its business with integrity. The governance structure that is <strong>de</strong>scribed in this chapter<br />
reflects how the group is directed and controlled, suiting the interests of its business and stakehol<strong>de</strong>rs. As entrepreneurship<br />
is one of <strong>Refresco</strong>’s most important core values, a certain level of risk taking is part of our nature and is<br />
consi<strong>de</strong>red to be unavoidable when doing business. In this section we <strong>de</strong>scribe possible risks on multiple levels<br />
and how we manage the <strong>de</strong>scribed risks.<br />
Risk management and internal control<br />
A simple <strong>de</strong>finition of risk management is the process of<br />
un<strong>de</strong>rstanding and managing the risks that an organization<br />
inevitably is subject to in attempting to achieve its corporate<br />
objectives. <strong>Refresco</strong>’s risk management and internal control<br />
systems are set up to mitigate the uncertainties that we face,<br />
therefore improving conditions for achieving our objectives.<br />
The following risks can be distinguished.<br />
Strategic risks<br />
<strong>Refresco</strong> may not be able to fully implement its strategy<br />
or achieve the set objectives due to the global financial and<br />
economic situation.<br />
The global economic downturn has impacted economies and<br />
markets in which we operate. Therefore <strong>Refresco</strong> was subject<br />
to a number of risks that might impair our ability to fully<br />
implement our strategy or achieve the set objectives. The<br />
liquidity crisis was limiting the availability of credit, which had<br />
a negative impact on the execution of our inten<strong>de</strong>d acquisition<br />
strategy. <strong>Refresco</strong> realized that to stay healthy and further<br />
strengthen our competitive position in this economic situation,<br />
short-term measures nee<strong>de</strong>d to be taken. To reduce costs in<br />
2008 and 2009 we have reduced working capital significantly.<br />
As a result the cash position of the company remains strong and<br />
working capital control remains tight.<br />
Operational risks<br />
<strong>Refresco</strong> faces risks of economic downturn reducing<br />
sales and/or margins<br />
A large part of <strong>Refresco</strong>’s revenue comes from economies<br />
that are severely affected by the unprece<strong>de</strong>nted economic<br />
slowdown. This has adversely impacted consumer markets<br />
and changes in consumer behavior. <strong>Refresco</strong>’s business is<br />
largely <strong>de</strong>pen<strong>de</strong>nt on continued consumer <strong>de</strong>mand, and less<br />
consumer spending may reduce the sales of our products with<br />
clear implications for revenue and profitability. Last year’s<br />
experience <strong>de</strong>monstrated that the private label soft drink and<br />
juice market is less sensitive to an economic downturn than<br />
other Fast Moving Consumer Goods (FMCG) markets. However,<br />
the margin pressure of our retail customers is stronger than<br />
ever. Within our strategy we aim at a broad portfolio: on<br />
product level, as in customer portfolio, as well as geographical<br />
spread to mitigate risks caused by the negative effect of one<br />
category. <strong>Refresco</strong> closely monitors performance in the most<br />
volatile markets as well as customers and suppliers, and is<br />
able to respond quickly in an effort to protect its business.
Risks related to price fluctuations and supply si<strong>de</strong><br />
Also in 2009 we faced significant volatility in the cost of<br />
various commodities and raw and packaging materials. In<br />
general, we have a policy of purchasing forward contracts<br />
for raw materials and commodities in or<strong>de</strong>r to cover sales<br />
positions with our customers. In addition, we substantially<br />
mitigate remaining risks through a combination of price<br />
increases, supply chain savings and mix improvements. Where<br />
appropriate, we also use futures contracts to hedge future<br />
price movements, especially in relation to purchases in US<br />
dollars. As a result of the acquisitions realized in the past few<br />
years and in 2009 our vulnerability on the supply si<strong>de</strong> has<br />
<strong>de</strong>creased. <strong>Refresco</strong> has increasingly become a total soft drink<br />
producer rather than just a juice producer and has balanced its<br />
customer portfolio -that in the early years mainly consisted of<br />
retail customers- with a larger share of A-brand manufacturers,<br />
thereby creating long-term stability. Whereas the contracts with<br />
retailers are renegotiated every year, we close co-manufacturing<br />
agreements with A-brand manufacturers for 3-5 years, thus<br />
ensuring capacity. This has reduced supply si<strong>de</strong> risk associated<br />
with vulnerability to individual commodities, raw materials and<br />
packaging, and to countries that supply these items.<br />
<strong>Refresco</strong> faces risks related to food safety<br />
Because the supply chain is becoming more and more<br />
internationalized, increasing levels of regulatory and consumer<br />
focus continue to ren<strong>de</strong>r food safety one of <strong>Refresco</strong>’s most<br />
significant business risks. <strong>Refresco</strong> may be confronted with<br />
food problems, including disruptions to the supply chain caused<br />
by food-borne illnesses, which may have a material adverse<br />
effect on <strong>Refresco</strong>’s reputation, sales and results of operations.<br />
To mitigate these risks, every production site has its own<br />
implemented quality system (HACCP) based on critical control<br />
and quality points in the production process in or<strong>de</strong>r to ensure<br />
food safety and quality. Additionally, every production site has<br />
been certified according to the International Food Standard (IFS)<br />
or, in the UK, to the British Retail Consortium (BRC) protocol to<br />
ensure food safety. Notwithstanding economic circumstances,<br />
<strong>Refresco</strong> is committed to not making any compromise on quality.<br />
Financial risks<br />
In addition to the above, <strong>Refresco</strong> is exposed to various<br />
specific risks in connection with our financial operations and<br />
results. These risks inclu<strong>de</strong> the following:<br />
the impact of movement in equity markets, interest rates<br />
and life expectancy on net pension liabilities;<br />
maintenance of group cash flows at an appropriate level;<br />
exposure of <strong>de</strong>bt and cash positions to changes in<br />
interest rates;<br />
potential impact of changes in exchange rates on the<br />
Group’s earnings and on the translation of its un<strong>de</strong>rlying<br />
net assets;<br />
market liquidity and counterparty risks;<br />
behavior of banks and credit insurers.<br />
Risk of losses due to credit risk<br />
There is no significant concentration of credit risk. In general,<br />
<strong>Refresco</strong> <strong>de</strong>als with several large customers and suppliers.<br />
However, as a result of acquisitions ma<strong>de</strong> in 2009, concentration<br />
on individual customers has <strong>de</strong>creased further. Our customers are<br />
subjected to credit limits and/or creditworthiness tests and sales<br />
are subject to payment conditions that are common practice in<br />
each country. Losses because of credit risk are unlikely, especially<br />
since due to the diversification of our activities credit risk from<br />
<strong>de</strong>bt is limited. The effects of the economic recession on our<br />
clients are carefully monitored. Since our customers are leading<br />
European or global retailers and A-brand companies, we do not<br />
insure credit risks.<br />
page _ 22 / 23
Business review 2009<br />
Other risks<br />
<strong>Refresco</strong>’s businesses are exposed to varying <strong>de</strong>grees of risk<br />
and uncertainty related to other factors, including competitive<br />
pricing, consumption levels, physical risks, legislative, fiscal,<br />
tax and regulatory <strong>de</strong>velopments, terrorism and economic,<br />
political, and social conditions in the environments where we<br />
operate. All of these risks could materially affect the Group’s<br />
business, revenue, operating profit, net profit, net assets<br />
and liquidity. There may be other risks that are unknown to<br />
<strong>Refresco</strong> or that are currently believed to be immaterial.<br />
Insurance<br />
As a multinational group with diverse product offerings and<br />
operations in eight countries, <strong>Refresco</strong> is subject to varying<br />
<strong>de</strong>grees of risk and uncertainty. It does not take out insurance<br />
against all risks and retains a significant element of exposure<br />
to those risks against which it is insured. However, its business<br />
assets in each country are insured against insurable risks as<br />
<strong>de</strong>emed appropriate. It is insured against key risks like fire,<br />
business interruption and product and general liability.<br />
Internal Control and Reporting Procedures<br />
In 2008 we started internal audit procedures supported by<br />
KPMG, which were continued in 2009. These procedures play<br />
a key role in providing an objective view and continuous<br />
reassurance of the effectiveness of risk management and<br />
related control systems throughout <strong>Refresco</strong>, to both business<br />
unit management and the Executive Board. The Group recently<br />
established an in<strong>de</strong>pen<strong>de</strong>nt Audit Committee, comprising<br />
entirely of Supervisory Board members, which started its<br />
activities in 2009. The Committee has met twice to discuss<br />
various internal control and audit measures. The Committee<br />
has discussed IFRS reporting standards and agreed to use<br />
them as of 2009.<br />
<strong>Refresco</strong> has a comprehensive budgeting and monthly reporting<br />
system with an annual budget approved by the Executive and<br />
Supervisory Boards. Monthly reporting routines are used to<br />
monitor performance against budget and previous year.<br />
It is <strong>Refresco</strong>’s practice to bring newly acquired companies into<br />
the Group’s governance procedures as soon as is practicable,<br />
and in any event, by the end of the first full year of operation.
page _ 24 / 25
Business review 2009<br />
Corporate governance<br />
Governance Structure<br />
<strong>Refresco</strong>’s governance structure is <strong>de</strong>centralized in or<strong>de</strong>r to<br />
respond quickly to market changes and customer <strong>de</strong>mands.<br />
The structure is built up around a central holding and 19 locally<br />
operating production sites. The production sites are clustered<br />
into four business units in regions where we have multiple<br />
companies and production facilities and three profit centers in<br />
regions with single companies. These seven business entities<br />
operate in<strong>de</strong>pen<strong>de</strong>ntly in their own markets and are held<br />
accountable for their regional performance. It is within our<br />
business philosophy that we keep the lines between Holding<br />
and regional business units and profit centers as short as<br />
possible.<br />
The local business units and profit centers are close to the<br />
customer and can be responsive to their needs. They are<br />
responsible for regional performance. At <strong>Refresco</strong> Holding a<br />
compact team coordinates central functions, realizes scale<br />
benefits and provi<strong>de</strong>s the business units with the tools to run<br />
their businesses in the best way possible. <strong>Refresco</strong> Holding<br />
has a two-tier board structure with an Executive Board that<br />
manages the Group on a day-to-day basis and an in<strong>de</strong>pen<strong>de</strong>nt<br />
Supervisory Board. The Executive and Supervisory Boards meet<br />
regularly.<br />
Executive Board<br />
<strong>Refresco</strong> is managed by the Executive Board, which is<br />
supervised and advised by the Supervisory Board. The<br />
Executive Board is responsible for the overall management<br />
and performance of <strong>Refresco</strong> and for <strong>de</strong>fining and executing<br />
its acquisition strategy. Their agenda inclu<strong>de</strong>s: strategy<br />
formulation, providing annual statements, <strong>de</strong>finition of annual<br />
budget and preparation of business plans, approval of major<br />
capital investments, monitoring of internal controls, acquisition<br />
policy, <strong>de</strong>al making and other important policy matters. The<br />
Executive Board provi<strong>de</strong>s the Supervisory Board with all the<br />
necessary and requested information. Key pieces of information<br />
provi<strong>de</strong>d are the budget, monthly management accounts, the<br />
annual report, proposals for significant investments, acquisition<br />
memoranda, risk management & control reports and major HR<br />
& ICT matters.
Supervisory Board<br />
The Supervisory Board is responsible for supervising and advi-<br />
sing the Executive Board and overseeing the general course of<br />
affairs and strategy of the company. The articles of association<br />
set forth that a number of strategic or otherwise important<br />
<strong>de</strong>cisions require the prior approval of the Supervisory Board.<br />
These inclu<strong>de</strong>: acquisitions, re<strong>de</strong>mptions, significant changes<br />
in the i<strong>de</strong>ntity or nature of the company or its businesses. Each<br />
year the budget is established by the Executive Board and approved<br />
by the Supervisory Board.<br />
The Supervisory Board has formed a remuneration committee<br />
in which proposals from the Executive Board concerning<br />
the remuneration policy for the Group are discussed. The<br />
Supervisory Board has also instituted an audit committee, which<br />
started its activities in 2009. Also other functions (HR, ICT, risk<br />
management) are discussed in the Supervisory Board meeting.<br />
The Chairman of the Supervisory Board is responsible for leading<br />
the Supervisory Board and functions as a sounding board for the<br />
Executive Board.<br />
page _ 26 / 27
Business review 2009<br />
Supervisory Board report<br />
The Supervisory Board is responsible for advising and<br />
supervising the Executive Board of <strong>Refresco</strong> and overseeing<br />
the general company strategy, including the general course<br />
of affairs.<br />
In the execution of their duties the Supervisory Board is<br />
gui<strong>de</strong>d by the overall interest of <strong>Refresco</strong> and relevant<br />
interests of its stakehol<strong>de</strong>rs.<br />
A year of sustainable growth<br />
The year 2009 has been a challenging one for <strong>Refresco</strong>.<br />
Following the substantial acquisitions ma<strong>de</strong> in 2007, the<br />
volume grew by 8% with operational performance on<br />
target and integration of the acquired companies well on<br />
track. Although the economic downturn affected some of<br />
our Icelandic sharehol<strong>de</strong>rs the situation has stabilized and<br />
alternatives to safeguard the continuity of the company and<br />
support further growth were evaluated. In 2009 two major<br />
strategic steps in the further <strong>de</strong>velopment of the Group have<br />
been realized. One concerned the acquisition in the Benelux<br />
of the soft drink division of Bavaria. In Spain, a cooperation<br />
contract with Leche Pascual was agreed upon for their juice<br />
business. Both agreements were closed in April 2009. Other<br />
acquisition targets and projects have been approached and<br />
discussed in or<strong>de</strong>r to create further growth in 2010 and later.<br />
Supervision<br />
The Supervisory Board met frequently in 2009. The meetings<br />
covered routine operational matters and focused on levels of key<br />
resources and strategy implementation. In various meetings the<br />
Supervisory Board discussed the two inten<strong>de</strong>d <strong>de</strong>als and the<br />
integration of the companies within the organizational structure.<br />
The Chairman and CEO had regular contact throughout the year.<br />
In particular, upon the occurrence of the Icelandic financial crisis<br />
the Supervisory and Executive Boards held regular updates to<br />
discuss operational and financial issues.<br />
Subjects discussed during the year’s meetings inclu<strong>de</strong>d:<br />
The medium-term Buy & Build strategy<br />
Potential acquisition opportunities<br />
Senior management appointments and significant human<br />
resources matters<br />
Major capital investments<br />
Operating and financial performance of the subsidiaries<br />
Bank financing arrangements<br />
Budget for 2010<br />
Outlook for the years thereafter<br />
Business plan 2012<br />
Risk and control framework
Composition of the Supervisory Board<br />
In 2009 the following changes were ma<strong>de</strong> to the composition of<br />
<strong>Refresco</strong>’s Supervisory Board. Jan Driessens and Sigurjon Palsson<br />
resigned from the Supervisory Board and Jon Sigurdsson, Hilmar<br />
Thor Kristinsson, Aalt Dijkhuizen and Peter Paul Verhallen were<br />
appointed. Per January 2010 Frans Barel resigned. We would like<br />
to thank Frans Barel, Jan Driessens and Sigurjon Palsson for their<br />
contribution to the Board and the company.<br />
Name Date of initial appointment<br />
Marc Veen May, 2006<br />
Thorsteinn Jonssón May, 2006<br />
Adam Shaw October, 2007<br />
Jon Sigurdsson April, 2009<br />
Hilmar Thor Kristinsson August, 2009<br />
Aalt Dijkhuizen October, 2009<br />
Peter Paul Verhallen October, 2009<br />
Annual Report 2009<br />
This Annual Report and the 2009 financial statements,<br />
audited by PricewaterhouseCoopers Accountants N.V., were<br />
presented to the Supervisory Board in a meeting that inclu<strong>de</strong>d<br />
representatives from PricewaterhouseCoopers Accountants N.V.<br />
Their Auditor’s report can be found on page 121 of this Annual<br />
Report. The Supervisory Board endorses this Annual Report<br />
and recommends that the General Meeting of Sharehol<strong>de</strong>rs<br />
adopt the financial statements for 2009.<br />
In conclusion<br />
We are pleased with the <strong>de</strong>velopment of the company and<br />
the strong operational performance that has been achieved,<br />
<strong>de</strong>spite a turbulent year. We believe that the un<strong>de</strong>rlying<br />
business is good and that the performance in 2010 will<br />
exceed 2009. We would like to express our appreciation<br />
of the commitment and <strong>de</strong>dication of the Executive Board<br />
and all of <strong>Refresco</strong>’s employees<br />
Dordrecht, March 17, 2010<br />
On behalf of the Supervisory Board,<br />
Marc Veen<br />
Chairman<br />
page _ 28 / 29
Business review 2009<br />
Sustainable growth<br />
As a leading European soft drink and fruit juice manufacturer we are committed to responsibly producing and<br />
supplying high quality while focusing on our goal of sustainably increasing the value of our business with regard to<br />
our stakehol<strong>de</strong>rs. We put great emphasis on creating a safe workplace for our people and building our organization.<br />
We aim to be the preferred partner for our customers, suppliers and other parties. Last but not least, we also<br />
acknowledge our responsibility for the environment.<br />
Roots & values<br />
Conditions for sustainable growth are the roots and values<br />
that are at the foundation of the <strong>Refresco</strong> organization. These<br />
roots and values are observed throughout the entire <strong>Refresco</strong><br />
organization and influence the way we do business across the<br />
whole group.<br />
In this section we outline our roots and values and share our<br />
progress over the last year in the above-mentioned three areas<br />
of sustainable growth.<br />
Total portfolio<br />
Speed to market<br />
Innovation-driver<br />
Geographic spread<br />
Scale<br />
Quality Reliability Cost-lea<strong>de</strong>rship<br />
<strong>Refresco</strong> roots & differentiators<br />
<strong>Refresco</strong> roots<br />
Our roots of Quality, Reliability and Cost Lea<strong>de</strong>rship have been<br />
embed<strong>de</strong>d in everything we have done in the past ten years.<br />
We believe they are essential to our people, our suppliers and<br />
our customers. They set the standard for expectations -- a key<br />
condition for success.<br />
Quality<br />
Delivering quality is a central concern to the people in our<br />
organization. We cooperate closely with customers, consi<strong>de</strong>r<br />
the options si<strong>de</strong> by si<strong>de</strong> with them and in many cases conjointly<br />
<strong>de</strong>velop products that will meet their needs and the consumer’s<br />
<strong>de</strong>mand. In cases of co-manufacturing, we <strong>de</strong>liver according to<br />
previously agreed specifications, quantities and time frames.<br />
We maintain a close and preferably long-standing relationship<br />
with our customers at all levels, listening carefully to their<br />
requirements so we can provi<strong>de</strong> them with what they need. We<br />
un<strong>de</strong>rstand the responsibility our customers entrust us with, and<br />
we treat all customer information with integrity.<br />
Each site has adopted a quality assurance approach whereby<br />
production quality is monitored against specifications and<br />
legislation at each stage of production to ensure that the<br />
customer receives good product quality. Every production<br />
site has its own implemented quality system based on critical<br />
control and quality points in the production process to ensure<br />
food safety and quality. Every production site has been certified<br />
according to the International Food Standard (IFS) or, in the UK,
to the British Retail Consortium (BRC) protocol to ensure<br />
food safety. Except for our Polish plants, all production sites are<br />
certified according to ISO 14001 or comparable standards. The<br />
remaining Polish plants are slated to become certified in 2010.<br />
Reliability<br />
We put great emphasis on food safety, quality and <strong>de</strong>livery<br />
performance with our goal being able to exceed our customers’<br />
expectations. Every day we conduct measurements of <strong>de</strong>liveries<br />
to ensure that our customers receive products with the correct<br />
specifications. All of our sites work with a supply and <strong>de</strong>mand<br />
quality system and have implemented or are in the process of<br />
implementing a Group ERP system. In case we need to work<br />
in a ‘just-in-time’ environment with a customer, complicated<br />
and <strong>de</strong>tailed planning and scheduling allow us to <strong>de</strong>liver in the<br />
right place at the right time. In these cases it is of the utmost<br />
importance to closely cooperate with our customers to assist in<br />
improving realistic forecasting and to optimize manufacturing,<br />
scheduling and planning. Our highly experienced professionals<br />
work together in planning, purchasing and logistics teams, to<br />
help ensure timely <strong>de</strong>livery.<br />
Cost Lea<strong>de</strong>rship<br />
Ever since our company started we have been convinced that<br />
cost lea<strong>de</strong>rship is a basic condition for doing business in the<br />
soft drink and juice market. It is our aim to ensure that we can<br />
offer our customers economies of scale without failing customer<br />
service at a local level. We can spread our resources across<br />
the Group within our business mo<strong>de</strong>l and thereby leverage<br />
economies of scale without compromising our flexibility or our<br />
ability to provi<strong>de</strong> our individual customers with service.<br />
The differentiators<br />
Our Total Portfolio, Geographic spread, Speed to market,<br />
Innovation drive and Scale are factors that differentiate us<br />
in the market. We are able to offer a total portfolio of all<br />
non-alcoholic beverages from (carbonated) soft drinks (CSDs)<br />
and waters to direct juice. Because we are present in eight<br />
countries throughout Europe, we keep our distribution<br />
distances as low as possible to help control our customers’<br />
MEASURING QUALITy<br />
To exceed both our own and our customers’ expectations, we<br />
engage in a continuous improvement process in our working<br />
methods. The actions taken are based on learning points<br />
gathered during production as a result of customer questions<br />
or complaints as well as on our own experiences. Information<br />
is shared between business units and production plants<br />
and cross-check analyses are continually being done.<br />
We act quickly on individual customer complaints<br />
to make sure we can prevent re-occurrence.<br />
margins and to address environmental concerns. We can<br />
<strong>de</strong>velop new concepts exceptionally fast in close cooperation<br />
with our customers and launch the results on the market<br />
in an extremely short time frame. Innovation is essential to<br />
encouraging market growth. It is our job to stay ahead of<br />
trends in non-alcoholic beverages and arm our customers with<br />
suitable <strong>de</strong>velopment i<strong>de</strong>as that fit the needs of their own<br />
customers, wherever they may be.<br />
<strong>Refresco</strong> values<br />
Entrepreneurship, No-nonsense, Teamwork, Spirit and Focus are<br />
the values that best <strong>de</strong>scribe the <strong>Refresco</strong> culture and the way we<br />
operate in our day-to-day business. These values are embed<strong>de</strong>d<br />
in the <strong>Refresco</strong> organization, each expressing how we want to<br />
be known in this business. Our people are recruited, rewar<strong>de</strong>d<br />
and appraised using competences that form the baseline of<br />
the aforementioned company values: e.g. results orientation,<br />
<strong>de</strong>cisiveness, open communication and consultative lea<strong>de</strong>rship,<br />
to ensure that the <strong>Refresco</strong> culture is kept alive within the Group.<br />
Entrepreneurship<br />
No-nonsense<br />
Teamwork<br />
Spirit<br />
Focus<br />
<strong>Refresco</strong> values<br />
page _ 30 / 31
Business review 2009<br />
People and organization<br />
<strong>Refresco</strong>’s fast-track growth requires continuous proactive<br />
<strong>de</strong>velopment of the organization and its staff on all levels.<br />
The <strong>Refresco</strong> organization is based on strong and empowered<br />
geographic profit-responsible units and now consists of<br />
four business units in regions where we have multiple<br />
companies and production facilities, and three profit centers<br />
in regions with a single company. In compliance with our<br />
business philosophy, we keep the lines between Holding and<br />
geographies simple and short. By doing so, we can closely<br />
gui<strong>de</strong> and support the unit management to guarantee the<br />
necessary speed in <strong>de</strong>cision-making processes. In 2008, the focus<br />
was on optimization of structures, streamlining of operations and<br />
staffing of senior management positions following the acquisitions<br />
and organic growth of <strong>Refresco</strong> in 2007. Local teams were ready<br />
to manage the increased scope and to realize the projected future<br />
growth of <strong>Refresco</strong>. This year, initiatives have been focused more<br />
around <strong>de</strong>velopment, building on the strategic outlook, culture<br />
and core values that were <strong>de</strong>fined in 2008. Nevertheless, in 2009<br />
several units also continued to streamline their operations and to<br />
rightsize activities.<br />
<strong>Refresco</strong><br />
Benelux<br />
4<br />
factories<br />
<strong>Refresco</strong><br />
France<br />
3<br />
factories<br />
<strong>Refresco</strong><br />
Germany<br />
4<br />
factories<br />
<strong>Refresco</strong><br />
Iberia<br />
4<br />
factories<br />
Holding<br />
to streamline<br />
With the strengthened HR functions across the units, a new<br />
approach to management <strong>de</strong>velopment and talent i<strong>de</strong>ntification<br />
was rolled out, group-wi<strong>de</strong> training initiatives were taken and<br />
on a local level high priority was given to strengthening the<br />
middle management layers of <strong>Refresco</strong>. In general, all units<br />
moved forward in professionalizing their human resources<br />
function, policies and practices.<br />
The focus on <strong>de</strong>velopment and unlocking internal human<br />
potential is very important in being able to accommodate the<br />
fast-paced growth. Because the majority of staff in senior<br />
management positions joined <strong>Refresco</strong> from outsi<strong>de</strong> companies<br />
over the last three years, the ambition is to significantly promote<br />
<strong>Refresco</strong>-groomed management talent to higher positions<br />
in the coming years, within and across (newly acquired)<br />
units. This is why <strong>Refresco</strong> <strong>de</strong>signed and implemented a new<br />
management <strong>de</strong>velopment approach with special inclusion<br />
of middle-management levels. Recruitment efforts started<br />
to be more tuned to employing higher potential talent in<br />
middle-management levels and increasing efforts in coaching<br />
and <strong>de</strong>veloping talent. After they were trained in behavioral<br />
competences, managers across the units engaged in a workshop<br />
<strong>Refresco</strong><br />
Scandinavia<br />
1<br />
factory<br />
<strong>Refresco</strong><br />
Poland<br />
2<br />
factories<br />
<strong>Refresco</strong><br />
UK<br />
1<br />
factory
“In 2009 <strong>Refresco</strong> business units continued<br />
their operations and to rightsize activities”<br />
to <strong>de</strong>fine <strong>Refresco</strong> lea<strong>de</strong>rship behavior, which formed the<br />
backbone for <strong>de</strong>veloping <strong>Refresco</strong> management. A group training<br />
program was <strong>de</strong>signed, for which we use an outsi<strong>de</strong> faculty from<br />
a few selected preferred suppliers, each covering different areas<br />
of lea<strong>de</strong>rship and management skill <strong>de</strong>velopment.<br />
In <strong>Refresco</strong> Benelux and <strong>Refresco</strong> Iberia the acquisition and<br />
integration of Schiffers Food at Hoensbroek and the Zumos<br />
Pascual plant at Palma <strong>de</strong>l Río were successfully accomplished.<br />
<strong>Refresco</strong> Benelux started in cooperation with SBK - a well-known<br />
Dutch training organization - the <strong>Refresco</strong> Aca<strong>de</strong>my, which trains<br />
employees to obtain the diploma of Operator C. The increased<br />
complexity of production lines and product varieties requires<br />
highly skilled personnel. On top <strong>Refresco</strong> wishes to optimize<br />
production line efficiency by means of World Class Manufacturing<br />
techniques. Therefore this integral training structure was set up.<br />
<strong>Refresco</strong> Iberia continued its initiatives to enhance<br />
organizational effectiveness and upgra<strong>de</strong> the quality of middle<br />
management through their ‘Talento’ project.<br />
In <strong>Refresco</strong> Poland, the process of streamlining and rightsizing<br />
was taken a step further whilst at the same time new HRM<br />
initiatives were successfully <strong>de</strong>ployed and overtime and<br />
absenteeism was reduced. Absenteeism was also significantly<br />
reduced in <strong>Refresco</strong> UK.<br />
In <strong>Refresco</strong> Germany, the inten<strong>de</strong>d restructuring of the<br />
manufacturing blueprint was completed including closure of the<br />
Burgstetten plant and the further streamlining of the Uelzen<br />
plant. At <strong>Refresco</strong> France, the turnaround of St. Alban was<br />
successful, which ma<strong>de</strong> the plant an important hub for a major<br />
contract manufacturing customer.<br />
Due to the inclusion of acquisitions the average number<br />
of employees within the <strong>Refresco</strong> Group increased from 2241<br />
to 2318 full time equivalents.<br />
Preferred partner<br />
Our customers<br />
<strong>Refresco</strong> supplies a broad portfolio of customers. On the<br />
one hand, accounting for approx. 60% of our total output,<br />
we manufacture private label products for leading retailers<br />
across Europe. Not only does this comprise <strong>de</strong>livering the end<br />
product, but it also entails responsibility for the entire supply<br />
chain. On the other hand, we co-manufacture for international<br />
A-brands. Their trust in us is rewar<strong>de</strong>d by the quality and<br />
service we <strong>de</strong>liver. We must un<strong>de</strong>rstand our customers’<br />
needs as well as the trends and movements in the markets we<br />
operate in. Close cooperation with our customers is therefore<br />
essential to successful business relationships.<br />
<strong>Refresco</strong>’s organizational mo<strong>de</strong>l is characterized by strong and in<strong>de</strong>pen<strong>de</strong>nt <strong>de</strong>centralized business units with central coordination<br />
focused on specific functions. <strong>Refresco</strong> provi<strong>de</strong>s the business units with the tools to run their operations in the best way<br />
possible. For that purpose <strong>Refresco</strong> started implementing a Group ERP system in 2004. Part of the synergies on past and present<br />
acquisitions can only be realized with better information and coordination. It is in line with the strategy begun in 2004 to roll out<br />
the Group ERP system to the newly formed business units. The central Holding team is set up to support the business units in<br />
their performance. The Holding team provi<strong>de</strong>s the necessary tools, transfers best practices and coordinates synergies across the<br />
companies. The Holding team is purposely kept compact to control costs.<br />
In our business, we focus on long-term cooperation with<br />
customers. Short-term or single collaborations do not fit our<br />
business mo<strong>de</strong>l because we believe in <strong>de</strong>livering high quality<br />
at the right price. This requires major investments that are<br />
not profitable when un<strong>de</strong>rtaking a short-term cooperation.<br />
We aim at market winners who we can offer state-of-the-art<br />
production sites combined with our highly skilled purchasing<br />
and manufacturing staff for turning out high quality products.<br />
Being in the right place at the right time to supply our customers<br />
means we are right behind them in their international expansion.<br />
page _ 32 / 33
Business review 2009<br />
Our suppliers<br />
<strong>Refresco</strong> aims at robust longterm<br />
relationships with its<br />
strategic suppliers based on respect,<br />
trust, mutual benefit and product<br />
<strong>de</strong>velopment. Our customers expect<br />
<strong>Refresco</strong> to maintain high quality standards<br />
and to be cost competitive at the same time.<br />
We expect the same from our suppliers. <strong>Refresco</strong><br />
and its strategic suppliers have seen substantial growth over<br />
the past few years, which is expected to continue in the coming<br />
years. <strong>Refresco</strong> needs its strong partners to support the Buy &<br />
Build strategy for mutual benefit.<br />
Environment<br />
We acknowledge that our manufacturing operations have an<br />
impact on the environment. In our <strong>de</strong>centralized business mo<strong>de</strong>l<br />
each business unit carries its own responsibility regarding<br />
its regional performance, which inclu<strong>de</strong>s environmental<br />
consi<strong>de</strong>rations. As a central Holding in the <strong>de</strong>centralized<br />
organization mo<strong>de</strong>l, we aim at stimulating the regional business<br />
units to take on the responsibility of protecting the environment<br />
whenever the possibility or need arises.<br />
<strong>Refresco</strong>’s business strategy gives priority to our customers’<br />
needs. It is our goal to establish and retain good partnerships<br />
with customers and we align our activities with our customers’<br />
requirements regarding environmental issues. We strive to help<br />
them achieve their targets by investigating and implementing<br />
different materials and manufacturing processes. We have<br />
to take into consi<strong>de</strong>ration that we operate in a low-margin<br />
business where the cost factor is crucial to maintaining<br />
our cost-lea<strong>de</strong>rship position. In the mean time we have a<br />
continuous search for opportunities to manage and reduce<br />
the environmental impact and as a result of our direct control,<br />
we take appropriate action. In addition, we also seek to<br />
minimize other possibly indirect impacts (e.g., that of our<br />
suppliers and customers).<br />
Our efforts have<br />
already resulted in recognition<br />
from our suppliers. On 24 August<br />
2009, Coca-Cola Enterprises (CCE)<br />
han<strong>de</strong>d the Corporate Responsibility and<br />
Sustainability Supplier of the year Award<br />
to supplier <strong>Refresco</strong> France, who in 2008<br />
provi<strong>de</strong>d CCE with exceptional service<br />
in line with their corporate<br />
responsibility and sustainability<br />
criteria.<br />
From a cultural point of view,<br />
we feel that our <strong>de</strong>ep conviction<br />
and attitu<strong>de</strong> of doing things<br />
first time right not only benefits<br />
cost efficiency, but also has a<br />
positive effect on the surrounding<br />
environment.<br />
In 2008 <strong>Refresco</strong> formulated and formalized<br />
a sustainability strategy in a number of concrete steps -<br />
each going above and beyond current legal and contractual<br />
requirements.<br />
In 2009 we have accomplished the following:<br />
We have completed the ISO 14001 certification for the<br />
majority of our production sites, and have slated two<br />
remaining production sites for completion by the end of 2010.<br />
We are engaging our major partners in discussions about<br />
the <strong>Refresco</strong> Sustainability Strategy.<br />
We have initiated a major project every year related to<br />
sustainability. In 2009 this concerned a major solar energy<br />
project in France. In 2010 we plan to start a similar solar<br />
energy project in Germany as well as a waste water project<br />
in France.<br />
We un<strong>de</strong>rtake environmentally friendly product<br />
<strong>de</strong>velopment with packaging suppliers.<br />
Whenever financially possible we keep smaller plants at<br />
geographically dispersed locations open to reduce the<br />
negative environmental impact of related logistics.<br />
We actively communicate our choices to achieve our<br />
goal of having our approach requested by customers and<br />
followed by competitors.
“We have a continuous search for opportunities<br />
to manage and reduce the environmental impact<br />
and as a result of our direct control, we take appropriate action”<br />
As indicated before, in recent years there have been several<br />
individual projects in the <strong>Refresco</strong> business units that have been<br />
carried out on a local level, <strong>de</strong>monstrating acknowledgement<br />
of our responsibility. One example that illustrates this year’s<br />
progress in the area of local environmental initiatives comes<br />
from the business unit <strong>Refresco</strong> France, where we have<br />
increased our warehousing capacity in the Marges site.<br />
In doing so, in cooperation with EDF, we have at the<br />
same time prepared the rooftop for the installation<br />
of solar energy panels. In total a 3.200 m2<br />
of photovoltaic membranes will be built<br />
on the rooftop of the warehouse.<br />
The production is equivalent to the<br />
consumption of 75 households.<br />
Another example comes from <strong>Refresco</strong> Benelux. An agreement<br />
with the Dutch government to reduce energy costs by 30% in<br />
the coming years has been signed by <strong>Refresco</strong> Benelux, together<br />
with the soft drinks association FWS and three big soft drink<br />
producers: Coca-Cola Enterprises, Vrumona and United Soft<br />
Drinks. The producers have agreed to reduce 2% on energy<br />
costs each year until 2020.<br />
We have ma<strong>de</strong> great efforts to have every production<br />
site certified according to international specifications for the<br />
environmental management system ISO 14001. This standard<br />
i<strong>de</strong>ntifies the following: requirements for establishing an environmental<br />
policy; <strong>de</strong>termines environmental aspects and impacts of products/<br />
activities/services; recommends planning environmental objectives and<br />
measurable targets; <strong>de</strong>fines the implementation and operation of programs<br />
to meet objectives and targets; recommends checking and corrective action,<br />
and outlines a management review. Almost every site has obtained<br />
certification in the past few years. For the few remaining plants, audits are<br />
planned for 2010.<br />
page _ 34 / 35
Business review 2009<br />
Results 2009<br />
<strong>Refresco</strong>’s performance in 2009 was influenced by the global economic downturn which started in the second half of<br />
2008. Although we managed to grow our business, we were limited in applying our acquisition strategy. The net result<br />
improved with 20 million from EUR 13,783,000 negative to positive EUR 7,693,000.<br />
The economic recession has not significantly affected<br />
<strong>Refresco</strong>’s overall business thus far, it is still very much in<br />
balance. We saw the largest swings in countries that are more<br />
sensitive to recession, such as Spain and Germany. As a result<br />
of the recession, prices of raw materials, especially packaging<br />
materials, <strong>de</strong>creased in 2009. Also, consumer prices of end<br />
products – especially private label – were lower in 2009.<br />
Retailers increasingly used low value private label propositions<br />
in their promotions with regard to consumers, as already seen<br />
in the past few years.<br />
In 2009 the volume in liters increased by 8% to 3.4 billion liters.<br />
The average selling price per liter <strong>de</strong>creased substantially, mainly<br />
due to lower priced raw materials. This caused the revenue to<br />
stabilize at a level slightly below last year at EUR 1,139,574,000.<br />
On a like-for-like basis excluding the acquisition of Schiffers<br />
and the cooperation agreement with Leche Pascual in 2009 the<br />
revenue was EUR 1,088,458,000.<br />
“In 2009 the volume<br />
The absolute margin as well as the relative margin per unit<br />
has improved. Cost-reduction programs have had a very<br />
positive impact on the performance of the Group.<br />
<strong>Refresco</strong> seeks to maintain a healthy financial position.<br />
The net result improved with 20 million from EUR 13,783,000<br />
negative to positive EUR 7,693,000. At the year end of 2009 the<br />
interest-bearing long-term and short-term loans amounted to EUR<br />
541 million. During 2009 our EBITDA/total <strong>de</strong>bt ratio remained<br />
at an excellent level. In 2009 we were able, yet again, to realize<br />
a significant improvement in our working capital. Consequently,<br />
we did not have to make use of available capital expenditure<br />
financing facilities to finance investments. The cash flow from<br />
operating activities for the year is EUR 94,919,000. The cash<br />
flow for the whole year was positively influenced by a working<br />
capital project which started in April 2008. The overall liquidity<br />
increased from EUR 33,844,000 last year to EUR 58,377,000 per<br />
the end of 2009, due to the improved working capital during<br />
the year. The solvability increased from 12,5% last year to<br />
13,3% per the end of 2009.
in liters increased by 8% to 3.4 billion liters”<br />
page _ 36 / 37
Business review 2009<br />
Outlook 2010<br />
The prospects for 2010 are positive. We expect further growth of our bottom line because of organic growth in the<br />
business units and further optimization of our operational activities. The volumes are also forecasted to increase<br />
because of the growth of private labels. In 2009, retailers enjoyed significant growth, <strong>de</strong>spite (or maybe thanks to)<br />
the difficult economic situation. Outsourcing by A-brands is still expected to increase.<br />
Development of the market<br />
Prices of raw materials, especially packaging materials, have a<br />
ten<strong>de</strong>ncy to increase in 2010. It is anticipated that retailers will<br />
increasingly use low value private label propositions in their<br />
promotions towards consumers. Market share of private label<br />
will grow.<br />
In line with the trends visible in 2009 we expect private label<br />
to grow its volume market share in non-alcoholic beverages<br />
in all our geographies. This increased market share will have<br />
its influence on bran<strong>de</strong>d propositions in the same category.<br />
It is not necessarily the A-brands that will suffer; they will<br />
keep looking for volume compensation by strong investments<br />
in innovations and promotions. It is more likely the less<br />
meaningful brands that do not succeed to excel in product<br />
and image that will feel the most pressure. <strong>Refresco</strong>, which<br />
besi<strong>de</strong>s being a private label producer is also a contract<br />
manufacturer for many local and international brands, might<br />
feel some volume pressure from their contract. It is expected<br />
that the growth of private label will, in 2010, also outperform<br />
the volume <strong>de</strong>velopment trend in contract manufacturing. The<br />
product mix of <strong>Refresco</strong> will shift slightly towards private label.<br />
“Our focus is on <strong>de</strong>livering<br />
Coupled with a solid un<strong>de</strong>rlying business and a diverse<br />
Sharehol<strong>de</strong>rs structure<br />
Since the foundation of the company <strong>Refresco</strong> has always<br />
followed a Buy & Build strategy, which needs the financial<br />
support of sharehol<strong>de</strong>rs. Given the stabilized financial situation<br />
in Iceland in 2009, our sharehol<strong>de</strong>rs can give us support for<br />
further executing our Buy & Build strategy, although the pace<br />
will be adapted to available financial resources.<br />
Budget 2010<br />
The Executive Board believes that 2010 will outperform the<br />
2009 results. There is overall growth of the private label<br />
market as a consequence of the economic downturn. A-brands<br />
have recovered from the first blow caused by an explosive<br />
growth of private label products in the first six months of 2009<br />
and adopted new strategies to regain their positions in the<br />
markets and to satisfy consumers. It is the less meaningful<br />
brands that will keep suffering.<br />
At this moment in time, the company has sufficient financing<br />
and has safeguar<strong>de</strong>d the support of major credit insurance<br />
companies. If nee<strong>de</strong>d, the company can use its additional<br />
revolving credit facility and <strong>de</strong>lay certain spending. The<br />
company is fully compliant with all the bank covenants and<br />
expects to remain so in 2010 and 2011.
high quality and on an ambitious growth strategy<br />
leading to a broad European presence.<br />
product portfolio our partners can benefit from the best quality offered<br />
Strategic focus 2010<br />
After a string of acquisitions in the last two years and full<br />
integration of these businesses in the <strong>Refresco</strong> organization<br />
in 2009, we are convinced that we have firmly established a<br />
sound platform for lea<strong>de</strong>rship in our industry. We are ready<br />
for further growth, although realistically our growth pace in<br />
2010 might be mo<strong>de</strong>st due to the economic situation. The<br />
organization will be challenged to focus on organic growth, the<br />
implementation of best practices and exploration of additional<br />
synergies. Senior management will pay great attention to<br />
our cost base. If we wish to lead the industry we need to<br />
<strong>de</strong>monstrate our cost lea<strong>de</strong>rship in the business. Our focus<br />
on the Buy & Build strategy remains unchanged and we even<br />
expect to accelerate this in the coming years.<br />
In or<strong>de</strong>r to compensate the negative trend in consumer<br />
spending, cost reduction will remain high on our capital<br />
expenditures strategy agenda for 2010. We set up a costreduction<br />
program at the end of 2008 throughout the Holding<br />
and all the business units in or<strong>de</strong>r to enhance our competitive<br />
edge as a low-cost manufacturer and to support bottom-line<br />
growth. A reorganization in the German business unit was<br />
conducted to create a stable and competitive platform in the<br />
German market. Having now created this platform we are ready<br />
for growth in both volumes and margins. Sales contracts have<br />
been closed for a large part and raw material positions have<br />
been taken. We expect gross margins to stay at last year’s<br />
levels. The number of employees will remain stable. Capital<br />
expenditures in property, plant and equipment in 2010 will be<br />
slightly below the amount in 2009. For the risk management<br />
on financial instruments we refer to the notes 3 and 6.2 to the<br />
consolidated financial statements.<br />
As a leading company in this business we acknowledge our<br />
responsibility to our partners and the impact we have on the<br />
environment. Despite a tough economic forecast for 2010<br />
we intend to pay more attention to sustainable growth and<br />
environmental issues conjointly with our supply chain partners.<br />
In 2010 we will increase our focus on cost effectiveness,<br />
<strong>de</strong>livering what we’ve promised as well as sustainability.<br />
By the end of 2010 we expect to have sharpened our profile,<br />
which is essential in accomplishing our mission of building a<br />
European platform of soft drink and juice manufacturers. Our<br />
focus is on <strong>de</strong>livering high quality and on an ambitious growth<br />
strategy leading to a broad European presence. Coupled with<br />
a solid un<strong>de</strong>rlying business and a diverse product portfolio of<br />
non-alcoholic beverages our partners can benefit from the best<br />
quality offered against the lowest costs.<br />
Dordrecht, March 17, 2010<br />
Executive Board<br />
Hans Roelofs<br />
Chief Executive Officer<br />
Aart Duijzer<br />
Chief Financial Officer<br />
against the lowest costs”<br />
page _ 38 / 39
<strong>Refresco</strong> can accommodate the wishes
of its customers,<br />
no matter what consumers choose<br />
Market review<br />
2009
Market review 2009<br />
Trends in the soft drink & juice market<br />
The past year, 2009, was dominated by the recession that started in the second half of 2008 and shook the entire<br />
world. Many segments felt the impact, with consumer behavior drastically turning around. The soft drink and juice<br />
business in which <strong>Refresco</strong> operates was, in its own way, also touched by the economic downturn; however, the impact<br />
was strongly <strong>de</strong>pen<strong>de</strong>nt on segment and category.<br />
In this section we give an overview of the major market trends<br />
in the European soft drink and juice business in the past year.<br />
Information is gained from market intelligence agencies and<br />
from our own experiences.<br />
Market movements<br />
Over the last three years, the growth of the European soft drink<br />
market has been slowing down to a negative 0.4% growth rate<br />
at 145.5 billion liters. For the larger Western European countries<br />
market conditions for growth have been mo<strong>de</strong>st, with large<br />
variations between categories.<br />
Overall, in 2009 the soft drink market in Europe <strong>de</strong>clined<br />
by 2.34 million liters (-1.6%) compared to 2008. European<br />
consumers have reduced their spending fuelled by<br />
unemployment fears and uncertainty over the economic<br />
recovery. Reduced spending has mainly affected on-premise<br />
consumption. In some European markets, off-premise has<br />
compensated for falling on-premise consumption, mainly<br />
as a result of massive price promotions and the excellent<br />
performance of some private label products.<br />
In 2009 packaged water still has the highest market share<br />
(41%) by volume, but suffered a loss of 905 million liters,<br />
mainly as a result of unfavorable weather in parts of Europe,<br />
low on-premise consumption, and consumers switching to<br />
more economical alternatives, such as tap water, as a result<br />
of the economy. Carbonated Soft Drinks (CSDs) <strong>de</strong>clined by<br />
915 million litres in 2009, mainly as a result of heavy losses<br />
in Eastern Europe, with the exception of Poland. In Western<br />
Europe, CSDs registered slight growth, mainly as a result of<br />
the positive performance of private labels in countries such<br />
as Germany. The ‘un-healthy’ image of CSDs is also affecting<br />
growth in some markets but CSDs still maintain the second<br />
largest market share of European consumption at 32.4% for<br />
2009. Juice suffered a loss of 607 million litres, mainly due<br />
to consumers switching to more economical fruit beverages<br />
such as nectars and fruit-flavored still drinks as a result of<br />
the economy. Conversely, the strong move towards smoothies<br />
and Not From Concentrate (NFC) juices continued, filling the<br />
<strong>de</strong>mand for healthier products. Squash/syrups was one of the<br />
few categories to register a positive performance in 2009 as<br />
a result of its cost advantage in times of economic hardship.<br />
Ready to Drink Ice teas/coffee drinks and energy drinks had a<br />
positive performance across Europe, albeit from a low base.<br />
The steady volume growth of energy drinks still perseveres<br />
(9.4%), but these still have a very small market share (1%).
160.000<br />
140.000<br />
120.000<br />
100.000<br />
80.000<br />
60.000<br />
40.000<br />
20.000<br />
Source:<br />
Cana<strong>de</strong>an<br />
Volume (mio liters)<br />
0<br />
Soft drinks growth by volume<br />
1999 2002 2005 2009<br />
Packaged water Juice Nectars Iced/RTD tea drinks Energy drinks<br />
Carbonates Squash / syrups Still drinks Sports drinks<br />
Other<br />
(99-02) (03-06) (07-09)<br />
Other -2,0% 1,5% -1,2%<br />
Energy<br />
Drinks 20,6% 20,5% 15,3%<br />
Sports<br />
Drinks 14,9% 10,7% 1,3%<br />
Iced/<br />
RTD Tea Drinks 5,2% 8,4% 4,9%<br />
Still Drinks 10,2% 5,2% 1,8%<br />
Nectars 10,2% 5,9% -0,6%<br />
Squash/<br />
Syrups -0,2% 0,3% 1,0%<br />
Juice 4,3% 2,3% -3,5%<br />
Carbonates 3,9% 2,3% -0,8%<br />
Packaged<br />
Water 5,6% 3,1% -0,7%<br />
All soft drinks 4,8% 3,0% -0,4%<br />
page _ 42 / 43
Market review 2009<br />
Consumer trends<br />
In recent years there has been a consumer ten<strong>de</strong>ncy towards<br />
more healthy food, convenience, indulgence and ethics. These<br />
drive new innovations and have caused an amalgamation of<br />
traditional segments, such as juices, soft drinks and water<br />
into new concepts, such as still drinks. These trends are still<br />
visible, even in the recent recession. The economic downturn<br />
accelerated a fifth trend, already distinguished in the previous<br />
years: value for money.<br />
First, consumers recognize a connection between healthy food<br />
& drinks and their well-being. The increasing inci<strong>de</strong>nce of<br />
overweight and obesity in the Western world is making people<br />
ever more conscious of the necessity to nourish their bodies<br />
in a healthy way. They are willing to pay more attention to the<br />
food they eat and the beverages they drink in or<strong>de</strong>r to help<br />
them improve their quality of life. CSDs have suffered from this<br />
shift which drives the amalgamation of traditional segments.<br />
Instead of CSDs, people now choose lighter flavored waters<br />
or fruit drinks. This trend is also responsible for the rise in<br />
consumption of fresh pressed Not From Concentrate (NFC)<br />
juices. Anticipating this trend, <strong>Refresco</strong> is investing in backward<br />
integration in orange juice, in Spain for instance.<br />
HEALTH &<br />
WELLNESS<br />
(diet, nutrition)<br />
CONVENIENCE<br />
(lifestyle)<br />
Another way in which <strong>Refresco</strong> contributes to the health<br />
trend is by succeeding in <strong>de</strong>veloping a new CSD without any<br />
preservatives by using a new aseptic technology.<br />
Second, the convenience market is growing because people are<br />
eating out more and eating fast food to make time for more<br />
leisure activities to counter their busy lifestyles.<br />
Third, we see an upward trend in the <strong>de</strong>mand for premium<br />
products, however small they may be, as a result of growing<br />
affluence. Even in times of economic downturn people like to<br />
indulge or treat themselves. Instead of expensive presents,<br />
people now turn to smaller luxury goods, and that causes a<br />
shift to premium-priced, value-ad<strong>de</strong>d products such as fruit<br />
juice smoothies and functional drinks.<br />
Fourth, ethical retailing – and environmental issues (climate<br />
change, recycling, etc.) are gaining ground on the consumer<br />
agenda. Factors un<strong>de</strong>rlining that this trend is growing are: the<br />
proliferation of local recycling schemes, and pilot recycling<br />
programs that will charge on the basis of waste quantity. But<br />
this trend is not yet booming.<br />
VALUE<br />
FOR MONEY<br />
PREMIUM<br />
(indulgence)<br />
ETHICS<br />
(sustainability,<br />
sourcing)
These trends create constant <strong>de</strong>mand for innovation and<br />
diversification. With laboratories at multiple <strong>Refresco</strong><br />
production sites, <strong>Refresco</strong> cooperates with customers to<br />
<strong>de</strong>velop new concepts that fit in with market trends and<br />
needs. This requires an un<strong>de</strong>rstanding of the specific market,<br />
the needs of the consumer, and the ability to respond to<br />
market trends at the right time and place. When it comes to<br />
<strong>de</strong>veloping new products, <strong>Refresco</strong> succeeds because of its<br />
crucial rapid time-to-market.<br />
Fifth, a clear trend that overlaps all other trends is that<br />
consumers choose value for money. On the one hand,<br />
consumers are upgrading to premium products, and on<br />
the other, they choose value for money, something they<br />
can find in private label products. It also accelerated<br />
the trend that had already begun from a health<br />
perspective -- from (100%) juices to typically lowercalorie<br />
and lower-priced fruit drinks and flavored<br />
waters (containing less fruit).<br />
In 2009 we saw a continuing trend of steadily<br />
<strong>de</strong>clining consumer confi<strong>de</strong>nce, already started<br />
in the second half of 2008 as a result of the<br />
economic downturn. The economic climate has had its<br />
consequences for the soft drink & juice market. On the<br />
one hand, consumers took a step back in their spending<br />
patterns, and sought alternative value-for-money products,<br />
which they found in private label products. On the other hand,<br />
as high-end expenses such as cars and luxury goods were<br />
being reconsi<strong>de</strong>red or rejected, people still liked to indulge<br />
themselves with small premium treats. As we estimated, strong<br />
A-brands with clear brand equity have been able to keep their<br />
good positions. By producing a complete and diverse portfolio<br />
<strong>Refresco</strong> can accommodate the wishes of its customers, no<br />
matter what consumers choose.<br />
page _ 44 / 45
Market review 2009<br />
battle or balance? Developments in private<br />
labels and A-brand<br />
The economic downturn, beginning with the mid-2008 credit crunch, has led the world into a recession. The changed<br />
economic situation has caused a change in consumer behavior towards products with a lower value proposition, where<br />
private label products can fill the gap. In Europe, in the non-alcoholic beverages category the private label share accounts<br />
for 25.8% of the market. A-brands started to feel some pressure, but sound and strong brands have recovered or are<br />
<strong>de</strong>termined to recover their market position in the near future. B- and C- brands notice a significant drop in volume.<br />
In this section views, perspectives and comments on the<br />
<strong>de</strong>velopments in private labels and A-brands are given by food<br />
experts and major captains of industry from retail and A-brand<br />
companies.<br />
We spoke to Jan-Willem Grievink, general director of<br />
FoodService Institute The Netherlands Food, who specializes<br />
in international food chain issues and Koen <strong>de</strong> Jong, Managing<br />
Partner at IPLC (International Private Label Consult). Also<br />
interviewed were two food analysts from Rabobank: Sebastiaan<br />
Schreijen, Associate Director Processed Food & Retail and<br />
Francois Sonneville, Industry Analyst Beverage Sector. They<br />
<strong>de</strong>scribe general <strong>de</strong>velopments in the retail food market.<br />
Where did private label first emerge?<br />
According to tradition, the emergence of private labels already<br />
started at the beginning of the twentieth century when a<br />
number of retailers took up producing their own products to be<br />
less <strong>de</strong>pen<strong>de</strong>nt on brand manufacturers. Sebastiaan Schreijen<br />
comments: “Striking is that many established ol<strong>de</strong>r retail<br />
companies started as a milkman or a butcher’s shop at the<br />
beginning of the twentieth century and ad<strong>de</strong>d groceries<br />
to their fresh portfolio to become supermarkets in the<br />
1950s. In essence you can say they started as private<br />
label companies.” Jan-Willem Grievink adds: “The larger<br />
emergence of private labels took place in the fifties.<br />
The general driving forces were pretty much the same<br />
throughout Europe, and every country translated this into its<br />
own cultural context. There are two front-running countries<br />
in Europe: Switzerland and the UK. In Switzerland, in the late<br />
forties, the first private labels were born from a more ethical<br />
angle, when Gottlieb Duttweiler, foun<strong>de</strong>r of the Migros retail<br />
chain in 1925 and socially engaged entrepreneur, argued that all<br />
consumers should have access to products against fair prices.<br />
He believed that products should be much cheaper when<br />
marketing and advertising costs were<br />
stripped.
The surrounding countries, Germany and<br />
Austria, with their typically hard discount<br />
concepts were highly influenced by this<br />
philosophy.<br />
The United Kingdom was the first country<br />
to be signaled where European private labels<br />
competed with A-brands.” Koen <strong>de</strong> Jong:<br />
“Around 25 years ago, retailers in the UK were the<br />
fastest in Europe to transform stores into<br />
brands. The UK situation stands<br />
as the most used example<br />
for the trends in private<br />
label that take place on<br />
the continent.<br />
It was the first time that a<br />
multi-layer private label<br />
strategy was introduced<br />
and that focus was<br />
put on the packaging,<br />
quality and branding<br />
of the store. Until that<br />
time private labels were<br />
mostly white labels of<br />
mo<strong>de</strong>st or inferior quality<br />
against the lowest prices.<br />
This caused a bad image for<br />
private labels and pushed critical<br />
consumers away. In those days private<br />
label was only bought by people who could<br />
not afford more expensive A-brands. Nowadays<br />
private labels are bought by people throughout<br />
all layers<br />
of the population<br />
and are no longer attached<br />
to status. Consumers never have to doubt<br />
the quality of a private label anymore.” Jan-Willem Grievink:<br />
“The early emergence of this high level of private label in the<br />
UK was driven by the emancipation process in the UK which,<br />
compared to the continent, started earlier. This, together<br />
with growing individualism, participation of women in the<br />
work arena, and the growing realization of time as a precious<br />
commodity, created the need for convenience goods. The UK<br />
market is characterized by: ‘If it is good and easy, I am willing<br />
to spend more’. In the UK, retailers pretty soon un<strong>de</strong>rstood this<br />
trend and entered this market with their own labels.”<br />
page _ 46 / 47
Market review 2009<br />
“The premium category offers a huge opportunity<br />
they can build consumer loyalty and are<br />
What differentiations can be ma<strong>de</strong> in private label?<br />
They have enough scale to introduce their private label products<br />
We often make the mistake of talking about private label as one in a wi<strong>de</strong>r range of categories. Second, hard discounters are<br />
single category. The experts distinguish between three types of forcing retailers to have alternatives available for consumers<br />
private label, each having a different starting point, background, looking for value-for-money products. Furthermore, consumer<br />
strategy, and future perspectives. De Jong: “In general we talk awareness has grown through the years; the ‘smart consumer’<br />
about good (value), better (standard), best (premium), the so- was introduced. The recession boosted this trend even further.”<br />
called three-tier structure all carrying the name of the store on Sonneville adds: “An important factor is also: how easily can<br />
the pack. First, we distinguish the type ‘value’: retailers will try you copy a product? And finally, the driving forces behind the<br />
to prevent customers turning to hard discounters<br />
success of private label often coinci<strong>de</strong> with buying<br />
by having their own range of value-formoney<br />
products as an alternative to<br />
hard discount products. Second,<br />
standard: private label can serve<br />
moments and occasions. The recession can<br />
DIFFERENTIATION<br />
function as a stepping stone for private<br />
OF PRIVATE LABEL<br />
label. If the consumer has chosen<br />
Four types can be distinguished:<br />
private label because of its lower<br />
as an alternative to an A-brand:<br />
GOOD<br />
prices during the recession, it is up<br />
a ‘me too’ product. Third, ‘Value’ – an alternative to hard discount products to the food retailer to retain these<br />
premium or niche: more and<br />
more retailers build their own<br />
BETTER<br />
‘Standard’ – ‘me too’ products as an<br />
private label buyers when the<br />
economy recovers. Rather than<br />
retail brand and introduce alternative to traditional mainstream A-brands returning to A-brands, these<br />
products to load their brand<br />
with premium products or to<br />
fill a niche (e.g. organic), often<br />
positioned above A-brands,<br />
BEST<br />
‘Premium’ – loading the retailers<br />
brand via premium or niche products<br />
customers could also opt for<br />
mainstream or premium private<br />
label alternatives.”<br />
transforming the retailer brand<br />
ALTERNATIVE<br />
into an asset.” Grievink: “On top ‘Hard discounter’ – high quality - low<br />
of that, I distinguish a fourth type of<br />
private label in hard discount. This fourth<br />
category of private labels can be found at hard<br />
prices through fancy labels<br />
discounters, who distinguish themselves by a portfolio<br />
of high quality products against low prices presented in fancy<br />
labels. They have no intention to load their own brand via their<br />
products or private labels.”<br />
What explains the success of private label?<br />
Schreijen: “Private label growth is driven by a combination<br />
of three forces: first, retail concentration: the economic<br />
viability of any product launch <strong>de</strong>pends on the size of the<br />
prospective market. Not surprisingly, larger retail chains<br />
generally have been more successful in their private<br />
label strategies.
for retailers <strong>de</strong>veloping private label because<br />
trading up consumers” Koen <strong>de</strong> Jong, IPLC<br />
In what product category does private label have the highest share?<br />
Grievink: “Private label serves several purposes, which makes<br />
its influence so broad throughout all categories and segments.<br />
But looking at single categories, private label has the highest<br />
share in fresh.” De Jong adds: “Fresh is particularly the<br />
domain of the retailers. They are by far in the best position<br />
to organize and optimize the logistical process and make it<br />
highly profitable. The fresh market is too complex for A-brands<br />
because of the logistics. Next to fresh you also find a high<br />
share of private label in commodity products.” Schreijen<br />
comments: “Categories where you can find high shares of<br />
private label are frequently in products with no emotional value<br />
e.g. in paper (tissue, toilet paper etc.). Categories such as beer,<br />
on the contrary, are hard to enter with private label because<br />
of the emotional value attached to beer.” “And,” adds De Jong,<br />
“another category where private label market share is relatively<br />
low is personal care, like shampoo, <strong>de</strong>odorants, and skin care.<br />
Consumers trust the brands they have been using for years and<br />
brand loyalty is very high in this category, partly due to the<br />
heavy promotional support of the brand owners. Apparently<br />
people are sensitive about personal care products and it seems<br />
tough to convince them to try alternatives. Moreover, the<br />
category chocolate candy bars is dominated by A-brands. The<br />
brands are offered in every store, gas station etc., so retailers<br />
are obliged to offer this to their customers as well, and in<br />
addition it seems difficult to produce a shelf-perishable product<br />
for retailers.”<br />
What are the <strong>de</strong>velopments of private label<br />
in the beverages category?<br />
De Jong: “The share of private label in the non-alcoholic<br />
beverages category has been growing fast, which has led to<br />
the disappearance of many B- and C-brands. Looking at the<br />
brand share in non-alcoholic beverages, there is a difference<br />
in non-carbonated soft drinks, like juices and carbonated<br />
soft drinks, like cola. Whereas in non-carbonated soft drinks<br />
there is a high share of local A-brand heroes, in carbonated<br />
soft drinks you see more of the international A-brands. Both<br />
show high brand loyalty. In non-carbonated soft drinks,<br />
retailers are <strong>de</strong>veloping varieties in flavors un<strong>de</strong>r private label<br />
though, which do not yet exist un<strong>de</strong>r A-brands. They have an<br />
advantage here, because it is easy for retailers to vary and<br />
it keeps their shelves vivid. This is a less attractive area for<br />
A-brands because their first goal is to build consumer loyalty<br />
to the product. They will not <strong>de</strong>velop temporary flavors which<br />
have to be removed from the shelf after a short period.”<br />
Where do you see the most striking growth in private label?<br />
Grievink: “Generally speaking, I expect that the total private<br />
label category in Europe will grow in the next few years, not so<br />
much in autonomous growth, but because of the introduction<br />
of new varieties. The front-running countries, the UK and<br />
Switzerland, will show stabilization in growth in private label<br />
share now it has reached about a 50% market share (volume)<br />
in both countries. The biggest growth of private label can<br />
be distinguished in fresh and frozen. These are now already<br />
categories where private label is almost overly represented.<br />
The focus will be even more on convenience, portion packs,<br />
and fresh-cut fruit or vegetables. Along with the growth of<br />
private label products, this category also offers opportunities<br />
for A-brands to enter. Looking at long-term growth over<br />
ten years in the different private label types, I expect the<br />
largest growth in the fourth type: hard discount. Value for<br />
money becomes increasingly more important, and consumers<br />
are becoming smarter. An already visible trend is the hard<br />
discounters transforming into primary supermarkets where<br />
people do their daily or regular shopping.” De Jong refutes this:<br />
“I do not believe that hard discounters will be able to replace<br />
primary supermarkets because their service level is not as high<br />
as that of retailers. Their portfolio is simply too narrow and<br />
shallow. Consumers want choice, and that’s what is lacking in<br />
hard discount. For every product they offer only one variety,<br />
while at retailers’ stores consumers can choose between<br />
several brands, private label and value labels.” Schreijen: “Due<br />
to brand promotions, hard discount is currently growing less<br />
vigorously than end-2008.”<br />
De Jong: “Another type, value (like Carrefour Discount, Tesco<br />
Value or Delhaize 365), is currently growing very strongly, but<br />
since this type is not very profitable for retailers I don’t expect<br />
huge future growth here.”<br />
page _ 48 / 49
Market review 2009<br />
“Retailers need to strike a balance between<br />
their credibility in<br />
Grievink adds: “The ‘value’ type will grow especially because<br />
more varieties will be introduced.” Schreijen: “The growth<br />
currently found in value private label is notably due to the<br />
recession. Retailers are expanding their SKUs and consumers<br />
are getting more price conscious. Grievink: “When the economy<br />
recovers, strong growth will be seen in the rather small third<br />
type of private label: premium, because people can then afford<br />
more luxury.” De Jong adds: “Here lies a huge opportunity for<br />
retailers. They can <strong>de</strong>fine target groups, formulate a theme<br />
that addresses what is going on in society and they can grow<br />
distinct segments, e.g. for the el<strong>de</strong>rly, or halal food, or organic.<br />
This will benefit them because they can adapt it to suit almost<br />
all categories. Not even the biggest A-brand manufacturer has<br />
so many categories at his disposal. Retailers are thus building<br />
consumer loyalty and are in fact trading up consumers. When<br />
A-brands perform less, growth can also be seen in the standard<br />
‘me too’ type.” Schreijen: “On the private label supplier si<strong>de</strong><br />
too there is still room for improvement in terms of efficiency<br />
and consolidation. When you look at the margarine market, for<br />
instance, it is consi<strong>de</strong>red a mature market; a few big suppliers<br />
cover Europe without much overlap.”<br />
What are the biggest challenges for A-brands?<br />
Grievink: “A-brands should be aware of becoming a commodity,<br />
easy to copy and very mainstream. It is expected that in the<br />
coming years about 25% of the A-brands will be in danger<br />
of disappearing. At the same time, retailers are uplifting<br />
stores into brands. They are transforming from being simply<br />
distributors into concepts, representing lifestyles, adding<br />
emotional value to their product. The need to stand out is<br />
growing, showing growth in private label type three ‘premium’.<br />
De Jong: “The biggest challenge for A-brands will be: how<br />
to <strong>de</strong>al with private label after the recession. The past few<br />
years have shown that after a period of economic downturn,<br />
customer loyalty to private label products remains.<br />
The majority of consumers who choose private label will not<br />
go back to choosing A-brands when times get better.”<br />
What should A-brands do to compete with private label?<br />
Grievink: “Innovate & differentiate. We now see the incremental<br />
value of some A-brands disappearing. The only A-brands<br />
that will survive are the ones that grow into ‘superbrands’,<br />
meaning those brands substantially better regarding product<br />
specifications (functionally) and regarding brand experience<br />
(emotionally). Innovation should not only be taking place in<br />
product, but all along the production chain, from product,<br />
packaging, consumer experience to distribution channels etc.<br />
The focus should be on differentiation from other (private<br />
label) products by promoting the quality and the emotional<br />
ad<strong>de</strong>d value. What A-brands absolutely need to avoid is solely<br />
price promotion.” De Jong: “I agree. In these tough times<br />
A-brands should heavily invest in promotions in or<strong>de</strong>r to<br />
support their brands. Advertising costs are now significantly<br />
lower because of the economic situation and the urge is there<br />
to keep the consumer’s loyalty. The current high advertising<br />
budgets spent by the major brands in the UK show that<br />
A-brand manufacturers see the importance of this.”
A-brands and private label to keep<br />
the eyes of the consumer” Jan-Willem Grievink, FCI<br />
PRIvATE lABEl SHARE By COuNTRy IN NON-AlCOHOlIC BEvERAGES<br />
Volume<br />
shares Change<br />
2008 2009<br />
UK 27.4% 26.4% -1.o%<br />
Germany 38.4% 41.6% 3.2%<br />
Belgium 35.5% 33.5% -2.o%<br />
Spain 13.9% 15.1% 1.2%<br />
Portugal 12.6% 14.2% 1.6%<br />
France 29.1% 30.1% 1.o%<br />
Netherlands 34.o% 35.o% 1.o%<br />
Finland 9.5% 9.5% 0.o%<br />
Swe<strong>de</strong>n 19.6% 19.4% -0.2%<br />
Poland 16.8% 18.5% 1.7%<br />
Czech<br />
republic 23.6% 24.4% 0.8%<br />
Slovakia 21.8% 22% 0.2%<br />
Switzerland 30.8% 31.6% 0.8%<br />
Source: Cana<strong>de</strong>an<br />
page _ 50 / 51
Market review 2009<br />
Would co-branding be an option?<br />
De Jong: “I don’t think that strong A-brands would want to<br />
attach their name and product to a retailer’s private label<br />
product. There is no sign that this will become a trend.”<br />
Will retailers turn into 100% private label stores?<br />
Grievink: “No, it is very unlikely that private label share<br />
among retailers will grow to 100%. Only a few will practice<br />
that strategy (M&S, Simply Food). A-brands are used by<br />
retailers to make price comparisons and will never completely<br />
disappear. Retailers need to strike a balance between A-brands<br />
and private label to keep their credibility in the eyes of the<br />
consumer. That is what you see in the fresh and fresh-cut food.<br />
This category is dominated by private label, but retailers are<br />
realizing that they have to balance this category by adding<br />
A-brands. When consumers can buy fresh-cut fruit at the gas<br />
station, they should also be able to buy the same product<br />
they trust and prefer at their supermarket.”<br />
“I see more and more private label<br />
and being able to introduce<br />
Ever since <strong>Refresco</strong> was foun<strong>de</strong>d, our focus has been on the retail<br />
and private label markets. In previous years, however, the retail market<br />
was difficult due to competition between retail formulas, especially between<br />
hard discounters and full service retailers. We saw an opportunity in the trend<br />
among A-brand soft drink manufacturers outsourcing their production. When outsourcing<br />
production, they can fully focus on their core business: building strong consumer brands.<br />
To increase the utilization of existing facilities and return on capital and to broa<strong>de</strong>n our<br />
customer base, thereby reducing our risk profile, <strong>Refresco</strong> increasingly took up co-manufacturing<br />
for A-brands in the past few years, which balances well with our activities for retailers. Since last<br />
year’s economic downturn the focus in the market has increasingly moved back to private label again,<br />
which rebalances the <strong>Refresco</strong> product portfolio for the coming years towards more private label. What<br />
is characteristic in <strong>Refresco</strong>’s <strong>de</strong>velopment is the change to a complete balanced portfolio in products,<br />
customers and locations. Our focus on non-alcoholic beverages remains central to our strategy.
manufacturers taking up product <strong>de</strong>velopment<br />
strong innovations” Sjaak <strong>de</strong> Korte, PLUS<br />
Retailers’ private label growth<br />
The internationalization and consolidation of mo<strong>de</strong>rn retailers<br />
continues. From a global point of view, the top five retailers<br />
cover only a relatively small percentage of total sales of retailers<br />
worldwi<strong>de</strong>. It is not expected that this consolidation trend will end<br />
soon. <strong>Refresco</strong> often enters into a relationship with major retailers<br />
on a symbiotic basis. For <strong>Refresco</strong>, this implies that we will continue<br />
to grow with our customers, who are often the frontrunners<br />
in consolidation and the ones initiating takeovers. We are already<br />
part of their supply chain so, in fact, the trend creates opportunities<br />
for us rather than being a threat. Even more importantly,<br />
increased market share of private label products in consolidated<br />
markets provi<strong>de</strong>s room for our organic growth, consequently<br />
increasing the upward potential for our business.<br />
Market dynamics show the attractiveness for the private<br />
label market. We constantly monitor these movements and,<br />
specifically, the further professionalizing of private labels. We<br />
learn quickly and work with our European customers to achieve<br />
fast and creative implementation of private label concepts.<br />
We asked one of our retail customers in the Netherlands to<br />
comment to the <strong>de</strong>velopments in private label. We spoke with<br />
Sjaak <strong>de</strong> Korte, Commercial Director of PLUS Retail group (The<br />
Netherlands) about <strong>de</strong>velopments in A-brands and private<br />
labels in general and the private label strategy of Plus.<br />
What was the first private label product on the shelves of PLUS?<br />
“The history of PLUS goes back many years. In the 1920s,<br />
there was a price dispute between the groceries cooperation<br />
‘Ons Belang’ and a Dutch A-brand washing pow<strong>de</strong>r, called<br />
‘Dove’. The cooperation refused to buy any more packs of<br />
‘Dove’ soap and instead started producing their own private<br />
label. Symbolically, they named this product after a bird of prey:<br />
Sperwer (a sparrowhawk), known to be the dove’s greatest enemy.<br />
This private label grew from one product to a complete range of<br />
products into a strong private label. Finally, the cooperation was<br />
given the same name as the private label, which heral<strong>de</strong>d the<br />
start of the Sperwer group, the ancestor of PLUS.”<br />
How has private label <strong>de</strong>veloped in your business down the years?<br />
“The start of the Sperwer cooperation was characterized<br />
by predominantly private label products un<strong>de</strong>r the name of<br />
Sperwer, while at the same time offering more and more<br />
A-brands. In later years the private label Sperwer disappeared<br />
from the shelves. In the 1980s the importance of private label<br />
products re-emerged in the market and Sperwer also introduced<br />
a rather obscure, multi-formulaic product: ‘Mijn merk’. At that<br />
time Sperwer was not really focused on a private label strategy,<br />
which did not contribute to its competitive position.<br />
From 2001 onwards, the group continued un<strong>de</strong>r the name PLUS<br />
and increasingly acknowledged that products can be used to<br />
transfer the i<strong>de</strong>ntity of your formula. If you had enough scale,<br />
having a private label was even essential in building brand<br />
equity. I must admit that as far as this <strong>de</strong>velopment goes,<br />
Albert Heijn (Ahold) paved the way for private label products.<br />
It is because of his efforts that consumer trust in private label<br />
increased enormously.<br />
In 2001, the first name-related private label products were<br />
introduced. Initially, these were in traditional categories: the<br />
primary non-food and food. In the last four to five years,<br />
private label products have been introduced in all categories,<br />
in-<strong>de</strong>pth and covering the entire range. We started in<br />
categories where A-brands did not have a dominant position<br />
with ‘me too’ products. In later stages we aimed at more in<strong>de</strong>pth<br />
and across the whole range. We introduced a premium<br />
private label range four years ago, which was rebran<strong>de</strong>d to<br />
PLUS Appétit last year. We do not have our own private label in<br />
the value segment, but offer fancy labels or B- and C-brands as<br />
alternatives to hard discounter products.”<br />
How does private label contribute to your business?<br />
“Private label products are, first and foremost, important in<br />
creating a bond between the formula and the consumer. It is<br />
through our products that we can transfer our i<strong>de</strong>ntity and<br />
enhance the PLUS brand experience. They are also used to<br />
offer our customers price alternatives. Finally, it is an important<br />
way of increasing our margins.”<br />
page _ 52 / 53
Market review 2009<br />
How do you manage to offer both private label and bran<strong>de</strong>d<br />
products si<strong>de</strong> by si<strong>de</strong>?<br />
“The share of private label in our offering is 28%, which has<br />
risen from 22% three years ago. Our target for next year is<br />
to have approximately 30% share, but this will all <strong>de</strong>pend on<br />
consumer preference, profitability and, most importantly, fair<br />
share. The amount of private label products in our offering is<br />
not as important as managing fair share and profitability. These<br />
indicators <strong>de</strong>termine the activity for either private label or<br />
A-brand.”<br />
What is PLUS’ private label strategy for the next few years?<br />
“We believe that a private label strategy is highly <strong>de</strong>pen<strong>de</strong>nt<br />
on necessity. Going back in time, PLUS has always had good<br />
relationships with A-brand companies and we are successful<br />
because our customers know we offer a wi<strong>de</strong> range of<br />
A-brands. This is why we have not set a high target to reach<br />
40% private label share next year, for instance. We have<br />
private label products in all major categories and do not wish<br />
to place private label products in smaller segments that could<br />
lead to the disappearance of A-brands. We do not want to<br />
force our customers to choose private label products instead of<br />
A-brands. Of course, if we feel that margins are too low and it<br />
concerns large volumes, we will consi<strong>de</strong>r introducing our own<br />
private labels.”<br />
“The future of private label<br />
What are your (marketing) research efforts in private label?<br />
“PLUS is part of Superunie, a purchase association that<br />
regularly <strong>de</strong>livers market data. They provi<strong>de</strong> us with a scan of<br />
the market and we jointly <strong>de</strong>ci<strong>de</strong> which segments to target and<br />
which supplier we will cooperate with.”<br />
In which product segment is private label most present?<br />
“Private label is most present in the traditional segments,<br />
like non-food (soap, toilet paper), juices and fresh. These<br />
are categories in which A-brands proved to be insufficiently<br />
distinctive, which created space for the growth of private label<br />
products.”<br />
What do A-brands have to do to keep a preferred position?<br />
“Innovate. And I mean real innovations, not merely updates.<br />
A-brand manufacturers with sufficient research resources –<br />
mainly the larger international companies - will survive. As for<br />
the ones not investing in innovations, it will simply be a matter<br />
of time before they disappear. A-brands have to be distinctive<br />
for consumers and retailers on three factors: content, image<br />
and margin. A-brands should also keep a focus on ad<strong>de</strong>d value.<br />
Take a look at the beer market. It is predominantly the domain<br />
of A-brands. For some reason, no retailer has ever succee<strong>de</strong>d in<br />
introducing a private label in this market, although on product<br />
level there is hardly any difference in taste between each lager<br />
beer brand. Consumers buy these products because they feel<br />
connected to a certain brand for its image, which in the beer<br />
market seems to be the most distinguishing factor. The content<br />
(the product itself) is less important. This is a good example<br />
of how brands can gain a strong position in the mind of the<br />
consumer merely based on image and brand experience.”
is in driving ‘values’ as well as value”<br />
Sainsbury’s Brand Director Judith Batchelar<br />
Where does innovation in soft drinks and juices come from?<br />
“I see more and more private label manufacturers taking<br />
up product <strong>de</strong>velopment and being able to introduce strong<br />
innovations. They often have the advantage of international<br />
presence and scale, so they can transfer products that are<br />
successful in one country to another country, which also<br />
increases volume.”<br />
In which segment do you foresee<br />
the most striking growth of private label share?<br />
“We are planning to introduce private label products in fresh<br />
dairy, which will contribute to a higher private label share. In<br />
general, I expect high growth of private label products in fresh,<br />
coming from new product innovations and the ‘international<br />
corridor’ with international spices and groceries.”<br />
Building brand equity<br />
Sainsbury’s<br />
has a history in private label<br />
that goes back almost a hundred years.<br />
Sainsbury’s Brand Director Judith Batchelar comments:<br />
“The first private label product on our shelves<br />
was Red Label Tea. Since then the range of private label<br />
products has grown to be at about 50% of our turnover, at times<br />
even 60%. Private label share is highest in fresh foods, traditionally<br />
the domain of the retailer. In all cases the choice between placing<br />
an A-brand on the shelves or <strong>de</strong>veloping an alternative private label is<br />
customer-led.” Judith Batchelar foresees for the future that private label<br />
“will be driving ‘values’ as well as value”. She sees the most striking<br />
growth in grocery and frozen.<br />
With the rising popularity of private label, A-brand<br />
manufacturers have to work har<strong>de</strong>r than ever to maintain and<br />
grow their position in the market. The soft drink market is<br />
characterized by short product life cycles, thereby requiring<br />
a strong focus on research & <strong>de</strong>velopment and brand<br />
management. There was already a growing trend among A-brand<br />
soft drink manufacturers to focus on their core competences,<br />
which are: research & <strong>de</strong>velopment and brand management<br />
of their products. But since the explosive growth of private<br />
label and increase of competition from the retailers’ si<strong>de</strong>, this<br />
focus has even intensified. Because the highly competitive soft<br />
drink market is driven by consumer <strong>de</strong>mand it is essential that<br />
manufacturers are able to act quickly on consumer trends by<br />
introducing new products and creating brand equity in or<strong>de</strong>r to<br />
gain a preferred position. The focus of A-brand manufacturers on<br />
building strong and trustworthy brands is necessary to closely<br />
relate to consumers’ specific lifestyles and habits and to stay in<br />
the mind’s eye of the consumer.<br />
We asked two captains of industry to comment on the abovementioned<br />
<strong>de</strong>velopments. First Roel van Neerbos, Presi<strong>de</strong>nt of<br />
Heinz Continental Europe, gives his view on <strong>de</strong>velopments in the<br />
private label market and the impact of this trend on the brand.<br />
What is Heinz’ strategy in competing with private label?<br />
“It is much more a matter of gaining market share with regard to<br />
other A-brands - something Heinz is currently very successful<br />
at. We focus on adding value to consumers with our<br />
brand, true value for which consumers are willing to<br />
pay. Competing with private label is a different<br />
game; it requires another way of thinking.<br />
Private Labels operate on low cost, for<br />
example, and aim to realize an extremely<br />
short time to market. This means for<br />
our bran<strong>de</strong>d operation that we need to<br />
continuously innovate our core products<br />
to stay ahead of the game.<br />
page _ 54 / 55
Market review 2009<br />
“you have to think out of the box<br />
and know where the consumer is”<br />
Roel van Neerbos, Heinz Continental Europe<br />
I believe that natural tension between A-brands and private label<br />
is healthy, because they need each other in the market. Creating<br />
variety of choice for consumers is a good driver for category<br />
growth.”<br />
Are price and promotion the key factors for success?<br />
“I would say promotions are part of the game, but they should,<br />
in my view, especially be aimed at creating ad<strong>de</strong>d value to<br />
consumers as well as retailers, so do not just promote on<br />
price. The more you promote on price, the more consumers will<br />
get used to low prices and adapt their buying behavior to it.<br />
This might, in the long term, have a negative impact on how<br />
consumers value your brand.”<br />
Where does innovation come from in soft drinks and juices:<br />
A-brands or private label?<br />
“The major innovations come from A-brands. The intrinsic<br />
product innovations coming from A-brands should not be too<br />
easy to replicate. For the Dutch market, for instance, we market<br />
the fruit cordial brand Karvan Cevitam. The brand, packed in<br />
shaped can, now contains 75% fruit and is still non-perishable.<br />
This gives us a competitive edge versus competition or private<br />
label, making it a unique product. In the Netherlands, Heinz<br />
has a unique strategic cooperation with <strong>Refresco</strong> on multiple<br />
levels, from research & <strong>de</strong>velopment, logistics, to procurement<br />
and account management. We jointly work on innovation and<br />
brought - un<strong>de</strong>r the brand name Roosvicee - a new RTD juice to<br />
market.”<br />
How do you guarantee your brand to stay preferred<br />
among consumers?<br />
“Next to having intrinsic product benefits, it is key for an<br />
A-brand operation to aim at, so to speak, the right brain<br />
value, meaning we focus on emotional value next to superior<br />
quality. Of course, we constantly innovate the intrinsic value<br />
of our products, but at the same time we add emotional value,<br />
to intensify the customer’s bond with the brand. Heinz, for<br />
instance, is positioned as the pure food company. We focus on<br />
sustainability of our products and processes. Our ketchup, for<br />
instance, is naturally grown, contains only natural ingredients,<br />
symbolized in our advertisements by bottles of Heinz tomato<br />
ketchup growing from tomato plants. In essence we do not<br />
touch this iconic product, because it has proven to be superb.<br />
We do have new product <strong>de</strong>velopments, but for ketchup they<br />
mainly focus on new packaging and in bringing variations in<br />
the flavor range, like Mexican or extra Hot tomato ketchup.<br />
Processed food should be presented as natural as possible.<br />
In our innovations we return to pure food, without any<br />
additives.”<br />
Have A-brands chased the consumer in the arms of private label?<br />
“No, you shouldn’t state it like that. It is better to speak of<br />
dynamics in the market that caused a movement between<br />
brands and private label. On the one hand, there haven’t been<br />
enough innovations from A-brands in some cases. The gap<br />
between an A-brand and private label became too narrow in<br />
terms of product performance and too big in terms of price.<br />
On the other hand, retailers increasingly want to distinguish<br />
themselves. Not only through price promotions or expanding<br />
their range of products, but also by offering alternative<br />
products carrying their name.<br />
This has driven their private label strategy. In some categories,<br />
retailers are also more innovative. The fresh category, in<br />
particular, is dominated by private label. But this is typically a<br />
category in which many retailers started their business and in<br />
which they invested in logistics and innovations. For a brand,<br />
the question is whether you want to enter this category.”<br />
Which sales channels do you explore?<br />
“The most important thing for A-brands is to be present<br />
wherever there are consumers, meaning next to the<br />
supermarket but also Out Of Home (OOH): at the gas station,<br />
snack bars etc. We also explore sales channels that the food<br />
industry has not entered before, such as in the UK where we<br />
sell our BBQ sauces in the BBQ section of gar<strong>de</strong>ning centers.<br />
you have to think out of the box and know where the consumer<br />
is. We focus on retailers that are less private label-min<strong>de</strong>d to<br />
be able to win, together with our partners.”
How do you see the future for private label and A-brands?<br />
“I see private label steadily becoming retailer brands. But<br />
one of the differences with A-brands is that you can only buy<br />
these retailer brands from a specific retailer. Characteristic of<br />
A-brands is the wi<strong>de</strong>-spread distribution, across many<br />
sales channels, from retailers to OOH, locally as well as<br />
internationally and even globally. Another characteristic of a<br />
brand is the focus. There is no one in the world with the 100%<br />
focus on ketchup that Heinz has. When A-brands manage to<br />
keep their ad<strong>de</strong>d value and stay ahead in the market to avoid<br />
becoming a commodity, they will survive and be successful.”<br />
“Quality is to a product<br />
what character is to a man”<br />
Henry John Heinz<br />
page _ 56 / 57
Market review 2009<br />
“I feel that indirectly private labels<br />
are the spur of growth in A-brands”<br />
We also talked with Charles Bouaziz, Presi<strong>de</strong>nt of PepsiCo<br />
Western Europe. He gives his view on <strong>de</strong>velopments in private<br />
label from the perspective of a major A-brand soft drink and<br />
juice manufacturer.<br />
What is your strategy for maintaining market share in<br />
competition with private label?<br />
“Our competition with private label highly <strong>de</strong>pends on the<br />
brands and market segments involved. Taking the case of<br />
juice in the French market, there is frankly little movement<br />
between our brand Tropicana and private label, since there is<br />
not sufficient immediate price difference for people to switch<br />
from the brand to a private label. A look at the juice market in<br />
Germany reveals the same consumer behavior: Punica seems to<br />
be market lea<strong>de</strong>r in fruit-juice based beverages. Then we play<br />
on innovation and differentiation to stay ahead of the curve. In<br />
the carbonated soft drinks segment you see more competition,<br />
especially for brands such as Pepsi.<br />
The fundamental difference with juices is that in CSDs – and<br />
especially in colas - both private label and we have a price<br />
position enabling us to attempt to challenge the lea<strong>de</strong>r<br />
Coca-Cola. It is more appropriate to consi<strong>de</strong>r Pepsi as more of<br />
an ally of private label in the assault on the large segment-dominant<br />
brand than to view the market as one where competition<br />
exists between private label and us. We recognize that some<br />
transfer occurs between the two, especially regarding people<br />
who are heavily price conscious and who switch from Coca-Cola<br />
to Pepsi or private label. This is less the case in other categories<br />
than cola. In the RTD tea segment, for example, there is no<br />
other A-brand than Lipton. The alternatives to Lipton can only<br />
be found in private label, but this will change next year as we<br />
expect Oasis Tea to be introduced in the market. This should<br />
<strong>de</strong>finitely help to bring more dynamism in this segment.”<br />
Are price and promotion the current critical success factors?<br />
“It is difficult to isolate a single parameter. When you have the<br />
ambition to <strong>de</strong>velop a brand you cannot just rely on the factors<br />
of price and promotion. We invested more in brand i<strong>de</strong>ntity<br />
during the period of crisis. This gave us a competitive advan-<br />
Charles Bouaziz, Pepsico West Europe<br />
tage because it helped to distinguish us from other brands that<br />
invested less during the crisis. Because of investment in the<br />
brand, we had been investing less in promotions in response to<br />
distributor <strong>de</strong>mand. Afterwards, we lost some sales opportunities<br />
because of this strategy. The lack of aggressive promotion<br />
meant that our brands could not be retained. We are therefore<br />
required to combine the two. If investments in the brand are replaced<br />
by promotions, the industrial role of an A-brand is abandoned<br />
and we compete on the same grounds as private label.<br />
It would be surprising for Pepsi to cut out brand investments.”<br />
Where will innovation in non-alcoholic beverages and juices<br />
come from? Private label or A-brands?<br />
“The truth is, there is frequently no breakthrough innovation,<br />
only improvements of the product, which can occur on different<br />
levels: manufacturing, packaging or on product level. Innovations<br />
in manufacturing are often not perceived by consumers,<br />
and need to be communicated extensively. Consumers do tend<br />
to benefit, but more at an ethical level (like for example a better<br />
carbon footprint), which is highly <strong>de</strong>termined by subjectivity.<br />
The packaging market has been very static for years, so limited<br />
innovations there. Innovations are more sophisticated at product<br />
level, specifically with regard to raw material sourcing, which<br />
can create different product qualities. Take sanguine orange, for<br />
example – our competitive edge comes from our exclusive sourcing<br />
from Sicily. It remains unique on the market because no one<br />
has ever succee<strong>de</strong>d in finding an equivalent, but that has led to<br />
limited innovation.”<br />
Can private label products enable growth<br />
in product categories?<br />
“I feel that indirectly private labels are the spur of growth in<br />
A-brands. In a market where there is no competition on brand<br />
level, such as in tea beverages, private labels are replacing the<br />
alternative A-brand and force us to be more efficient (quality,<br />
price, etc.). In a competitive market, they are the custodians of<br />
the relation with the consumers. By this, I mean that a lower<br />
price private label prevents A-brands from losing contact with<br />
reality. In general, private label have an important social role in
enabling consumers to acquire quality beverages at affordable<br />
prices.”<br />
How do you view the future of private label and A-brands?<br />
“Everything is a question of balance and differs by country.<br />
If you consi<strong>de</strong>r the cola market in Germany, the Pepsi and Coke<br />
brands represent 37% of the market in volume, whereas private<br />
labels take the lion share with 63%. This reflects the German<br />
distribution system, which is very oriented towards hard<br />
discount, low prices giving private label a great<br />
<strong>de</strong>al of weight. In the UK, private labels<br />
are very strong because they can<br />
position themselves as real<br />
alternatives to A-brands.<br />
This means that they do not just operate on the quality/price<br />
relationship but also on quality/image. In France, only very few<br />
brands focus on innovations. This can create space for private<br />
labels to gain a higher share of the market, such as in Germany<br />
or in UK. But in general, you need a competitive environment<br />
between A-brands and private labels in or<strong>de</strong>r to stimulate the<br />
markets.”<br />
In the midst of an economic<br />
downturn it is even more important for<br />
A-brand manufacturers to build brand loyalty.<br />
The rising popularity of bran<strong>de</strong>d products i<strong>de</strong>ntified<br />
in some markets (UK) is part of a more general mood of<br />
nostalgia among consumers, where people retrench to things<br />
they know and trust because of a long-term relationship: the<br />
good old favorites that remind them of better times. At the same<br />
time, competition between private label products is increasing and<br />
the economic climate is pressuring companies to pay extra attention<br />
to where they can gain any cost advantage. To achieve this, they are<br />
seeking to outsource the manufacturing of their products to specialists,<br />
like <strong>Refresco</strong>, so they can profit from economies of scale and count on<br />
reliable production from people with the right expertise.<br />
page _ 58 / 59
Financial review<br />
2009
financial review 2009<br />
Business is not a financial science,<br />
it’s about trading, buying and selling.<br />
It’s about creating a product<br />
or service so good<br />
that people will pay for it.<br />
Anita Roddick
Contents<br />
Financial statements 64<br />
Consolidated balance sheet as at December 31, 2009 64<br />
Consolidated income statement 2009 65<br />
Consolidated statement of comprehensive income 2009 66<br />
Consolidated cash flow statement 2009 67<br />
Consolidated statement of changes in equity 2009 68<br />
Notes to the consolidated financial statements 69<br />
1 General 69<br />
2 Significant accounting policies 69<br />
3 Financial risk management 77<br />
4 Notes to the consolidated balance sheet 79<br />
5 Notes to the consolidated income statement 94<br />
6 Supplementary information 98<br />
Company balance sheet as at December 31, 2009 112<br />
Company income statement 2009 113<br />
Notes to the company financial statements 114<br />
1 General 114<br />
2 Significant accounting policies 114<br />
3 Notes to the company balance sheet and income statement 114<br />
Other information 118<br />
Auditor’s report 121<br />
Ten years <strong>Refresco</strong> 123<br />
page _ 62 / 63
Financial review 2009<br />
Consolidated balance sheet<br />
As at December 31<br />
EUR’000<br />
ASSETS<br />
note<br />
2009 2008<br />
Non-current assets<br />
Property, plant and equipment 4.1 328,807 323,023<br />
Intangible assets 4.2 274,859 271,769<br />
Other investments 4.3 1,320 370<br />
Deferred tax assets 4.4 6,006 9,387<br />
Total non-current assets 610,992 604,549<br />
Current assets<br />
Inventories 4.5 92,985 94,028<br />
Other investments, including <strong>de</strong>rivatives 4.3 2,541 6,344<br />
Current tax assets 2,079 823<br />
Tra<strong>de</strong> and other receivables 4.6 176,472 180,853<br />
Cash and cash equivalents 4.7 59,742 44,702<br />
333,819 326,750<br />
Assets classified as held for sale 4.8 1,782 1,238<br />
Total current assets 335,601 327,988<br />
Total assets 946,593 932,537<br />
EQUITY & LIABILITIES<br />
Equity<br />
Share capital 5,437 5,437<br />
Share premium 156,531 156,606<br />
Reserves (44,143) (31,659)<br />
Profit / (loss) for the year 7,693 (13,783)<br />
Total equity attributable to equity hol<strong>de</strong>rs of the Company 4.9 125,518 116,601<br />
Non-current liabilities<br />
Loans and borrowings 4.10 524,686 524,934<br />
Derivatives 6.2 16,281 10,122<br />
Employee benefits provisions 4.11 13,068 12,942<br />
Other provisions 4.12 525 712<br />
Deferred tax liabilities 4.4 22,120 24,508<br />
Total non-current liabilities 576,680 573,218<br />
Current liabilities<br />
Bank overdrafts 4.10 1,365 10,858<br />
Loans and borrowings 4.10 16,695 16,642<br />
Tra<strong>de</strong> and other payables 4.13 226,335 215,218<br />
Total current liabilities 244,395 242,718<br />
Total liabilities 821,075 815,936<br />
Total equity and liabilities 946,593 932,537<br />
The notes on pages 79 to 93 are an integral part of these consolidated financial statements.
Consolidated income statement 2009<br />
EUR’000<br />
2009 2008<br />
note<br />
Revenue 5.1 1,139,574 1,146,082<br />
Other income 5.2 568 0<br />
Raw materials and consumables used (672,588) (697,589)<br />
Employee benefits expense 5.3 (105,947) (99,979)<br />
Depreciation, amortization and impairment expense 5.4 (51,886) (47,511)<br />
Other operating expenses 5.5 (242,017) (243,534)<br />
Operating profit 67,704 57,469<br />
Finance income 5.6 201 2,014<br />
Finance expense 5.6 (56,491) (76,383)<br />
Net finance result (56,290) (74,369)<br />
Profit / (loss) before income tax 11,414 (16,900)<br />
Income tax (expense) / benefit 5.7 (3,721) 3,117<br />
Profit / (loss) 7,693 (13,783)<br />
Attributable to:<br />
Equity hol<strong>de</strong>rs of the Company 4.9 7,693 (13,783)<br />
Profit / (loss) 7,693 (13,783)<br />
The notes on pages 94 to 98 are an integral part of these consolidated financial statements.<br />
page _ 64 / 65
Financial review 2009<br />
Consolidated statement of comprehensive income 2009<br />
EUR’000<br />
2009 2008<br />
Foreign currency translation differences for<br />
foreign operations<br />
note<br />
4.9 1,299 (5,955)<br />
Other comprehensive income / (loss) 1,299 (5,955)<br />
Profit / (loss) 7,693 (13,783)<br />
Total comprehensive income / (loss) 8,992 (19,738)<br />
Attributable to:<br />
Equity hol<strong>de</strong>rs of the Company 8,992 (19,738)<br />
Total comprehensive income / (loss) 8,992 (19,738)<br />
The notes on page 87 are an integral part of these consolidated financial statements.
Consolidated cash flow statement 2009<br />
EUR’000<br />
CASH FLOWS FROM OPERATING ACTIVITIES<br />
note<br />
2009 2008<br />
Operating profit 67,704 57,469<br />
Adjustments for:<br />
Amortization, <strong>de</strong>preciation and impairments 4.1+4.2 51,886 47,511<br />
(Gain) / loss on sale of property, plant and equipment 4.1 (568) 0<br />
Other non cash items 0 1,998<br />
Finance income / (expense) 5.6 (37,077) (74,369)<br />
Income tax (expense) / benefit 5.7 (3,721) 3,117<br />
Cash flows from operating activities before changes<br />
in working capital and provisions<br />
Change in:<br />
78,224 35,726<br />
Inventories 4.5 7,817 (8,258)<br />
Other investments, including <strong>de</strong>rivatives 4.3 4,295 (1,223)<br />
Tra<strong>de</strong> and other receivables 4.6 1,917 (10,193)<br />
Tra<strong>de</strong> and other payables 4.13 4,616 28,881<br />
Total change in working capital 18,645 9,207<br />
Change in other provisions and employee benefits 4.11+4.12 (1,950) (6,326)<br />
Net cash generated from operating activities 94,919 38,607<br />
CASH FLOWS FROM INVESTING AND ACQUISITION ACTIVITIES<br />
Proceeds from sale of property, plant and equipment 4.1 3,457 1,083<br />
Purchase of property, plant and equipment 4.1 (46,194) (35,958)<br />
Purchase of intangible assets 4.2 (2,332) (866)<br />
Purchase of other investments 4.3 (949) (48)<br />
Acquisition of subsidiary, net of cash acquired 6.1 (10,930) (1,780)<br />
Net cash used in investing and acquisition activities (56,948) (37,569)<br />
CASH FLOWS FROM FINANCING ACTIVITIES<br />
Proceeds from issue of share capital 4.9 0 57,043<br />
Divi<strong>de</strong>nds paid 4.9 (75) 0<br />
Proceeds from / (repayment of) subordinated loans 4.10 0 69,212<br />
Proceeds from / (repayment of) other loans and borrowings 4.10 (13,548) (97,407)<br />
Purchase of minority interest 0 (236)<br />
Net cash (used in) from financing activities (13,623) 28,612<br />
Translation adjustment 185 (5,955)<br />
Movement in cash and cash equivalents 24,533 23,695<br />
Cash and cash equivalents as at January 1 4.7 33,844 10,149<br />
Cash and cash equivalents as at December 31 4.7 58,377 33,844<br />
The notes on pages 79 to 111 are an integral part of these consolidated financial statements.<br />
page _ 66 / 67
Financial review 2009<br />
Consolidated statement of changes in equity 2009<br />
EUR’000<br />
Issued<br />
share<br />
capital<br />
Share<br />
premium<br />
Translation<br />
reserve<br />
Other<br />
reserves<br />
Profit /<br />
(loss) for<br />
the year<br />
Total<br />
equity<br />
January 1, 2008 3,351 101,649 2,676 (2,388) (26,946) 78,342<br />
Effect of adoption<br />
of IFRS<br />
January 1, 2008<br />
based on IFRS<br />
0 0 0 954 0 954<br />
3,351 101,649 2,676 (1,434) (26,946) 79,296<br />
Issue of ordinary<br />
shares<br />
2,086 54,957 0 0 0 57,043<br />
Profit appropriation<br />
2007<br />
0 0 0 (26,946) 26,946 0<br />
Net recognized income<br />
and expense<br />
0 0 (5,955) 0 (5,955)<br />
Profit / (loss) 0 0 0 0 (13,783) (13,783)<br />
December 31, 2008 5,437 156,606 (3,279) (28,380) (13,783) 116,601<br />
January 1, 2009 5,437 156,606 (3,279) (28,380) (13,783) 116,601<br />
Profit appropriation<br />
2008<br />
0 0 0 (13,783) 13,783 0<br />
Divi<strong>de</strong>nds to equity<br />
hol<strong>de</strong>rs<br />
0 (75) 0 0 0 (75)<br />
Net recognized income<br />
and expense<br />
0 0 1,299 0 1,299<br />
Profit / (loss) 0 0 0 0 7,693 7,693<br />
December 31, 2009 5,437 156,531 (1,980) (42,163) 7,693 125,518
Notes to the consolidated financial statements<br />
1 General<br />
1. 1 Reporting entity<br />
<strong>Refresco</strong> Holding B.V. (a private company with limited liability)<br />
is domiciled in the Netherlands, with its registered office at<br />
Stationsweg 4, 3311 JW Dordrecht. The consolidated financial<br />
statements of <strong>Refresco</strong> Holding B.V. (‘<strong>Refresco</strong>’ or the ‘Company’)<br />
as at and for the year en<strong>de</strong>d December 31, 2009 comprise the financial<br />
statements of the Company and its subsidiaries (together<br />
referred to as the ‘Group’ and individually as ‘Group entities’).<br />
The activities of the Group consist of the manufacture of<br />
private label and own brands of fruit juices and soft drinks.<br />
Furthermore the Group operates as a contract manufacturer<br />
for brands. Sales are ma<strong>de</strong> both domestically and abroad, the<br />
European Union being the most important market.<br />
1.2 Basis of preparation<br />
Statement of compliance<br />
The consolidated financial statements have been prepared in<br />
accordance with International Financial Reporting Standards<br />
(IFRS) as adopted by the European Union. These are the<br />
Group’s first consolidated financial statements un<strong>de</strong>r IFRS,<br />
and IFRS 1 has been applied. An explanation of how the<br />
adoption of IFRS has affected the reported balance sheet and<br />
income statement of the Group is provi<strong>de</strong>d in note 6.8.<br />
The consolidated financial statements were authorized for issue<br />
by the Executive Board on March 17, 2010 and will be submitted<br />
for adoption to the Annual General Meeting of Sharehol<strong>de</strong>rs<br />
on March 17, 2010.<br />
Basis of measurement<br />
The consolidated financial statements have been prepared on<br />
the historical cost basis except for <strong>de</strong>rivative financial instruments<br />
which are measured at fair value.<br />
Functional and presentation currency<br />
These consolidated financial statements are presented in Euros,<br />
which is the Company’s functional currency. All financial information<br />
presented in Euros has been roun<strong>de</strong>d to the nearest<br />
thousand, unless stated otherwise.<br />
Use of estimates and judgements<br />
The preparation of financial statements in conformity with IFRS<br />
requires management to make judgements, estimates and<br />
assumptions that affect the application of accounting policies<br />
and the reported amounts of assets, liabilities, income and<br />
expenses. Actual results may differ from these estimates.<br />
Estimates and un<strong>de</strong>rlying assumptions are reviewed on an ongoing<br />
basis. Revisions to accounting estimates are recognized<br />
in the period in which the estimates are revised and in any<br />
subsequent periods affected.<br />
Information is provi<strong>de</strong>d in the following notes regarding the<br />
areas of estimation and critical judgment used in applying<br />
accounting policies that have the most significant effect on the<br />
amounts recognized in the financial statements:<br />
Note 2.19: Determination of fair values<br />
Note 3: Financial risk management<br />
Note 4.2: Intangible assets<br />
Note 4.4: Deferred tax assets and liabilities<br />
Note 4.11: Employee benefits provision<br />
Note 4.12: Other provisions<br />
2 Significant accounting policies<br />
The accounting policies set out below have been applied consistently<br />
to all periods presented in these consolidated financial<br />
statements, and have been applied consistently by Group entities.<br />
2.1 Basis of consolidation<br />
Subsidiaries<br />
Subsidiaries are entities controlled by the Group. Control exists<br />
when the Group has the power to govern the financial and<br />
operating policies of an entity so as to benefit from its activities.<br />
In assessing control, potential voting rights that currently<br />
are exercisable are taken into account. The financial statements<br />
of subsidiaries are inclu<strong>de</strong>d in the consolidated financial<br />
statements from the date on which control commences until<br />
the date on which control ceases. The accounting policies of<br />
subsidiaries have been changed where necessary to align them<br />
with the policies adopted by the Group.<br />
page _ 68 / 69
Financial review 2009<br />
Transactions eliminated on consolidation<br />
Intra-group balances and transactions, and any unrealized<br />
income and expenses arising from intra-group transactions, are<br />
eliminated in preparing the consolidated financial statements.<br />
Unrealized losses are eliminated in the same way as unrealized<br />
gains, but only to the extent that there is no evi<strong>de</strong>nce of<br />
impairment.<br />
2.2 Foreign currency<br />
Foreign currency transactions<br />
Transactions in foreign currencies are translated into the<br />
respective functional currencies of Group entities at the<br />
exchange rates at the dates of the transactions. Monetary<br />
assets and liabilities <strong>de</strong>nominated in foreign currencies at the<br />
reporting date are translated into the functional currency at the<br />
exchange rate at that date. The foreign currency gain or loss<br />
on monetary items is the difference between amortized cost in<br />
the functional currency at the beginning of the period, adjusted<br />
for effective interest and payments during the period, and the<br />
amortized cost in foreign currency translated at the exchange<br />
rate at the end of the period. Non-monetary assets and liabilities<br />
<strong>de</strong>nominated in foreign currencies that are measured<br />
at fair value are retranslated into the functional currency at the<br />
exchange rate at the date that the fair value was <strong>de</strong>termined.<br />
Foreign currency differences arising on translation are recognized<br />
in profit or loss, except for differences arising on financial<br />
liabilities <strong>de</strong>signated as a hedge of the net investment in a<br />
foreign operation, which are recognized in the foreign currency<br />
translation reserve (FCTR).<br />
Foreign operations<br />
The assets and liabilities of foreign operations, including good-<br />
will and fair value adjustments arising on acquisition, are trans-<br />
lated into Euros at the exchange rate at the reporting date. The<br />
income and expenses of foreign operations are translated into<br />
Euros at the exchange rates at the dates of the transactions.<br />
Foreign currency differences arising thereon are recognized,<br />
in other comprehensive income, in the FCTR. When a foreign<br />
operation is disposed of, either in part or in full, the associated<br />
cumulative amount in the FCTR is transferred to profit or loss<br />
as an adjustment to the profit or loss on disposal.<br />
Foreign exchange gains and losses arising on a monetary item<br />
receivable from or payable to a foreign operation, the settlement<br />
of which is neither planned nor likely in the foreseeable<br />
future, are consi<strong>de</strong>red to form part of the net investment in the<br />
foreign operation and are recognized in other comprehensive<br />
income in the FCTR.<br />
Hedge of a net investment in a foreign operation<br />
Translation differences on intra-group long-term loans that<br />
effectively constitute an increase or <strong>de</strong>crease in a net<br />
investment in a foreign operation are recognized in other<br />
comprehensive income in the reserve for translation<br />
differences.<br />
2.3 Financial instruments<br />
Non-<strong>de</strong>rivative financial instruments<br />
Non-<strong>de</strong>rivative financial instruments comprise investments in<br />
held-to-maturity investments, tra<strong>de</strong> and other receivables, cash<br />
and cash equivalents, loans and borrowings, and tra<strong>de</strong> and<br />
other payables.<br />
Non-<strong>de</strong>rivative financial instruments are recognized initially at<br />
fair value plus, for instruments not at fair value through profit<br />
or loss, any directly attributable transaction costs. Subsequent<br />
to initial recognition, non-<strong>de</strong>rivative financial instruments are<br />
measured as <strong>de</strong>scribed below.<br />
Cash and cash equivalents comprise cash balances, checks in<br />
transit and call <strong>de</strong>posits. Bank overdrafts that are repayable<br />
on <strong>de</strong>mand and form an integral part of the cash management<br />
processes are inclu<strong>de</strong>d as a component of cash and cash<br />
equivalents for the purpose of the cash flow statement.<br />
The accounting for finance income and expense is <strong>de</strong>scribed in<br />
note 2.16.<br />
Held-to-maturity investments<br />
If the Group has the positive intent and ability to hold <strong>de</strong>bt<br />
securities to maturity, the securities are classified as heldto-maturity.<br />
Held-to-maturity investments are measured at
amortized cost, using the effective interest method, less any<br />
impairment losses.<br />
Derivative financial instruments<br />
The Group holds <strong>de</strong>rivative financial instruments to hedge its<br />
foreign currency and interest rate risk exposures. Derivatives<br />
are recognized initially at fair value and attributable transaction<br />
costs are recognized in profit or loss when incurred. Subsequent<br />
to initial recognition, the <strong>de</strong>rivatives are measured at fair<br />
value. All changes in its fair value are recognized immediately in<br />
profit or loss. Where the financial instruments are held to hedge<br />
foreign currency purchases of raw materials and consumables,<br />
the changes are inclu<strong>de</strong>d in raw materials and consumables<br />
used. Where the instruments are held to hedge interest rate<br />
risk exposure, the changes are inclu<strong>de</strong>d in finance income and<br />
expense.<br />
2.4 Share capital<br />
Ordinary share capital<br />
Ordinary share capital is classified as equity. Incremental costs<br />
directly attributable to the issue of ordinary shares and share<br />
options are recognized as a <strong>de</strong>duction from equity, net of any tax<br />
effects.<br />
Preference share capital<br />
Preference share capital is classified as equity if it is non-re<strong>de</strong>emable,<br />
or re<strong>de</strong>emable only at the Company’s option, and any<br />
divi<strong>de</strong>nds are discretionary. Divi<strong>de</strong>nds thereon are recognized<br />
as distributions within equity upon approval by the General<br />
Meeting of Sharehol<strong>de</strong>rs.<br />
2.5 Property, plant and equipment<br />
Recognition and measurement<br />
Items of property, plant and equipment are measured at cost<br />
less accumulated <strong>de</strong>preciation and accumulated impairment<br />
losses. Cost inclu<strong>de</strong>s expenditure that is directly attributable to<br />
the acquisition of the asset. The cost of self-constructed assets<br />
inclu<strong>de</strong>s the cost of materials and direct labor, any other costs<br />
directly attributable to bringing the assets to a condition suit-<br />
able for their inten<strong>de</strong>d use, and the costs of dismantling and<br />
removing the items and restoring of the site on which they are<br />
located. Borrowing costs that are directly attributable to the<br />
acquisition or construction of a qualifying asset are recognized<br />
in profit and loss when incurred.<br />
When elements of an item of property, plant and equipment<br />
have different useful lives, they are accounted for as separate<br />
items (major components) of property, plant and equipment.<br />
Gains and losses on disposal of an item of property, plant and<br />
equipment are <strong>de</strong>termined by comparing the net proceeds of<br />
disposal with the carrying amount and are recognized on a net<br />
basis in other income in profit or loss.<br />
Subsequent costs<br />
The cost of replacing part of an item of property, plant and<br />
equipment is recognized in the carrying amount of the item<br />
if it is probable that the future economic benefits embodied<br />
within the part will flow to the Group and its cost can be<br />
measured reliably, the carrying amount of the replaced part<br />
is <strong>de</strong>recognized. The costs of the day-to-day maintenance of<br />
property, plant and equipment are recognized in profit or loss<br />
as incurred.<br />
Depreciation<br />
Depreciation is recognized in profit or loss on a straight-line<br />
basis over the estimated useful lives of each element of an<br />
item of property, plant and equipment. Land is not <strong>de</strong>preciated.<br />
The estimated useful lives for the current and comparative<br />
periods are as follows:<br />
Buildings : 25 years<br />
Machinery and equipment : 5-10 years<br />
Other fixed assets : 3-10 years<br />
Depreciation methods, useful lives and residual values are<br />
reviewed at each reporting date.<br />
page _ 70 / 71
Financial review 2009<br />
2.6 Intangible assets<br />
Goodwill<br />
Goodwill arises on the acquisition of subsidiaries, associates<br />
and jointly controlled entities.<br />
As part of the adoption of IFRS, the Group elected not to restate<br />
business combinations that occurred prior to the January 1,<br />
2008 transition date. In respect of acquisitions prior to January<br />
1, 2008, goodwill represents the amount recognized un<strong>de</strong>r the<br />
previous accounting framework of the Group, Dutch GAAP.<br />
For acquisitions on or after January 1, 2008, goodwill represents<br />
the excess of the cost of the acquisition over the interest<br />
in the net fair value of the i<strong>de</strong>ntifiable assets, liabilities and<br />
contingent liabilities of the company acquired. When the excess<br />
is negative (negative goodwill), it is recognized immediately in<br />
profit or loss.<br />
Goodwill is measured at cost less accumulated impairment<br />
losses.<br />
Other intangibles<br />
Other intangibles consist of software. Software acquired by<br />
the Group is measured at cost less accumulated amortization<br />
and accumulated impairment losses. Subsequent expenditure<br />
is capitalized only to the extent that it increases the future<br />
economic benefits embodied in the specific asset to which it<br />
relates. All other expenditure, including expenditure on internally<br />
generated goodwill and brands, is recognized in profit or<br />
loss as incurred.<br />
Amortization is recognized in the income statement on a<br />
straight-line basis over the estimated useful lives, generally<br />
3 years.<br />
2.7 Leased assets<br />
Leases in terms of which the Group assumes substantially<br />
all the risks and rewards of ownership are classified as finance<br />
leases. Upon initial recognition, the leased asset is measured<br />
at an amount equal to the lower of its fair value and the present<br />
value of the minimum lease payments. Subsequent to initial<br />
recognition, the asset is accounted for in accordance with the<br />
accounting policy applicable to that asset.<br />
Other leases are operating leases and are not recognized on<br />
the consolidated balance sheet.<br />
2.8 Inventories<br />
Inventories are measured at the lower of cost and net realizable<br />
value. The cost of inventories is based on the first-in firstout<br />
method, and inclu<strong>de</strong>s expenditure incurred in acquiring the<br />
inventories, production and conversion costs and other costs<br />
incurred in bringing them to their existing location and condition.<br />
The cost of finished goods and work in progress inclu<strong>de</strong>s<br />
an appropriate share of production overheads based on normal<br />
operating capacity. Net realizable value is the estimated selling<br />
price in the ordinary course of business, less the estimated<br />
costs of completion and selling expenses.<br />
2.9 Impairment<br />
Financial assets<br />
Financial assets are assessed at each reporting date to<br />
<strong>de</strong>termine whether there is any objective evi<strong>de</strong>nce that it is<br />
impaired.<br />
A financial asset is consi<strong>de</strong>red to be impaired if objective evi<strong>de</strong>nce<br />
indicates that one or more events have had a negative<br />
effect on the estimated future cash flows of the asset.<br />
Impairment losses in respect of financial assets measured at<br />
amortized cost are calculated as the difference between the<br />
carrying amounts and present values of the estimated future<br />
cash flows discounted at the original effective interest rate.<br />
An impairment loss in respect of an available-for-sale financial<br />
asset is measured by reference to its fair value.<br />
Individually significant financial assets are tested for impairment<br />
on an individual basis. The remaining financial assets are<br />
assessed collectively in groups that share similar credit risk<br />
characteristics. Impairment losses are recognized in profit or<br />
loss. An impairment loss is reversed if the reversal can be related<br />
objectively to an event occurring after the impairment loss<br />
was recognized. For financial assets measured at amortized<br />
cost the reversal is recognized in profit or loss.
Non-financial assets<br />
The carrying amounts of non-financial assets, other than inven-<br />
tories and <strong>de</strong>ferred tax assets, are reviewed at each reporting<br />
date to <strong>de</strong>termine whether there is any indication of impairment.<br />
If any such indication exists, then the asset’s recoverable<br />
amount is estimated. For goodwill and intangible assets that<br />
have in<strong>de</strong>finite lives or that are not yet available for use, the<br />
recoverable amount is estimated annually.<br />
The recoverable amount of an asset or cash-generating unit is<br />
the greater of its value in use and its fair value less costs to<br />
sell. In assessing value in use, the estimated future cash flows<br />
are discounted to their present value using a pre-tax discount<br />
rate that reflects current market assessments of the time value<br />
of money and the risks specific to the asset. For the purpose of<br />
impairment testing, assets are grouped at the lowest levels for<br />
which there are separately i<strong>de</strong>ntifiable cash flows from continuing<br />
use that are largely in<strong>de</strong>pen<strong>de</strong>nt of the cash flows of other<br />
assets or groups of assets (the “cash-generating units”). For the<br />
purpose of impairment testing, the goodwill acquired in a business<br />
combination is allocated to cash-generating units that are<br />
expected to benefit from the synergies of the combination.<br />
An impairment loss is recognized if the carrying amount of<br />
an asset or its cash-generating unit exceeds its estimated<br />
recoverable amount. Impairment losses are recognized in profit<br />
or loss. Impairment losses recognized in respect of cash-generating<br />
units are allocated first to reduce the carrying amount of<br />
any goodwill allocated to the units and then to reduce the carrying<br />
amount of the other assets in the unit (or group of units)<br />
on a pro rata basis.<br />
An impairment loss in respect of goodwill is not reversed.<br />
In respect of other assets, impairment losses recognized in<br />
prior periods are assessed at each reporting date for indications<br />
that the loss has <strong>de</strong>creased or no longer exists.<br />
An impairment loss is reversed if there has been a change in<br />
the estimates used to <strong>de</strong>termine the recoverable amount.<br />
An impairment loss is reversed only to the extent that the<br />
asset’s carrying amount does not exceed the carrying amount<br />
that would have been <strong>de</strong>termined, net of <strong>de</strong>preciation or amortization,<br />
if no impairment loss had been recognized.<br />
2.10 Assets classified as held for sale<br />
Non-current assets (or disposal groups) are classified as assets<br />
held for sale when their carrying amount is to be recovered<br />
principally through a sale transaction and a sale is consi<strong>de</strong>red<br />
highly probable. Immediately before classification as held<br />
for sale, the assets are re-measured in accordance with the<br />
accounting policies of the Group. Thereafter the assets are<br />
generally measured at the lower of their carrying amount and<br />
fair value less costs to sell. Impairment losses on initial classification<br />
as held for sale and subsequent gains or losses on<br />
re-measurement are recognized in profit or loss. Gains are not<br />
recognized in excess of any cumulative impairment loss.<br />
2.11 Employee benefits<br />
Defined contribution plans<br />
A <strong>de</strong>fined contribution plan is a post-employment benefit plan<br />
un<strong>de</strong>r which an entity pays fixed contributions into a separate<br />
entity with no legal or constructive obligation to pay further<br />
amounts. Obligations for contributions to <strong>de</strong>fined contribution<br />
pension plans are recognized as an employee benefits expense<br />
in profit or loss when they are due. Prepaid contributions are<br />
recognized as an asset to the extent that a cash refund or a<br />
reduction in future payments is available.<br />
Defined benefit plans<br />
A <strong>de</strong>fined benefit plan is a post-employment benefit plan other<br />
than a <strong>de</strong>fined contribution plan. The net obligation in respect<br />
of <strong>de</strong>fined benefit pension plans is calculated separately for<br />
each plan by estimating the amount of future benefit that<br />
employees have earned in return for their service in the current<br />
and prior periods; that benefit is discounted to <strong>de</strong>termine its<br />
present value. Any unrecognized past service costs and the<br />
fair value of any plan assets are <strong>de</strong>ducted. The discount rate<br />
is the yield at the reporting date on AA credit-rated bonds<br />
that have maturity dates approximating the terms of the<br />
obligations and that are <strong>de</strong>nominated in the same currency<br />
in which the benefits are expected to be paid. The calculation<br />
is performed annually by a qualified actuary using the projected<br />
unit credit method. When the calculation results in a benefit<br />
page _ 72 / 73
Financial review 2009<br />
to the Group, the asset recognized is limited to the total of<br />
any unrecognized past service costs and the present value of<br />
any economic benefits available in the form of future refunds<br />
from the plan or reductions in future contributions to the plan.<br />
An economic benefit is available to the Group if it is realizable<br />
during the life of the plan or on settlement of the plan<br />
liabilities.<br />
When the benefits of a plan are improved, the portion of the<br />
increased benefit relating to past service by employees is<br />
recognized in profit or loss on a straight-line basis over the<br />
average period until the benefits become vested. To the extent<br />
that the benefits vest immediately, the expense is recognized<br />
immediately in profit or loss.<br />
Cumulative unrecognized actuarial gains and losses arising<br />
from changes in actuarial assumptions exceeding 10% of the<br />
greater of the <strong>de</strong>fined benefit obligation and the fair value of<br />
the plan assets are recognized in profit or loss over the expected<br />
average future service years of the employees participating<br />
in the plan (the corridor approach).<br />
Multi employer plans<br />
The Group also facilitates multi employer plans, in which vari-<br />
ous employers contribute to one central pension union.<br />
In accordance with IAS 19, as the pension union managing the<br />
plan is not able to provi<strong>de</strong> the Group with sufficient information<br />
to enable the Group to account for the plan as a <strong>de</strong>fined<br />
benefit plan, the Group accounts for its multi employer <strong>de</strong>fined<br />
benefit plan as if it were a <strong>de</strong>fined contribution plan.<br />
Other long-term employee benefits<br />
The net obligation in respect of long-term employee benefits<br />
other than pension plans is the amount of future benefit that<br />
employees have earned in return for their service in the current<br />
and prior periods; that benefit is discounted to <strong>de</strong>termine<br />
its present value, and the fair value of any related assets is<br />
<strong>de</strong>ducted. The discount rate is the yield at the reporting date<br />
on AA credit-rated bonds that have maturity dates approximating<br />
the terms of the obligations of the Group. The calculation<br />
is performed using the projected unit credit method. Actuarial<br />
gains or losses are recognized in profit or loss in the period in<br />
which they arise.<br />
Termination benefits<br />
Termination benefits are recognized as an expense when the<br />
Group is <strong>de</strong>monstrably committed, without realistic possibility of<br />
withdrawal, to a formal <strong>de</strong>tailed plan to either terminate employment<br />
before the normal retirement date or to provi<strong>de</strong> termination<br />
benefits as a result of an offer ma<strong>de</strong> to encourage voluntary<br />
redundancy. Termination benefits for voluntary redundancies are<br />
recognized as an expense if the Group has ma<strong>de</strong> an offer of voluntary<br />
redundancy, it is probable that the offer will be accepted,<br />
and the number of acceptances can be reliably estimated.<br />
Short-term benefits<br />
Short-term employee benefit obligations are measured on an<br />
undiscounted basis and are expensed as the related service is<br />
provi<strong>de</strong>d.<br />
A liability is recognized for the amount expected to be paid un<strong>de</strong>r<br />
short-term cash bonus or profit-sharing plans if the Group<br />
has a legal or constructive obligation to pay this amount as a<br />
result of past service provi<strong>de</strong>d by the employee and the obligation<br />
can be reliably estimated.<br />
2.12 Provisions<br />
A provision is recognized if, as a result of a past event, the<br />
Group has a legal or constructive obligation that can be reliably<br />
estimated and it is probable that an outflow of economic benefits<br />
will be required to settle the obligation. Provisions are<br />
<strong>de</strong>termined by discounting the expected future cash flows at<br />
a pre-tax rate that reflects current market assessments of the<br />
time value of money and the risks specific to the liability.<br />
Restructuring<br />
A provision for restructuring is recognized when the Group has<br />
approved a <strong>de</strong>tailed and formal restructuring plan, and the restructuring<br />
has either commenced or been publicly announced.<br />
Future operating costs are not provi<strong>de</strong>d for.
2.13 Revenue<br />
Products sold<br />
Revenue from the sale of products is measured at the fair value<br />
of the consi<strong>de</strong>ration received or receivable, net of returns,<br />
tra<strong>de</strong> discounts and volume rebates. Revenue is recognized<br />
when the significant risks and rewards of ownership have<br />
been transferred to the buyer, recovery of the consi<strong>de</strong>ration is<br />
probable, the associated costs and possible return of goods<br />
can be estimated reliably, there is no continuing management<br />
involvement with the goods, and the amount of revenue can be<br />
measured reliably.<br />
Contract manufacturing<br />
Contract manufacturing consists of the provision of manufac-<br />
turing services and sale of the resultant product. The nature<br />
and the risk profile of the contract with the customer is key in<br />
<strong>de</strong>termining whether the Group is providing a manufacturing<br />
service or is selling a product.<br />
Where the Group acts solely as a co-packer of products on<br />
behalf of the customer and the risk profile and compensation<br />
for the Group relates to the manufacturing activity, only the<br />
revenue related to the ren<strong>de</strong>ring of manufacturing services is<br />
recognized.<br />
2.14 Government grants<br />
Government grants are recognized at their fair value when it is<br />
reasonably assured that the Group will comply with the conditions<br />
attaching to them and that the grants will be received.<br />
Government grants relating to property, plant and equipment<br />
are <strong>de</strong>ducted from the carrying amount of the asset.<br />
Government grants relating to period costs are <strong>de</strong>ferred and<br />
recognized in the income statement over the period necessary to<br />
match them with the costs they are inten<strong>de</strong>d to compensate.<br />
2.15 Lease payments<br />
Payments ma<strong>de</strong> un<strong>de</strong>r operating leases are recognized in profit<br />
or loss on a straight-line basis over the term of the lease.<br />
Lease incentives received are recognized, as an integral part of<br />
the total lease expense, over the term of the lease. Minimum<br />
lease payments ma<strong>de</strong> un<strong>de</strong>r finance leases are apportioned between<br />
the finance expense and the reduction of the outstanding<br />
liability. The finance expense is allocated to each period<br />
of the lease term so as to produce a constant periodic rate of<br />
interest on the remaining balance of the liability. Contingent<br />
lease payments are accounted for by revising the minimum<br />
lease payments over the remaining term of the lease when the<br />
lease adjustment is confirmed.<br />
2.16 Finance income and expense<br />
Finance income comprises interest income on bank <strong>de</strong>posits and<br />
gains on hedging instruments that are recognized in profit or<br />
loss. Interest income is recognized in profit or loss as it accrues,<br />
using the effective interest method. Finance expense comprises<br />
interest expense on borrowings, the unwinding of discount on<br />
provisions and profit and losses on interest hedging instruments<br />
that are recognized in profit or loss.<br />
2.17 Income tax<br />
Income tax expense comprises current and <strong>de</strong>ferred tax.<br />
Income tax expense is recognized in profit or loss except to the<br />
extent that it relates to items recognized in other comprehensive<br />
income in which case the income tax expense is recognized<br />
in equity.<br />
Current tax is the income tax expected to be payable on the<br />
taxable profit for the year, using tax rates enacted or substantively<br />
enacted at the reporting date, together with any adjustment<br />
to tax payable in respect of previous years.<br />
Deferred tax is recognized using the balance sheet method,<br />
providing for temporary differences between the carrying<br />
amounts of assets and liabilities for financial reporting purposes<br />
and the amounts used for taxation purposes. In addition,<br />
<strong>de</strong>ferred tax is not recognized arising on the initial recognition<br />
of goodwill. Deferred tax is measured at the tax rates that are<br />
expected to be applied to temporary differences in the reporting<br />
period they reverse, based on the laws that have been<br />
enacted or substantively enacted by the reporting date.<br />
Deferred tax assets and liabilities are offset:<br />
page _ 74 / 75
Financial review 2009<br />
if there is a legally enforceable right to offset current tax<br />
liabilities and assets, and<br />
they relate to income taxes levied by the same tax authority<br />
on the same taxable entity or on different taxable<br />
entities which intend to settle current tax liabilities and<br />
assets on a net basis or the tax assets and liabilities of<br />
which will be realized simultaneously.<br />
A <strong>de</strong>ferred tax asset is recognized to the extent that it is probable<br />
that future taxable profits will be available against which<br />
the temporary difference can be utilized. Deferred tax assets<br />
are reviewed at each reporting date and are reduced to the<br />
extent that it is no longer probable that the related tax benefit<br />
will be realized.<br />
2.18 New standards and interpretations not yet adopted<br />
A number of new standards, amendments to standards and<br />
interpretations are not yet effective for the year en<strong>de</strong>d<br />
December 31, 2009 and have not been applied in preparing<br />
these consolidated financial statements. Other than Revised<br />
IFRS 3, the new and amen<strong>de</strong>d standards are not expected to<br />
have a significant impact on the consolidated financial statements<br />
of the Group.<br />
Revised IFRS 3 Business Combinations (2008) establishes a fair<br />
value measurement principle for recognizing and measuring<br />
all assets acquired and liabilities assumed, including contingent<br />
consi<strong>de</strong>ration, in a business combination. Revised IFRS 3<br />
introduces the term non-controlling interest (formerly minority<br />
interest) and permits an acquirer to recognize non-controlling<br />
interests at its either proportionate interest in the fair value<br />
of the i<strong>de</strong>ntifiable assets and liabilities of the acquiree or at<br />
fair value. The revised standard also modifies the <strong>de</strong>finition of<br />
a business combination to focus on control, and modifies the<br />
<strong>de</strong>finition of a business to clarify that it can inclu<strong>de</strong> a set of<br />
activities and assets which, while not currently being operated<br />
as a business, is capable of operating as a business. It incorporates<br />
the following changes that are likely to be relevant to the<br />
operations of the Group:<br />
The <strong>de</strong>finition of a business has been broa<strong>de</strong>ned, which<br />
is likely to result in more acquisitions being treated as<br />
business combinations.<br />
Contingent consi<strong>de</strong>ration will be measured at fair value,<br />
with subsequent changes therein being recognized in<br />
profit or loss.<br />
Transaction costs, other than share and <strong>de</strong>bt issue costs,<br />
will be expensed as incurred.<br />
Any pre-existing interest in the company acquired will be<br />
measured at fair value with the gain or loss being recognized<br />
in profit or loss.<br />
Any non-controlling (minority) interest will be measured<br />
either at fair value or at its proportionate interest in the<br />
i<strong>de</strong>ntifiable assets and liabilities of the company acquired,<br />
on a transaction-by-transaction basis.<br />
Revised IFRS 3, which becomes mandatory for the 2010 consolidated<br />
financial statements, will be applied prospectively and<br />
there will therefore be no impact on prior periods in the 2010<br />
consolidated financial statements.<br />
2.19 Determination of fair values<br />
A number of the accounting policies and disclosures require the<br />
<strong>de</strong>termination of fair value, for both financial and non-financial<br />
assets and liabilities. Fair values have been <strong>de</strong>termined<br />
for measurement and/or disclosure purposes based on the<br />
methods set out below. Where applicable further information<br />
regarding the assumptions ma<strong>de</strong> in <strong>de</strong>termining fair values is<br />
disclosed in the notes specific to that asset or liability.<br />
Property, plant and equipment<br />
The fair value of property, plant and equipment recognized as a<br />
result of a business combination is based on market values.<br />
The market value of property is the estimated amount for<br />
which a property would likely be exchanged on the date of<br />
valuation between a willing buyer and a willing seller in an<br />
arm’s length transaction after proper marketing wherein the<br />
parties had each acted knowledgeably, pru<strong>de</strong>ntly and without<br />
compulsion. The market value of items of machinery & equip-
ment and other fixed assets is based on the quoted market<br />
prices for similar items.<br />
Other intangible assets<br />
The fair value of other intangible assets is based on the dis-<br />
counted cash flows expected to be <strong>de</strong>rived from the use and<br />
eventual sale of these assets.<br />
Inventories<br />
The fair value of inventories acquired in a business combina-<br />
tion is <strong>de</strong>termined based on the estimated selling price in the<br />
ordinary course of business less the estimated costs of completion<br />
and sale and less a reasonable profit margin based on the<br />
effort required to complete and sell the inventories.<br />
Tra<strong>de</strong> and other receivables<br />
The fair value of tra<strong>de</strong> and other receivables is based on the<br />
present value of future cash flows, discounted at the market<br />
rate of interest at the reporting date.<br />
Derivatives<br />
The fair value of forward currency contracts is based on their<br />
listed market price, if available. If a listed market price is not<br />
available, then fair value is estimated by discounting the difference<br />
between the contract forward price and the current<br />
forward price for the residual maturity of the contract using a<br />
risk-free interest rate (based on government bonds).<br />
The fair value of interest rate swaps is based on broker quotes.<br />
These quotes are tested for reasonableness by discounting<br />
estimated future cash flows based on the terms and maturity<br />
of each contract and using market interest rates for a similar<br />
instrument at the measurement date.<br />
Non-<strong>de</strong>rivative financial liabilities<br />
Fair value for disclosure purposes is based on the present value<br />
of future principal and interest cash flows, discounted at the<br />
market rate of interest at the reporting date. In respect of the<br />
liability component of convertible notes, the market rate of interest<br />
is <strong>de</strong>termined by reference to similar liabilities that do not<br />
have a conversion option. For finance leases the market rate of<br />
interest is <strong>de</strong>termined by reference to similar lease agreements.<br />
3 Financial risk management<br />
3.1 Overview<br />
The Group has exposure to the following risks as regards its<br />
use of financial instruments:<br />
Credit risk<br />
Liquidity risk<br />
Market risk<br />
This note provi<strong>de</strong>s information regarding the exposure of the<br />
Group to each of the above risks, the objectives, policies and<br />
processes for measuring and managing risk, and the management<br />
of capital. Further quantitative disclosures are inclu<strong>de</strong>d<br />
throughout these consolidated financial statements.<br />
The Executive Board has the responsibility for the establishment<br />
and oversight of the risk management framework of the Group.<br />
Risk management policies of the Group are established to<br />
i<strong>de</strong>ntify and analyze the risks faced by the Group, to set appropriate<br />
risk limits and controls, and to monitor risks and<br />
adherence to limits. Risk management policies and systems are<br />
reviewed regularly to reflect changes in market conditions and<br />
in the activities of the Group. Through its training program and<br />
its management standards and procedures, the Group aims to<br />
<strong>de</strong>velop a disciplined and constructive control environment in<br />
which all employees un<strong>de</strong>rstand their roles and responsibilities.<br />
The Supervisory Board oversees management’s monitoring of<br />
compliance with the risk management policies and procedures<br />
of the Group and it reviews the a<strong>de</strong>quacy of the risk management<br />
framework in relation to the risks faced by the Group.<br />
3.2 Credit risk<br />
Credit risk represents the risk that counter parties fail to meet<br />
their contractual obligations, and arises principally in the<br />
receivables from customers, cash and cash equivalents,<br />
<strong>de</strong>rivative financial instruments and <strong>de</strong>posits with banks and<br />
financial institutions. The Group does not have any significant<br />
page _ 76 / 77
Financial review 2009<br />
concentration of credit risk. In or<strong>de</strong>r to reduce the exposure<br />
to credit risk, the Group carries out ongoing credit evaluations<br />
of the financial position of customers but generally does not<br />
require collateral. Use is ma<strong>de</strong> of a combination of in<strong>de</strong>pen<strong>de</strong>nt<br />
ratings and risk controls to assess the credit quality of the<br />
customer, taking into account its financial position, past experience<br />
and other factors. Sales are subject to payment conditions<br />
which are common practice in each country. The banks and<br />
financial institutions used as counterparty for holding cash and<br />
cash equivalents and <strong>de</strong>posits and in <strong>de</strong>rivative transactions<br />
can be classified as high credit quality financial institutions<br />
(minimal: A rating).<br />
The Group has policies that limit the amount of credit exposure<br />
to individual financial institutions. Management believes that<br />
the likelihood of losses arising from credit risk is remote particularly<br />
in the light of the diversification of activities.<br />
3.3 Liquidity risk<br />
Liquidity risk is the risk that the Group will not be able to meet<br />
its financial obligations as they fall due. The approach of the<br />
Group to managing liquidity risk is to ensure, as far as possible,<br />
that it always has sufficient liquidity to meet its liabilities<br />
when due, un<strong>de</strong>r both normal and more extreme conditions,<br />
without incurring unacceptable losses or risking damage to the<br />
reputation of the Group.<br />
The Group has a clear focus on financing long-term growth as<br />
well as current operations. Strong cost and cash management<br />
and controls over working capital and capital expenditure proposals<br />
are in place to ensure effective and efficient allocation<br />
of financial resources.<br />
3.4 Market risk<br />
Currency risk<br />
The Group is exposed to currency risk mainly on purchases<br />
<strong>de</strong>nominated in USD. At any point in time the Group hedges<br />
80 to 100 percent of its estimated foreign currency exposure<br />
on forecasted purchases for the following 12 months. The<br />
Group uses currency option contracts and forward exchange<br />
contracts to hedge its currency risks, most of which have a<br />
maturity date of less than one year from the reporting date.<br />
Where necessary, forward exchange contracts are rolled over<br />
on maturity.<br />
In respect of other monetary assets and liabilities <strong>de</strong>nominated<br />
in foreign currencies, the Group ensures that its net exposure<br />
is kept to an acceptable level by buying or selling foreign<br />
currencies at spot rates, as necessary, to address short-term<br />
imbalances.<br />
The Group’s investment in its UK subsidiaries is hedged by a<br />
GBP secured bank loan, which mitigates the currency risk<br />
arising from the subsidiary’s net assets. The investments in<br />
other subsidiaries are not hedged.<br />
Interest rate risk<br />
The Group is exposed to interest rate risk on interest-bearing<br />
long-term and current liabilities. The Group is exposed to the<br />
effects of variable interest rates on receivables and liabilities.<br />
On fixed interest receivables and liabilities, it is exposed to<br />
market value fluctuations.<br />
For certain long-term interest liabilities to financial institutions,<br />
the Group has entered into interest rate swap agreements<br />
through which the Group effectively pays at fixed interest rates<br />
for certain long-term interest liabilities.<br />
3.5 Capital management<br />
There were no changes in the approach of the Group to capital<br />
management during the year. The policy is to maintain a<br />
sufficient capital base so as to maintain investor, creditor<br />
and market confi<strong>de</strong>nce and to sustain future <strong>de</strong>velopment<br />
of the business. The Executive Board monitors the capital<br />
employed, which consists of the capital in property, plant and<br />
equipment, as well the net working capital. Furthermore, the<br />
Group monitors its cash positions, both actual and forecasted,<br />
on a monthly basis.<br />
Neither the Company nor any of its subsidiaries are subject to<br />
externally imposed capital requirements.
4 Notes to the consolidated balance sheet<br />
4.1 Property, plant and equipment<br />
The composition and changes were as follows:<br />
EUR’000<br />
COST<br />
note<br />
Land and<br />
buildings<br />
Machinery<br />
and<br />
equipment<br />
Other fixed<br />
assets<br />
Un<strong>de</strong>r<br />
construction Total<br />
January 1, 2008 180,190 186,543 7,104 8,109 381,946<br />
Additions 6,281 23,370 886 5,421 35,958<br />
Acquisitions through<br />
business combinations<br />
5,009 4,800 0 0 9,809<br />
Transfer to assets held<br />
for sale<br />
4.8 (863) 0 0 0 (863)<br />
Disposals 0 (5,140) (798) (361) (6,299)<br />
Effect of movements in<br />
exchange rates<br />
(1,774) (3,525) (161) (258) (5,718)<br />
December 31, 2008 188,843 206,048 7,031 12,911 414,833<br />
January 1, 2009 188,843 206,048 7,031 12,911 414,833<br />
Additions 2,259 22,819 3,296 17,813 46,187<br />
Acquisitions through<br />
business combinations<br />
6.1 11,574 10,390 0 191 22,155<br />
Transfer to assets held<br />
for sale<br />
4.8 (4,820) 0 0 0 (4,820)<br />
Disposals (1,683) (23,710) (1,030) (1,833) (28,256)<br />
Effect of movements in<br />
exchange rates<br />
347 778 56 15 1,196<br />
December 31, 2009 196,520 216,325 9,353 29,097 451,295<br />
page _ 78 / 79
Financial review 2009<br />
EUR’000<br />
DEPRECIATION AND<br />
IMPAIRMENT LOSSES<br />
note<br />
Land and<br />
buildings<br />
Machinery<br />
and<br />
equipment<br />
Other fixed<br />
assets<br />
Un<strong>de</strong>r<br />
construction Total<br />
January 1, 2008 (13,905) (37,753) (409) 0 (52,067)<br />
Depreciation for the year 5.4 (5,931) (37,817) (792) 0 (44,540)<br />
Impairment losses 5.4 (756) (1,574) 0 0 (2,330)<br />
Disposals 0 4,436 780 0 5,216<br />
Effect of movements in<br />
exchange rates<br />
412 1,416 83 1,911<br />
December 31, 2008 (20,180) (71,292) (338) 0 (91,810)<br />
January 1, 2009 (20,180) (71,292) (338) 0 (91,810)<br />
Depreciation for the year 5.4 (6,565) (39,193) (1,292) 0 (47,050)<br />
Impairment losses 5.4 (347) (1,173) 0 0 (1,520)<br />
Acquisitions through<br />
business combinations<br />
6.1 (4,655) (5,010) 0 0 (9,665)<br />
Transfer to assets<br />
held for sale<br />
4.8 1,781 0 0 0 1,781<br />
Disposals 1,155 24,291 842 0 26,288<br />
Effect of movements in<br />
exchange rates<br />
(94) (389) (29) 0 (512)<br />
December 31, 2009 (28,905) (92,766) (817) 0 (122,488)<br />
CARRYING AMOUNTS<br />
January 1, 2008 166,285 148,790 6,695 8,109 329,879<br />
December 31, 2008 168,663 134,756 6,693 12,911 323,023<br />
December 31, 2009 167,615 123,559 8,536 29,097 328,807
The current fair market value of property, plant and equipment<br />
is not materially different from the net book value.<br />
For the purpose of the acquisition of the Group by its current<br />
sharehol<strong>de</strong>rs in May 2006, a valuation was ma<strong>de</strong> by an in<strong>de</strong>pen<strong>de</strong>nt<br />
appraiser.<br />
For all acquisitions after 2006, property, plant and equipment<br />
was re-stated to fair market value based on valuation reports,<br />
and the <strong>de</strong>preciation terms have been brought in line with the<br />
company’s policies.<br />
Impairment losses<br />
In 2008 and 2009, the impairments recognized were related to<br />
property, plant and equipment in Germany, Poland and Spain.<br />
Financial leases<br />
The Group leases a warehouse and production equipment<br />
un<strong>de</strong>r a number of finance lease agreements secured on the<br />
un<strong>de</strong>rlying leased assets (see note 4.10).<br />
At December 31, 2009, the carrying amount of leased plant and<br />
machinery was EUR 14,104,000 (2008: EUR 18,329,000).<br />
Security<br />
Securities for the re<strong>de</strong>mption of amounts payable to banks<br />
have been given as follows:<br />
First priority mortgage on the real estate in<br />
The Netherlands and Germany.<br />
Pledge of all property, plant and equipment.<br />
Property, plant and equipment un<strong>de</strong>r construction<br />
Property, plant and equipment un<strong>de</strong>r construction relates<br />
mainly to expansion of production and warehouse facilities in<br />
the Netherlands, France, the UK and Germany. After construction<br />
is complete, the assets are reclassified to the applicable<br />
property, plant and equipment category.<br />
page _ 80 / 81
Financial review 2009<br />
4.2 Intangible assets<br />
The composition and changes were as follows:<br />
EUR’000<br />
COST<br />
note<br />
Goodwill Software Total<br />
January 1, 2008 272,604 3,006 275,610<br />
Acquisitions through business combinations 6.1 2,709 0 2,709<br />
Additions at cost 0 866 866<br />
Disposals at cost 0 (10) (10)<br />
Effect of movements in exchange rates (5,478) 0 (5,478)<br />
December 31, 2008 269,835 3,862 273,697<br />
January 1, 2009 269,835 3,862 273,697<br />
Acquisitions through business combinations 6.1 1,423 557 1,980<br />
Additions at cost 0 2,344 2,344<br />
Disposals at cost 0 (268) (268)<br />
Effect of movements in exchange rates 1,050 0 1,050<br />
December 31, 2009 272,308 6,495 278,803<br />
AMORTIzATION AND IMPAIRMENT LOSSES<br />
January 1, 2008 0 (1,287) (1,287)<br />
Amortization for the year 5.4 0 (641) (641)<br />
December 31, 2008 0 (1,928) (1,928)<br />
January 1, 2009 0 (1,928) (1,928)<br />
Acquisitions through business combinations 6.1 0 (497) (497)<br />
Amortization for the year 5.4 0 (697) (697)<br />
Impairment losses 5.4 (975) (7) (982)<br />
Disposals 0 160 160<br />
December 31, 2009 (975) (2,969) (3,944)<br />
CARRYING AMOUNTS<br />
January 1, 2008 272,604 1,719 274,323<br />
December 31, 2008 269,835 1,934 271,769<br />
December 31, 2009 271,333 3,526 274,859<br />
Amortization and impairment charge<br />
Amortization and impairment losses are recognized in <strong>de</strong>preciation, amortization and impairment expense<br />
in the income statement.
Impairment testing for cash-generating units containing goodwill<br />
For the purpose of impairment testing, goodwill is allocated to the business units of the Group, being the lowest<br />
level within the Group at which goodwill is monitored for internal management purposes.<br />
The aggregate carrying amounts of goodwill allocated to each unit are as follows:<br />
EUR’000<br />
2009 2008<br />
<strong>Refresco</strong> Benelux 93,716 92,293<br />
<strong>Refresco</strong> France 65,910 65,910<br />
<strong>Refresco</strong> Germany 39,859 39,859<br />
<strong>Refresco</strong> Iberia 35,716 35,716<br />
<strong>Refresco</strong> Poland 12,796 13,553<br />
<strong>Refresco</strong> UK 12,022 11,190<br />
<strong>Refresco</strong> Scandinavia 11,314 11,314<br />
271,333 269,835<br />
The recoverable amounts of the cash-generating units are based on value-in-use calculations.<br />
Value-in-use was <strong>de</strong>termined by discounting the future pre-tax cash flows generated from the continuing use of the<br />
unit using a pre-tax discount rate and was based on the following key assumptions:<br />
Cash flows were projected based on the current operating results and the 3-year business plan. Future cash<br />
flows were extrapolated using a growth rate which is based on the growth expectations of the private label<br />
segment in the total local market. These growth expectations are retrieved from researches from in<strong>de</strong>pen<strong>de</strong>nt<br />
external sources. Management believes that this forecast period was appropriate to the long-term nature of<br />
the business.<br />
A pre-tax discount rate of 10% was applied in <strong>de</strong>termining the recoverable amount of the units. This rate was<br />
based on a weighted average cost of capital applicable to the industry.<br />
The values assigned to the key assumptions represent management’s assessment of future trends in the industry<br />
and are based on both external and internal sources (historical data). With the exception for Poland, the recoverable<br />
amounts of the units were <strong>de</strong>termined to be higher than their carrying values and accordingly no impairment<br />
charges have been recognized. The impairment of EUR 975,000 in Poland is mainly caused by a reduced expected<br />
growth of our activities in the local market.<br />
Sensivity analysis<br />
If the undiscounted cash flow per cash-generating unit had been 10% lower than management’s estimates, that<br />
would have led to an additional reduction in Poland of the book value of goodwill by EUR 4.1 million at December<br />
31, 2009. If the estimated pre-tax discount rate applied to calculate the present value of future cash flows had been<br />
one percentage point higher than management’s estimates, then that would have led to an additional reduction of<br />
the book value of goodwill in Poland by EUR 4.7 million at December 31, 2009.<br />
page _ 82 / 83
Financial review 2009<br />
4.3 Other investments<br />
Non-current investments<br />
The composition as at December 31 was as follows:<br />
EUR’000<br />
2009 2008<br />
note<br />
Securities and bonds 6.2 1,320 370<br />
Current investments<br />
The composition as at December 31 was as follows:<br />
EUR’000<br />
1,320 370<br />
2009 2008<br />
note<br />
Derivatives used for hedging 6.2 2,541 6,344<br />
2,541 6,344<br />
The exposure to credit, currency and interest rate risks related to other investments is disclosed in notes 3 and 6.2.<br />
4.4 Deferred tax assets and liabilities<br />
Deferred tax assets and liabilities arise on the following:<br />
EUR’000<br />
Assets Liabilities Net<br />
2009 2008 2009 2008 2009 2008<br />
Property, plant and<br />
equipment<br />
1,407 416 (30,666) (32,230) (29,259) (31,814)<br />
Intangible assets 2,731 2,593 (1,149) (1,199) 1,582 1,394<br />
Inventories 437 360 (26) (66) 411 294<br />
Tra<strong>de</strong> and other<br />
receivables<br />
1,443 1,246 (336) (311) 1,107 935<br />
Loans and borrowings 4,324 3,786 (1,251) (602) 3,073 3,184<br />
Derivatives 3,861 1,706 0 0 3,861 1,706<br />
Employee benefits<br />
provision<br />
391 938 0 (168) 391 770<br />
Other provisions 271 42 (1,058) (1,487) (787) (1,445)<br />
Current liabilities 950 2,259 (3,449) (1,791) (2,499) 468<br />
Deferred tax assets<br />
/ (liabilities)<br />
15,815 13,346 (37,935) (37,854) (22,120) (24,508)<br />
Tax loss<br />
carry-forwards<br />
6,006 9,387<br />
Net Tax assets / (liabilities) (16,114) (15,121)
EUR’000<br />
Movement in temporary differences 2008<br />
January 1,<br />
2008<br />
Recognized<br />
in profit or<br />
loss<br />
Recognized<br />
in<br />
equity<br />
Acquired in<br />
business<br />
combinations<br />
Effect of<br />
movement<br />
in exchange<br />
rates<br />
December<br />
31, 2008<br />
Property, plant and<br />
equipment<br />
(30,091) 2,288 (1,020) (3,230) 239 (31,814)<br />
Intangible assets 1,705 (311) 0 0 0 1,394<br />
Inventories 82 208 0 0 4 294<br />
Tra<strong>de</strong> and other<br />
receivables<br />
1,253 (335) 0 0 17 935<br />
Loans and borrowings (20) 1,281 0 1,961 (38) 3,184<br />
Derivatives (915) 2,621 0 1,706<br />
Employee benefits<br />
provision<br />
749 21 0 0 0 770<br />
Other provisions (1,766) 324 0 0 (3) (1,445)<br />
Current liabilities (556) 766 0 297 (39) 468<br />
Deferred tax assets<br />
/ (liabilities)<br />
(29,559) 6,863 (1,020) (972) 180 (24,508)<br />
Tax loss<br />
carry-forwards<br />
12,031 (2,479) 0 0 (165) 9,387<br />
Net tax assets /<br />
(liabilities)<br />
EUR’000<br />
Movement in temporary differences 2009<br />
(17,528) 4,384 (1,020) (972) 15 (15,121)<br />
January 1,<br />
2009<br />
Recognized<br />
in profit or<br />
loss<br />
Acquired in<br />
business<br />
combinations<br />
Effect of<br />
movement<br />
in exchange<br />
rates<br />
December<br />
31, 2009<br />
Property, plant and equipment (31,814) 4,479 (1,890) (34) (29,259)<br />
Intangible assets 1,394 188 0 0 1,582<br />
Inventories 294 416 (299) 0 411<br />
Tra<strong>de</strong> and other receivables 935 177 0 (5) 1,107<br />
Loans and borrowings 3,184 (113) 0 2 3,073<br />
Derivatives 1,706 2,155 0 0 3,861<br />
Employee benefits provision 770 (378) 0 (1) 391<br />
Other provisions (1,445) 168 489 1 (787)<br />
Current liabilities 468 (3,085) 105 13 (2,499)<br />
Deferred tax assets / (liabilities) (24,508) 4,007 (1,595) (24) (22.120)<br />
Tax loss carry-forwards 9,387 (3,432) 0 51 6,006<br />
Net tax assets / (liabilities) (15,121) 575 (1,595) 27 (16,114)<br />
page _ 84 / 85
Financial review 2009<br />
Tax losses carry-forwards<br />
The Group has losses carry-forwards for an amount of EUR 7,322,000 (2008: EUR 10,058,000) as<br />
per December 31, 2009, which expire in the following years:<br />
EUR’000<br />
2009 2008<br />
2009 - 2013 0 0<br />
2014 323 323<br />
After 2014 but not unlimited 3,125 5,257<br />
Unlimited 3,874 4,478<br />
7,322 10,058<br />
Recognized as <strong>de</strong>ferred tax assets (net) 6,006 9,387<br />
Not recognized 1,316 671<br />
4.5 Inventories<br />
The composition as at December 31 was as follows:<br />
EUR’000<br />
2009 2008<br />
Stock of raw materials and consumables 46,635 44,050<br />
Stock of finished goods 46,350 49,978<br />
Stocks are impaired for obsolescence by EUR 3,968,000 (2008: EUR 3,771,000).<br />
4.6 Tra<strong>de</strong> and other receivables<br />
The composition as at December 31 was as follows:<br />
EUR’000<br />
92,985 94,028<br />
2009 2008<br />
note<br />
Tra<strong>de</strong> receivables 154,621 157,784<br />
Other receivables, prepayments and accrued income 12,996 11,585<br />
Other taxes and social security premiums 8,855 11,484<br />
6.2 176,472 180,853<br />
Non-current 0 0<br />
Current 176,472 180,853<br />
The exposure to credit and currency risks and impairment losses related to tra<strong>de</strong> and other receivables is<br />
disclosed in note 6.2.
4.7 Cash and cash equivalents<br />
The composition as at December 31 was as follows:<br />
EUR’000<br />
2009 2008<br />
note<br />
Bank balances 20,742 27,702<br />
Deposits 39,000 17,000<br />
Cash and cash equivalents 6.2 59,742 44,702<br />
Bank overdrafts 4.10 (1,365) (10,858)<br />
Cash and cash equivalents in the statement of cash flows 58,377 33,844<br />
The full amount of bank balances is available on <strong>de</strong>mand. The term of the <strong>de</strong>posits is less than 3 months.<br />
The exposure to interest rate risk and the sensitivity analysis for financial assets and liabilities are disclosed in note 6.2<br />
4.8 Assets classified as held for sale<br />
Manufacturing facilities, as well as some machinery and equipment in Germany and Poland, have been classified<br />
as assets held for sale following the <strong>de</strong>cision by the management to sell these assets. Efforts to sell the assets are<br />
in progress and a sale is expected within normal market terms for such assets. During 2009, assets held for sale in<br />
France have been sold. Valuation is based on latest market information.<br />
EUR’000<br />
2009 2008<br />
Assets classified as held for sale as at January 1 1,238 437<br />
Transfer from property, plant and equipment 3,039 863<br />
Impairment on transferred assets (1,637) 0<br />
Assets sold (863) 0<br />
Effect of movements in exchange rates 5 (62)<br />
1,782 1,238<br />
4.9 Capital and reserves<br />
A <strong>de</strong>tailed overview of equity is provi<strong>de</strong>d in the consolidated statement of changes in equity 2009.<br />
In 2009, the Group paid a divi<strong>de</strong>nd of EUR 75,000 from the share premium to Okil Holding B.V. and Go<strong>de</strong>tia II B.V.<br />
For the year 2009, the Executive Board proposes not to <strong>de</strong>clare any divi<strong>de</strong>nd.<br />
Re<strong>de</strong>emable preference shares<br />
The rights of re<strong>de</strong>emable preference sharehol<strong>de</strong>rs are disclosed in note 3.2 to the company financial statements.<br />
4.10 Loans and borrowings<br />
The interest-bearing loans and borrowings are recognized at amortized cost. The exposure to interest rate,<br />
foreign currency and liquidity risks is disclosed in note 6.2.<br />
page _ 86 / 87
Financial review 2009<br />
Non-current liabilities<br />
The composition as at December 31 was as follows:<br />
EUR’000<br />
2009 2008<br />
Syndicated bank loans 296,697 311,200<br />
Subordinated bank loans 218,182 199,927<br />
Finance lease liabilities 9,807 13,807<br />
Current liabilities<br />
The composition as at December 31 was as follows:<br />
EUR’000<br />
524,686 524,934<br />
2009 2008<br />
note<br />
Current portion of syndicated bank loans 11,779 10,180<br />
Current portion of finance lease liabilities 4,297 4,522<br />
Other bank loans 619 1,940<br />
16,695 16,642<br />
Bank overdrafts 4.7 1,365 10,858<br />
The terms and conditions of the outstanding loans are as follows:<br />
Currency<br />
Nominal<br />
interest<br />
rate<br />
EUR’000 %<br />
Syndicated<br />
and other<br />
bank loans<br />
Subordinated<br />
bank loans<br />
Finance lease<br />
liabilities<br />
Bank<br />
overdrafts<br />
Year of<br />
maturity<br />
Face value<br />
2009<br />
Carrying<br />
amount<br />
2009<br />
18,060 27,500<br />
Face value<br />
2008<br />
Carrying<br />
amount<br />
2008<br />
EUR 1.9-6.3 2013-2015 310,962 309,095 325,695 323,320<br />
EUR 9.9-16.4 2016-2017 187,380 218,182 187,380 199,927<br />
EUR Various Various 14,104 14,104 18,329 18,329<br />
EUR 1.0-2.0 2010 1,365 1,365 10,858 10,858<br />
Total interest-bearing liabilities 513,811 542,746 542,262 552,434
The bank loans are secured by the following:<br />
First priority mortgage on the real estate in The Netherlands and Germany<br />
Pledge of property, plant and equipment, receivables, inventories and the shares of all group companies.<br />
Assignment of movable fixed assets and inventories, rights and claims un<strong>de</strong>r a Share Purchase Agreement<br />
and certain insurance policies.<br />
The Group maintains the following lines of credit:<br />
A EUR 17.5 million facility for capital expenditures, with interest payable at the rate of EURIBOR plus 1.50 %.<br />
A EUR 50.0 million revolving credit facility to meet short-term financing needs, with interest payable at the<br />
rate of EURIBOR plus 1.50 %.<br />
Finance lease liabilities<br />
Finance lease liabilities are payable as follows:<br />
EUR’000<br />
Future<br />
minimum<br />
lease<br />
payments<br />
2009<br />
Interest<br />
2009<br />
Present<br />
value of<br />
minimum<br />
lease<br />
payments<br />
2009<br />
Future<br />
minimum<br />
lease<br />
payments<br />
2008<br />
Interest<br />
2008<br />
Present<br />
value of<br />
minimum<br />
lease<br />
payments<br />
2008<br />
Less than one year 4,898 601 4,297 5,233 711 4,522<br />
Between one and five years 9,595 926 8,669 12,365 1,370 10,995<br />
More than five years 1,175 37 1,138 2,948 136 2,812<br />
15,668 1,564 14,104 20,546 2,217 18,329<br />
Financial leases relate mainly to a warehouse and an office building in France and production equipment in Belgium<br />
and Poland.<br />
page _ 88 / 89
Financial review 2009<br />
4.11 Employee benefits provision<br />
The composition as at December 31 was as follows:<br />
EUR’000<br />
2009 2008<br />
Present value of unfun<strong>de</strong>d obligations 15,199 13,707<br />
Present value of fun<strong>de</strong>d obligations 40,069 31,355<br />
Present value of pension benefit obligations 55,268 45,062<br />
Fair value of plan assets (38,969) (32,699)<br />
Present value of net obligations 16,299 12,363<br />
Effect of §58(b) - asset ceiling 0 368<br />
Unrecognized past service costs (204) 0<br />
Unrecognized net actuarial gains / (losses) (3,027) 211<br />
Total employee benefits (asset) / liability 13,068 12,942<br />
The Group contributes to a number of <strong>de</strong>fined benefit plans that provi<strong>de</strong> pension benefits to employees upon<br />
retirement in the Netherlands, Germany and the United Kingdom. The amount of the benefits <strong>de</strong>pends on age,<br />
salary and years of service. Furthermore, the Group has an in<strong>de</strong>mnity plan in France and obligations for jubilee<br />
in the Netherlands, Germany and France.<br />
Plan assets comprise:<br />
EUR’000<br />
2009 2008<br />
Equity securities 9,080 6,776<br />
Government bonds 27,765 23,040<br />
Other 2,124 2,883<br />
38,969 32,699
Movements in the present value of the <strong>de</strong>fined benefit obligations<br />
The composition and changes were as follows:<br />
EUR’000<br />
2009 2008<br />
Defined benefit obligations as at January 1 45,062 47,521<br />
Net transfers in / (out) 604 (58)<br />
Benefits paid by the plan (1,146) (1,574)<br />
Current service costs 2,280 2,018<br />
Interest costs 2,595 2,509<br />
Plan participants contributions 204 187<br />
Past service costs 215 0<br />
Effect of movements in exchange rates 311 (1,622)<br />
Actuarial (gains) / losses 5,143 (3,919)<br />
Defined benefit obligations as at December 31 55,268 45,062<br />
Movements in the fair value of plan assets<br />
The composition and changes were as follows:<br />
EUR’000<br />
2009 2008<br />
Fair value of plan assets as at January 1 (32,699) (35,521)<br />
Net transfers (in) / out (604) 58<br />
Benefits paid by the plan 1,508 1,622<br />
Employer contributions (3,540) (2,392)<br />
Plan participants contributions (204) (307)<br />
Expected return on plan assets (1,521) (1,743)<br />
Effect of movements in exchange rates (343) 1,700<br />
Actuarial (gains) / losses (1,566) 3,884<br />
Fair value of plan assets as at December 31 (38,969) (32,699)<br />
The weighted average returns for the Netherlands, Germany and UK are based on the strategic asset mixes and the<br />
corresponding yields for each asset category.<br />
page _ 90 / 91
Financial review 2009<br />
Expenses recognized in the income statement<br />
The composition was as follows:<br />
EUR’000<br />
2009 2008<br />
note<br />
Current service costs 2,280 2,018<br />
Interest on benefit obligations 2,595 2,509<br />
Expected return on plan assets (1,521) (1,743)<br />
Amortization of past service cost including §58A 11 0<br />
Effect of §58(b) limit (396) 137<br />
Recognized actuarial losses / (gains) including §58A 339 (707)<br />
Pension costs of <strong>de</strong>fined benefit schemes 3,308 2,214<br />
Pension contributions to <strong>de</strong>fined contribution schemes 1,003 2,368<br />
Total pension costs 5.3 4,311 4,582<br />
The pensions costs are recognized in the employee benefits expense.<br />
The actual return on plan assets was EUR 3,086,000 positive (2008: EUR 2,141,000 negative).<br />
Actuarial assumptions<br />
Principal actuarial assumptions at the reporting date (expressed as weighted averages):<br />
%<br />
2009 2008<br />
Discount rate as at 31 December 5.3 5.7<br />
Expected return on plan assets as at January 1 4.2 4.2<br />
Future salary increases 3.0 2.0<br />
Future pension increases 2.1 2.0<br />
The assumptions regarding future mortality are based on published statistics and mortality tables.<br />
Historical information<br />
The composition as at December 31 was as follows:<br />
EUR’000<br />
2009 2008 2007 2006<br />
Present value of <strong>de</strong>fined benefit obligations 55,268 45,062 47,521 42,536<br />
Fair value of plan assets (38,969) (32,699) (35,521) (27,774)<br />
Deficit in the plan 16,299 12,363 12,000 14,762<br />
Experience gains / (losses) arising on plan liabilities (1%) 9%<br />
Experience adjustments arising on plan assets 4% (12%)
The Group expects that contributions to the <strong>de</strong>fined benefit plans will be EUR 2,186,000 in 2010.<br />
4.12 Other provisions<br />
The composition and changes were as follows:<br />
EUR’000<br />
Reorganization Other Total<br />
January 1, 2009 2,620 712 3,332<br />
Provisions ma<strong>de</strong> during the period 2,300 920 3,220<br />
Provisions used during the period (3,332) 0 (3,332)<br />
Provisions reversed during the period 0 (7) (7)<br />
Effect of movements in exchange rates 0 31 31<br />
December 31, 2009 1,588 1,656 3,244<br />
Non-current 0 525 525<br />
Current 1,588 1,131 2,719<br />
Reorganization<br />
During 2009, the Group committed to a plan to further restucture the German organization. Following the<br />
announcement of the plan the Group recognized in 2009 a provision of EUR 2,300,000 for the expected reorganization<br />
costs, including employee termination benefits. Based on the terms of the applicable contracts, EUR 3,332,000<br />
was charged to the provision in 2009.<br />
Other provisions<br />
Other provisions inclu<strong>de</strong> provisions for claims.<br />
4.13 Tra<strong>de</strong> and other payables<br />
The composition as at December 31 was as follows:<br />
EUR’000<br />
2009 2008<br />
note<br />
Tra<strong>de</strong> accounts payable 158,046 154,767<br />
Income tax payable 1,837 3,899<br />
Other taxes and social security premiums 12,518 12,213<br />
Current part of provisions 2,719 2,620<br />
Other payables, accruals and <strong>de</strong>ferred income 51,215 41,719<br />
6.2 226,335 215,218<br />
The exposure to foreign currency and liquidity risks on tra<strong>de</strong> and other payables is disclosed in note 6.2.<br />
page _ 92 / 93
Financial review 2009<br />
5 Notes to the consolidated income statement<br />
5.1 Revenue<br />
The composition was as follows:<br />
EUR’000<br />
2009 2008<br />
Private label and own brands 899,434 898,163<br />
Contract manufacturing 240,140 247,919<br />
5.2 Other income<br />
Other income relates entirely to the gain on the sale of property, plant and equipment.<br />
5.3 Employee benefits expense<br />
The composition was as follows:<br />
EUR’000<br />
1,139,574 1,146,082<br />
2009 2008<br />
note<br />
Wages and salaries 82,876 77,626<br />
Compulsory social security contributions 18,760 17,771<br />
Pension contributions to <strong>de</strong>fined contribution schemes 4.11 1,003 2,368<br />
Pension costs of <strong>de</strong>fined benefit schemes 4.11 3,308 2,214<br />
105,947 99,979<br />
During 2009 the average number of employees in the Group, in full-time equivalents (“FTEs”), was 2,318<br />
(2008: 2,241), of which 1,927 (2008: 1,926) were employed outsi<strong>de</strong> the Netherlands.<br />
5.4 Depreciation, amortization and impairment expense<br />
The composition was as follows:<br />
EUR’000<br />
2009 2008<br />
note<br />
Property, plant and equipment 4.1+4.7 50,207 46,870<br />
Intangible assets 4.2 1,679 641<br />
51,886 47,511
5.5 Other operating expenses<br />
The composition was as follows:<br />
EUR’000<br />
2009 2008<br />
note<br />
Freight charges 49,914 55,307<br />
Other cost of sales, including excise duties 44,873 49,146<br />
Promotion costs 1,364 1,584<br />
Temporary staff 9,099 9,150<br />
Other personnel costs 7,971 5,095<br />
Rent and leasing of machinery and equipment 6.3 16,348 13,735<br />
Maintenance 26,948 25,918<br />
Energy 25,264 22,987<br />
Advice and legal costs 4,917 6,955<br />
Housing costs, including rental of buildings 6.3 9,489 7,971<br />
Storage costs 14,898 14,708<br />
Other operating costs 30,932 30,978<br />
Auditor’s fees<br />
242,017 243,534<br />
With reference to Section 2:382a(1) and (2) of the Dutch Civil Co<strong>de</strong>, the following fees for the financial year have<br />
been charged by PricewaterhouseCoopers Accountants N.V. and the PricewaterhouseCoopers network insi<strong>de</strong> and<br />
outsi<strong>de</strong> the Netherlands to the Company, its subsidiaries and other consolidated entities:<br />
EUR’000<br />
2009 2008<br />
Statutory audit of financial statements 925 822<br />
Other auditing services 44 40<br />
Tax advisory services 593 1,247<br />
Other non-audit services 47 978<br />
Total 1,609 3,087<br />
page _ 94 / 95
Financial review 2009<br />
5.6 Finance income and expense<br />
Finance income and expense recognized in the income statement<br />
The composition was as follows:<br />
EUR’000<br />
2009 2008<br />
Interest income on bank <strong>de</strong>posits 201 2,014<br />
Finance income 201 2,014<br />
Interest expense on financial liabilities measured at amortized cost (49,874) (55,017)<br />
Cost of borrowings (635) (7,361)<br />
Net change in fair value of <strong>de</strong>rivatives (5,982) (14,005)<br />
Finance expense (56,491) (76,383)<br />
Net finance expense (56,290) (74,369)<br />
The cost of borrowings EUR 635,000 (2008: EUR 7,361,000) relates to the financing costs of the syndicated loan<br />
facility entered into in 2008, which were capitalized in the aggregate amount of EUR 6,319,000 and amortized over<br />
the terms of the loans. In 2008, an amount of EUR 5,906,000 related to the one-time write off of capitalized finance<br />
costs arising on loans, originating in 2006, which were refinanced in 2008.<br />
The net change in fair value of <strong>de</strong>rivatives EUR 5,982,000 negative (2008: EUR 14,005,000 negative) relates to<br />
changes in the fair value of the interest rate swaps contracts conclu<strong>de</strong>d by the Group to hedge the interest rate risk<br />
on syndicated bank loans and subordinated bank loans.<br />
Finance income and expense recognized in other comprehensive income<br />
The composition was as follows:<br />
EUR’000<br />
2009 2008<br />
Foreign currency translation differences for foreign operations 1,299 (5,955)<br />
Finance income / (expense) recognized in other comprehensive income,<br />
net of tax<br />
Recognized in:<br />
1,299 (5,955)<br />
Translation reserve 1,299 (5,955)
5.7 Income tax (expense) / benefit<br />
The composition was as follows:<br />
EUR’000<br />
2009 2008<br />
Current tax expense<br />
Current period (6,047) (3,962)<br />
Un<strong>de</strong>r / (over) provisions in prior years 1,745 3,479<br />
(4,302) (483)<br />
Deferred tax expenses<br />
Origination and reversal of temporary differences 3,756 7,429<br />
Change in tax rate (26) (568)<br />
Previously unrecognized <strong>de</strong>ductible temporary differences 75 0<br />
Utilization of tax losses recognized (3,965) (2,479)<br />
Recognition of previously unrecognized tax losses 533 0<br />
Un<strong>de</strong>r / (over) provisions in prior years 208 (782)<br />
581 3,600<br />
Total income tax (expense) / benefit (3,721) 3,117<br />
EUR’000<br />
Reconciliation of effective tax rate<br />
2009 2008<br />
Profit / (loss) before income tax 11,414 (16,900)<br />
Income tax (expense) / benefit (3,721) 3,117<br />
Profit / (loss) 7,693 (13,783)<br />
2009 2008<br />
EUR’000 % %<br />
Income tax using the Company’s domestic tax rate 25.5% (2,911) 25.5% 4,310<br />
Effect of tax rates in foreign jurisdictions 22.1% (2,522) (5.0%) (845)<br />
Reduction in tax rate 0.2% (23) (3.4%) (575)<br />
Non-<strong>de</strong>ductible expenses 3.1% (354) (13.4%) (2,265)<br />
Non-taxable income (2.4%) 274 7.3% 1,234<br />
Recognition of previously unrecognized tax losses 1.5% (171) (4.5%) (761)<br />
Current year losses for which no <strong>de</strong>ferred tax asset<br />
was recognized<br />
2.6% (297) (2.4%) (406)<br />
Un<strong>de</strong>r / (over) provisions in prior years (20.0%) 2,283 14.4% 2,425<br />
Total income tax (expense) / benefits 32.6% (3,721) 18.4% 3,117<br />
page _ 96 / 97
Financial review 2009<br />
The major item in the effective tax rate reconciliation relates to the favorable outcome of discussions with the<br />
Dutch tax authorities. This has resulted in the release of an over-provision relating to prior years. Furthermore,<br />
the effective tax rate has been affected by the non-recognition of losses in both Poland and the UK and by a<br />
combination of non-<strong>de</strong>ductible expenses and non-taxable income.<br />
6 Supplementary Information<br />
6.1 Acquisition of subsidiaries and non-controlling interests<br />
On April 18, 2009, the Group agreed to purchase 100% of the share capital of Schiffers B.V. for EUR 18.8 million in<br />
cash. Schiffers B.V. manufactures carbonated soft drinks for the private label market and also acts as a contract<br />
manufacturer. For the period from acquisition to December 31, 2009 the subsidiary contributed an operating profit<br />
of EUR 1,265,000. If the acquisition had taken place on January 1, 2009, management estimates that Schiffers B.V.<br />
would have contributed revenue of EUR 50.3 million and operating profit of EUR 1.6 million. In <strong>de</strong>termining these<br />
amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would<br />
have been the same if the acquisition had taken place on January 1, 2009.<br />
The acquisition had the following effect on the assets and liabilities on acquisition date:<br />
Pre-acquisition<br />
carrying<br />
amount<br />
Fair value<br />
adjustments<br />
Recognized<br />
values on<br />
acquisition<br />
EUR’000<br />
Property, plant and equipment<br />
note<br />
4.1 5,079 7,411 12,490<br />
Intangible assets 4.2 60 0 60<br />
Inventories 5,400 1,171 6,571<br />
Tra<strong>de</strong> and other receivables 627 0 627<br />
Cash and cash equivalents 7,914 0 7,914<br />
Deferred tax liabilities 4.4 0 (1,595) (1,595)<br />
Tra<strong>de</strong> and other payables (6,547) (2,099) (8,646)<br />
Net i<strong>de</strong>ntifiable assets and liabilities 12,533 4,888 17,421<br />
Goodwill on acquisition 4.1 1,423<br />
Consi<strong>de</strong>ration paid, satisfied in cash 18,844<br />
Cash acquired (7,914)<br />
Net cash outflow 10,930
Pre-acquisition carrying amounts were <strong>de</strong>termined based on IFRS standards applicable as of the date of<br />
acquisition. The values of assets, liabilities, and contingent liabilities recognized on acquisition are their<br />
estimated fair values (see note 2.19 for methods used to <strong>de</strong>termine fair values). The goodwill recognized on<br />
the acquisition is attributable mainly to the synergies expected to be achieved from integrating the acquired<br />
company into the existing business.<br />
On March 31, 2008, the Group acquired the remaining 10 percent interest in Histogram Ltd. (the United Kingdom)<br />
increasing its ownership from 90 percent to 100 percent for an amount of GBP 1.3 million.<br />
On June 17, 2008, the Group acquired the remaining 90 percent interest in Eldis S.A.S. in France increasing its<br />
ownership from 10 percent to 100 percent for an amount of EUR 37,000.<br />
On December 22, 2008, the Group acquired 25% of Junita Fruchtsaft Marketing GmbH in Germany increasing its<br />
ownership to 100% for an insignificant amount.<br />
6.2 Financial instruments<br />
Credit risk<br />
Exposure to credit risk<br />
The carrying amount of financial assets represents the maximum credit exposure, as follows at the reporting date:<br />
EUR’000<br />
Carrying amount<br />
2009 2008<br />
note<br />
Non-current investments 4.3 1,320 370<br />
Tra<strong>de</strong> and other receivables 4.6 176,472 180,853<br />
Current investments 4.3 2,541 6,344<br />
Cash and cash equivalents 4.7 59,742 44,702<br />
240,075 232,269<br />
The maximum exposure to credit risk for tra<strong>de</strong> and other receivables at the reporting date by geographic region<br />
was as follows:<br />
EUR’000<br />
Carrying amount<br />
2009 2008<br />
Euro-zone countries (EUR) 161,132 169,094<br />
United Kingdom (GBP) 7,675 5,180<br />
Poland (PLN) 7,665 6,579<br />
176,472 180,853<br />
page _ 98 / 99
Financial review 2009<br />
Ageing and impairment losses<br />
The ageing of tra<strong>de</strong> and other receivables at the reporting date was as follows:<br />
EUR’000<br />
2009 2008<br />
Gross Impairment Gross Impairment<br />
Not past due 156,757 0 155,002 0<br />
Past due 0 - 30 days 15,993 0 22,548 0<br />
Past due 31 - 60 days 2,074 0 1,309 0<br />
Past due more than 60 days 2,964 1,316 3,724 1,730<br />
177,788 1,316 182,583 1,730<br />
The movements in the impairment loss in respect of tra<strong>de</strong> and other receivables during the year were as follows:<br />
EUR’000<br />
2009 2008<br />
January 1 1,730 2,086<br />
Impairment loss recognized 167 232<br />
Release of provision (238) (390)<br />
Written off (350) (126)<br />
Effect of movements in exchange rates 7 (72)<br />
December 31 1,316 1,730<br />
The Group <strong>de</strong>termines impairment losses on the basis of specific estimates of losses incurred in respect of tra<strong>de</strong><br />
and other receivables. Based on historic <strong>de</strong>fault rates, the Group believes that no impairment loss has occurred in<br />
respect of tra<strong>de</strong> receivables not past due or past due by up to 60 days.<br />
Liquidity risk<br />
The contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of<br />
netting agreements, are as shown in the following table.<br />
Insofar as these cash flows <strong>de</strong>pend on future floating interest rates, the level of which was unknown on the balance<br />
sheet date, these cash flows have been estimated on the basis of rates prevailing on the balance sheet date.
EUR’000<br />
December 31, 2009<br />
Carrying<br />
amount<br />
Contractual<br />
cash flows<br />
6 months<br />
or less<br />
6 - 12<br />
months<br />
1 – 2<br />
years<br />
2 – 5<br />
years<br />
> 5<br />
years<br />
Non-<strong>de</strong>rivative financial liabilities<br />
Syndicated<br />
bank loans<br />
309,095 (428,652) (17,542) (18,218) (36,481) (217,147) (139,264)<br />
Subordinated<br />
bank loans<br />
218,182 (582,623) (5,847) (5,847) (12,361) (41,508) (517,060)<br />
Finance lease<br />
liabilities<br />
14,104 (15,668) (2,449) (2,449) (4,386) (5,208) (1,176)<br />
Tra<strong>de</strong> and other<br />
payables<br />
226,335 (226,335) (226,335) 0 0 0 0<br />
Bank overdrafts 1,365 (1,365) (1,365) 0 0 0 0<br />
Derivative financial liabilities<br />
Interest rate swaps<br />
used for hedging<br />
769,081 (1,254,643) (253,538) (26,514) (53,228) (263,863) (657,500)<br />
Cash flow 16,281 (22,835) (4,900) (4,519) (7,876) (5,540) 0<br />
EUR’000<br />
December 31, 2008<br />
Carrying<br />
amount<br />
Contractual<br />
cash flows<br />
6 months<br />
or less<br />
6 - 12<br />
months<br />
1 – 2<br />
years<br />
2 – 5<br />
years<br />
> 5<br />
years<br />
Non-<strong>de</strong>rivative financial liabilities<br />
Syndicated<br />
bank loans<br />
323,320 (463,442) (17,000) (17,835) (35.715) (104,174) (288,718)<br />
Subordinated<br />
bank loans<br />
199,927 (593,689) (4,047) (7,018) (11,695) (39,272) (531,657)<br />
Finance lease<br />
liabilities<br />
18,329 (20,546) (2,616) (2,616) (5,053) (7,313) (2,948)<br />
Tra<strong>de</strong> and other<br />
payables<br />
215,218 (215,218) (215,218) 0 0 0 0<br />
Bank overdrafts 10,858 (10,858) (10,858) 0 0 0 0<br />
Derivative financial liabilities<br />
Interest rate <strong>de</strong>rivatives<br />
used for hedging<br />
767,652 (1,303,753) (249,739) (27,469) (52,463) (150,759) (823,323)<br />
Cash flow 10,122 (12,970) (2,496) (2,347) (5,116) (3,011) 0<br />
page _ 100 / 101
Financial review 2009<br />
Foreign currency risk<br />
Exposure to foreign currency risk<br />
The notional amounts of exposure to foreign currency risk were as follows:<br />
USD’000<br />
2009 2008<br />
Tra<strong>de</strong> payables 12,443 8,850<br />
Estimated forecast purchases 98,709 137,879<br />
Gross exposure 111,152 146,729<br />
Forward exchange contracts / Currency option contracts 97,165 134,670<br />
Net exposure 13,987 12,059<br />
The change in fair value of the financial instruments used to hedge currency risk is inclu<strong>de</strong>d in raw materials and<br />
consumables in the income statement.<br />
The following significant exchange rates were applied during the year:<br />
Value of EUR 1<br />
Average Year-end<br />
2009 2008 2009 2008<br />
USD 1.40 1.48 1.44 1.40<br />
GBP 0.89 0.80 0.89 0.95<br />
PLN 4.33 3.52 4.10 4.17<br />
Sensitivity analysis<br />
A 10 percent strengthening of the Euro against the USD at December 31 would have not affected equity and profit<br />
or loss significantly, as the Group hedges USD positions, except for the change in fair value of <strong>de</strong>rivatives which is<br />
recognized in the income statement. This analysis assumes that all other variables, particularly interest rates,<br />
remain constant. The analysis has been performed on the same basis as for 2008.
Interest rate risk<br />
Profile<br />
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was as follows:<br />
EUR’000<br />
Carrying amount<br />
2009 2008<br />
note<br />
Fixed rate instruments<br />
Non-current investments 4.3 1,320 370<br />
Loans and borrowings 4.10 (372,604) (452,329)<br />
Interest rate swaps floating to fixed 6.2 (16,281) (10,122)<br />
(387,565) (462,081)<br />
Variable rate instruments<br />
Loans and borrowings 4.10 (170,142) (100.105)<br />
(170,142) (100.105)<br />
Sensitivity analysis for fixed rate instruments<br />
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and<br />
the Group does not <strong>de</strong>signate <strong>de</strong>rivatives (interest rate swaps) as hedging instruments un<strong>de</strong>r a fair value hedge<br />
accounting mo<strong>de</strong>l. Therefore a change in interest rates at the reporting date would not have affected profit or loss,<br />
with the exception of the change in fair value of the Interest rate swaps.<br />
Sensitivity analysis for variable rate instruments<br />
A change of 100 basis points in interest rates at the reporting date would have changed equity and profit or loss<br />
by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates,<br />
remain constant. The analysis is performed on the same basis as for 2008.<br />
page _ 102 / 103
Financial review 2009<br />
EUR’000<br />
December 31, 2009<br />
100 basis<br />
points<br />
increase<br />
Profit / (loss) Equity<br />
100 basis<br />
points<br />
<strong>de</strong>crease<br />
100 basis<br />
points<br />
increase<br />
100 basis<br />
points<br />
<strong>de</strong>crease<br />
Variable rate instruments (5,273) 5,273 (5,273) 5,273<br />
Net Interest rate swaps floating to fixed 8 500 (8,500) 8,500 (8,500)<br />
Total 3,227 (3,227) 3,227 (3,227)<br />
Variable rate instruments (5,273) 5,273 (5,273) 5,273<br />
% not hedged by interest rate swaps 32.0% 32.0% 32.0% 32.0%<br />
Cash flow sensitivity (net) (1,687) 1,687 (1,687) 1,687<br />
EUR’000<br />
December 31, 2008<br />
100 basis<br />
points<br />
increase<br />
Profit / (loss) Equity<br />
100 basis<br />
points<br />
<strong>de</strong>crease<br />
100 basis<br />
points<br />
increase<br />
100 basis<br />
points<br />
<strong>de</strong>crease<br />
Variable rate instruments (5,232) 5,232 (5,232) 5,232<br />
Net Interest rate swaps floating to fixed 13,000 (13,000) 13,000 (13,000)<br />
Total 7,768 (7,768) 7,768 (7,768)<br />
Variable rate instruments (5,232) 5,232 (5,232) 5,232<br />
% not hedged by interest rate swaps 17.1% 17.1% 17.1% 17.1%<br />
Cash flow sensitivity (net) (895) 895 (895) 895<br />
Fair values<br />
The fair values of financial assets and liabilities approximate the carrying amounts.
Interest rates used for <strong>de</strong>termining fair value<br />
The interest rates used to discount estimated cash flows, where applicable, are based on the government yield<br />
curve at the reporting date plus an a<strong>de</strong>quate spread and were as follows:<br />
%<br />
2009 2008<br />
Derivatives 2.0% 2.8%<br />
Finance leases 5.0% 5.1%<br />
6.3 Operating leases<br />
Operating lease and rentals as at December 31 are payable as follows:<br />
EUR’000<br />
2009 2008<br />
Less than one year 21,440 10,385<br />
Between one and five years 46,213 29,866<br />
More than five years 4,254 0<br />
71,907 40,251<br />
The Group leases buildings, equipment and cars. During 2009, EUR 20,016,000 was recognized as expense in<br />
the income statement in respect of operating leases and rentals (2008: EUR 16,654,000).<br />
6.4 Purchase and investment commitments<br />
The composition as at December 31 was as follows:<br />
EUR’000<br />
Total<br />
Less than<br />
1 year 1-5 years<br />
More than<br />
5 years Total 2008<br />
Property, plant & equipment or<strong>de</strong>red 7,334 7,334 0 0 8,803<br />
Raw material purchase contracts 146,145 141,979 3,929 237 28,359<br />
153,479 149,313 3,929 237 37.162<br />
page _ 104 / 105
Financial review 2009<br />
6.5 Contingencies<br />
The group companies are jointly and individually liable vis à vis the syndicate of banks. Banks have issued<br />
guarantees to suppliers and customs on behalf of the Group in the aggregate amount of EUR 10,312,000<br />
(2008: EUR 8,854,000).<br />
The Company forms a fiscal unity for income tax purposes with <strong>Refresco</strong> B.V., Menken Drinks B.V., <strong>Refresco</strong> Onroerend<br />
Goed B.V. and Frisdranken Industrie Winters B.V. In accordance with the standard conditions, the Company and the<br />
subsidiaries that are part of the fiscal unity are jointly and individually liable for taxation payable by the fiscal unity.<br />
Some claims have been filed against the Group. Based on legal advice, the directors do not expect that the<br />
outcome of these claims will have a material effect on the financial position of the Group.<br />
6.6 Related parties<br />
Sharehol<strong>de</strong>r structure<br />
The Company’s sharehol<strong>de</strong>rs are Ferskur Holding 2 B.V., Okil Holding B.V., and Go<strong>de</strong>tia II B.V. The ultimate<br />
sharehol<strong>de</strong>rs of the Group are Kaupthing Bank HF, Vifilfell HF and Stodir (previously FL Group) HF.<br />
A minority share is with the management of the Group.<br />
I<strong>de</strong>ntification of related parties<br />
The subsidiaries inclu<strong>de</strong>d in note 3.1 of the company financial statements are consi<strong>de</strong>red to be related parties.<br />
Other i<strong>de</strong>ntified related parties are: Okil Holding B.V., Okil Holding GmbH, <strong>Refresco</strong> KG, Ferskur Holding 1 B.V.,<br />
Ferskur Holding 2 B.V., Kaupthing Bank HF, Vifilfell HF and Stodir (previously FL Group) HF., Go<strong>de</strong>tia II B.V.,<br />
Menken Dairy Foods B.V., and members of management who are sharehol<strong>de</strong>rs of the Group. The transactions with<br />
these related parties relate primarily to the shareholding and <strong>de</strong>bt financing of the Group.<br />
Personnel compensation and transactions with Executive and Supervisory Board Members<br />
Executive Board personnel compensation<br />
In addition to their salaries, the Group also provi<strong>de</strong>s non-cash benefits to members of the Executive Board and<br />
contributes to a post-employment <strong>de</strong>fined benefit plan on their behalf. In accordance with the terms of the plan,<br />
members of the Executive Board retire at age 65.<br />
Compensation of the Executive Board members comprised the following:<br />
EUR’000<br />
2009 2008<br />
Short-term employee benefits 1,779 1,451<br />
Post-employment benefits 203 460<br />
The remuneration of Supervisory Board members was EUR 95,500 (2008: EUR 85,000).<br />
1,982 1,911
Transactions with key management and directors<br />
The Executive Board members of the Group held (either directly or indirectly) 7.6 % of the Company’s ordinary<br />
shares. None of the current members of the Supervisory Board held any shares of the Company.<br />
Other related party transactions<br />
The composition was as follows:<br />
EUR’000<br />
Transaction value<br />
Balance outstanding<br />
December 31<br />
2009 2008 2009 2008<br />
Increase of sharehol<strong>de</strong>rs’ equity<br />
Ferskur Holding 2 B.V. 0 57,043 0 148,644<br />
Divi<strong>de</strong>nds from share premium<br />
Okil Holding B.V. 55 0 0 0<br />
Go<strong>de</strong>tia II B.V. 20 0 0 0<br />
Total 75 0 0 0<br />
Management charges<br />
Ferskur Holding 2 B.V. 863 0 505 0<br />
In 2008, as part of the refinancing of the group, the preference shares held by sharehol<strong>de</strong>rs Okil Holding B.V.<br />
and Go<strong>de</strong>tia II B.V. were converted into ordinary shares, with no impact on total sharehol<strong>de</strong>rs’ equity.<br />
The management charges payable to Ferskur Holding 2 B.V. relate to the years 2006-2009.<br />
Transactions un<strong>de</strong>rlying outstanding balances with these related parties are priced on an arm’s length basis and the<br />
balances are to be settled in cash within six months of the reporting date. None of the balances is secured.<br />
6.7 Group entities<br />
The overview of the entities of the Group is inclu<strong>de</strong>d in note 3.1 to the company financial statements.<br />
6.8 Adoption of IFRS<br />
These are the first consolidated financial statements of the Group prepared in accordance with IFRS.<br />
The accounting policies set out in note 2 have been applied in preparing the financial statements for 2009, the<br />
comparative information presented in these financial statements for 2008 and the IFRS opening balance sheet<br />
as at January 1, 2008, the date of transition.<br />
In preparing its opening IFRS balance sheet, the Group has adjusted amounts reported previously in financial statements<br />
prepared in accordance with its previous basis of accounting (Dutch GAAP). The impact of the transition from<br />
Dutch GAAP to IFRS on the financial position, profit or loss and cash flows is set out in the following tables and the<br />
notes that accompany the tables.<br />
page _ 106 / 107
Financial review 2009<br />
EUR’000<br />
Reconciliation of the balance sheet<br />
ASSETS<br />
note<br />
January 1, 2008 December 31, 2008<br />
Dutch GAAP Impact IFRS Dutch GAAP Impact IFRS<br />
Property, plant and<br />
equipment<br />
a 333,625 (3,746) 329,879 326,133 (3,110) 323,023<br />
Intangible assets b 274,323 0 274,323 257,213 14,556 271,769<br />
Other investments c 3,834 4,081 7,915 370 0 370<br />
Deferred tax assets d 0 12,031 12,031 0 9,387 9,387<br />
Total non-current assets 611,782 12,366 624,148 583,716 20,833 604,549<br />
Inventories e 86,182 (363) 85,819 94,567 (539) 94,028<br />
Other investments,<br />
including <strong>de</strong>rivatives<br />
c 0 533 533 0 6,344 6,344<br />
Current tax assets d 15,310 (15,310) 0 10,210 (9,387) 823<br />
Tra<strong>de</strong> and other<br />
receivables<br />
f 152,552 18,289 170,841 162,305 18,548 180,853<br />
Prepayments for current<br />
assets<br />
f 15,836 (15,836) 0 23,543 (23,543) 0<br />
Cash and cash<br />
equivalents<br />
42,534 0 42,534 44,702 0 44,702<br />
312,414 (12,687) 299,727 335,327 (8,577) 326,750<br />
Assets classified as<br />
held for sale<br />
a 0 437 437 0 1,238 1,238<br />
Total current assets 312,414 (12,250) 300,164 335,327 (7,339) 327,988<br />
Total assets 924,196 116 924,312 919,043 13,494 932,537
EUR’000<br />
EQUITY<br />
note<br />
January 1, 2008 December 31, 2008<br />
Dutch GAAP Impact IFRS Dutch GAAP Impact IFRS<br />
Share capital 3,351 0 3,351 5,437 0 5,437<br />
Share premium 101,649 0 101,649 156,606 0 156,606<br />
Reserves 288 954 1,242 (32,372) 713 (31,659)<br />
Profit / (loss) for the year (26,946) 0 (26,946) (16,323) 2,540 (13,783)<br />
Total equity 78,342 954 79,296 113,348 3,253 116,601<br />
Minority interest 236 0 236 0 0 0<br />
LIABILITIES<br />
Loans and borrowings g 380,917 938 381,855 518,090 6,844 524,934<br />
Derivatives c 0 197 197 0 10,122 10,122<br />
Employee benefits<br />
provision<br />
h 14,605 (2,304) 12,301 15,967 (3,025) 12,942<br />
Other provisions f 962 802 1,764 2,978 (2,266) 712<br />
Deferred tax liabilities d 29,923 (364) 29,559 28,683 (4,175) 24,508<br />
Total non-current<br />
liabilities<br />
426,407 (731) 425,676 565,718 7,500 573,218<br />
Bank overdrafts 32,385 0 32,385 10,858 0 10,858<br />
Loans and borrowings 200,698 0 200,698 16,642 0 16,642<br />
Tra<strong>de</strong> and other payables f 186,128 (107) 186,021 212,477 2,741 215,218<br />
Total current liabilities 419,211 (107) 419,104 239,977 2,741 242,718<br />
Total liabilities 845,618 (838) 844,780 805,695 10,241 815,936<br />
Total equity and<br />
liabilities<br />
924,196 116 924,312 919,043 13,494 932,537<br />
page _ 108 / 109
Financial review 2009<br />
EUR’000<br />
Reconciliation of the income statement 2008<br />
Dutch GAAP Impact IFRS<br />
note<br />
Revenue i 1,246,498 (100,416) 1,146,082<br />
Change in inventories of finished goods j 1,714 (1,714) 0<br />
Raw materials and consumables used e+i (724,473) 26,884 (697,589)<br />
Employee benefits expense h (100,700) 721 (99,979)<br />
Depreciation, amortization and impairment expense a+b (63,694) 16,183 (47,511)<br />
Other operating expenses i (320,295) 76,761 (243,534)<br />
Operating profit 39,050 18,419 57,469<br />
Finance income 2,014 0 2,014<br />
Finance expense c+g (56,472) (19,911) (76,383)<br />
Net finance result (54,458) (19,911) (74,369)<br />
Profit / (loss) before income tax (15,408) (1,492) (16,900)<br />
Income tax (expense) / benefit d (915) 4,032 3,117<br />
Profit / (loss) (16,323) 2,540 (13,783)<br />
Attributable to:<br />
Equity hol<strong>de</strong>rs of the Company (16,323) 2,540 (13,783)<br />
Profit / (loss) (16,323) 2,540 (13,783)<br />
EUR’000<br />
Reconciliation of the statement of comprehensive income 2008<br />
Dutch GAAP Impact IFRS<br />
Foreign currency translation differences for foreign operations (5,714) (241) (5,955)<br />
Other comprehensive income / (loss) (5,714) (241) (5,955)<br />
Profit / (loss) (16,323) 2,540 (13,783)<br />
Total comprehensive income / (loss) (22,037) 2,299 (19,738)
Notes to the reconciliation of balance sheet and the income statement<br />
The main impacts of reporting un<strong>de</strong>r IFRS as adopted by the European Union as compared to reporting un<strong>de</strong>r<br />
Book 2 of the Dutch Civil Co<strong>de</strong> (Dutch GAAP) are:<br />
a) The components method has been used for property, plant and equipment, resulting in a change in<br />
book value and <strong>de</strong>preciation. Furthermore, property, plant and equipment held for sales is classified to<br />
assets classified as held for sale.<br />
b) Annual amortization of goodwill has been reversed un<strong>de</strong>r IFRS and replaced by annual testing for impairment.<br />
c) Interest rate swaps and foreign currency instruments are measured at fair value un<strong>de</strong>r IFRS, rather than<br />
reported off balance as allowed un<strong>de</strong>r Book 2 of the Dutch Civil Co<strong>de</strong>.<br />
d) Deferred tax assets and liabilities are impacted by reclassifications within the balance sheet and by changes<br />
in the profit before tax un<strong>de</strong>r IFRS.<br />
e) Inventories un<strong>de</strong>r IFRS exclu<strong>de</strong> certain cost items, resulting in a lower aggregate valuation.<br />
f) The impact on tra<strong>de</strong> receivables and prepayments, tra<strong>de</strong> and other payables and other provisions relate to<br />
reclassifications within the balance sheet.<br />
g) The costs related to long-term liabilities have been measured using the effective interest method rather than<br />
amortizing these costs on a straight line basis.<br />
h) Most of the unrecognized gains and losses inclu<strong>de</strong>d in employee benefits as at January 1, 2008 have been<br />
inclu<strong>de</strong>d in other reserves (IFRS 1).<br />
i) Revenue is impacted by recognizing sales commissions and rebates as revenue un<strong>de</strong>r IFRS, rather than as<br />
operating expenses as allowed un<strong>de</strong>r Book 2 of the Dutch Civil Co<strong>de</strong> and by changing the method of contract<br />
manufacturing revenue recognition.<br />
j) Change in inventories of finished goods is reclassified to raw materials and consumables used.<br />
There are no significant changes in the cash flow statement as result of the adoption of IFRS.<br />
page _ 110 / 111
Financial review 2009<br />
Company balance sheet<br />
As at December 31<br />
(Before profit appropriation)<br />
EUR’000<br />
ASSETS<br />
note<br />
2009 2008<br />
Non-current assets<br />
Financial fixed assets 3.1 135,308 113,976<br />
Deferred tax assets 1,643 1,643<br />
Total non-current assets 136,951 115,619<br />
Current assets<br />
Receivables from group companies 131,553 130,398<br />
Current tax assets 9,034 8,317<br />
Cash and cash equivalents 5 0<br />
Total current assets 140,592 138,715<br />
Total assets 277,543 254,334<br />
EQUITY & LIABILITIES<br />
Equity<br />
Share capital 5,437 5,437<br />
Share premium 156,531 156,606<br />
Translation reserve (1,980) (3,279)<br />
Other reserves (42,163) (28,380)<br />
Profit / (loss) for the year 7,693 (13,783)<br />
Total equity attributable to equity hol<strong>de</strong>rs of the Company 3.2 125,518 116,601<br />
Non-current liabilities<br />
Total non-current liabilities 3.3 152,000 137,501<br />
Current liabilities<br />
Accounts payable to group companies 0 210<br />
Tra<strong>de</strong> and other payables 25 22<br />
Total current liabilities 25 232<br />
Total equity and liabilities 277,543 254,334
Company income statement 2009<br />
EUR’000<br />
2009 2008<br />
note<br />
Share in results from participating interests, after taxation 3.1 20,033 3,410<br />
Other result after taxation (12,340) (17,193)<br />
Profit / (loss) 7,693 (13,783)<br />
page _ 112 / 113
Financial review 2009<br />
Notes to the company financial statements<br />
1 General<br />
The financial statements of <strong>Refresco</strong> Holding B.V. ‘the Company’ are inclu<strong>de</strong>d in the consolidated financial<br />
statements of the Group.<br />
With reference to the company income statement, use has been ma<strong>de</strong> of the exemption pursuant to Section 402<br />
of Book 2 of the Dutch Civil Co<strong>de</strong>.<br />
2 Significant accounting policies<br />
For the principles for the recognition and measurement of assets and liabilities and for <strong>de</strong>termination of the<br />
result for its company financial statements, the Company makes use of the option provi<strong>de</strong>d in section 2:362 (8) of<br />
the Dutch Civil Co<strong>de</strong>, un<strong>de</strong>r which the principles for the recognition and measurement of assets and liabilities and<br />
for <strong>de</strong>termination of the result of the company financial statements are the same as those applied for the consolidated<br />
financial statements (hereinafter referred to as principles for recognition and measurement). The consolidated<br />
financial statements are prepared according to the standards laid down by the International Accounting Standards<br />
Board and adopted by the European Union. These principles are set out on page 69 to 111.<br />
Participating interests over which significant influence is exercised are carried on the basis of the equity method.<br />
The share in the result of participating interests represents the Company’s share in the result of these participating<br />
interests. To the extent that they are <strong>de</strong>emed to be unrealized, results are not recognized on transactions between<br />
the Company and its participating interests and mutually between participating interests themselves.<br />
3 Notes to the company balance sheet and income sheet<br />
3.1 Financial fixed assets<br />
Financial fixed assets consist of participating interests in group companies. The movements in the participating<br />
interests in group companies were as follows:<br />
EUR’000<br />
2009 2008<br />
January 1 113,976 35,907<br />
Share in result of participating interests 20,033 3,410<br />
Capital increase 0 83,774<br />
Transfer to / (from) group companies 0 (3,343)<br />
Effect of movements in exchange rates 1,299 (5,772)<br />
December 31 135,308 113,976
<strong>Refresco</strong> Holding B.V. owns the following subsidiaries as at December 31:<br />
NAME COMPANY STATUTORY SEAT OWNERSHIP INTEREST<br />
2009 2008<br />
note<br />
<strong>Refresco</strong> B.V. Dordrecht (The Netherlands) 100% 100%<br />
Menken Drinks B.V. Bo<strong>de</strong>graven (The Netherlands) 100% 100%<br />
<strong>Refresco</strong> Onroerend Goed B.V. Amsterdam (The Netherlands) 100% 100%<br />
Frisdranken Industrie Winters B.V. Maarheeze (The Netherlands) 100% 100%<br />
<strong>Refresco</strong> Benelux B.V. Maarheeze (The Netherlands) 100% 100%<br />
Bronwater Import Kantoor Eindhoven B.V. Maarheeze (The Netherlands) 100% 100%<br />
Han<strong>de</strong>lsmaatschappij Winters B.V. Maarheeze (The Netherlands) 100% 100%<br />
Schiffers Food B.V. Hoensbroek (The Netherlands 1) 100% 0%<br />
Sunco N.V. Ninove (Belgium) 100% 100%<br />
Ringsi<strong>de</strong> N.V. Ninove (Belgium) 100% 100%<br />
Sodraco N.V. Ninove (Belgium) 100% 100%<br />
<strong>Refresco</strong> Iberia S.L. Oliva (Spain) 100% 100%<br />
<strong>Refresco</strong> Deutschland GmbH Herrath (Germany) 100% 100%<br />
Krings Fruchtsaft GmbH Herrath (Germany) 100% 100%<br />
Hardthof Fruchtsaft GmbH Burgstetten (Germany) 100% 100%<br />
VIP-Juicemaker Holding O.y. Kuopio (Finland) 100% 100%<br />
VIP-Juicemaker O.y. Kuopio (Finland) 100% 100%<br />
Délifruits S.A.S. Marges (France) 100% 100%<br />
Ferskur France S.A.S. Marges (France) 100% 100%<br />
Eldis S.A.S. Marges (France) 100% 100%<br />
Nuits Saint-Georges Production S.A.S. Marges (France) 100% 100%<br />
Eaux Minérales <strong>de</strong> Saint Alban-les-Eaux S.A. Saint Alban (France) 100% 100%<br />
<strong>Refresco</strong> Holdings GB Ltd. London (United Kingdom) 100% 100%<br />
Histogram Holdings Ltd. Durham (United Kingdom) 100% 100%<br />
<strong>Refresco</strong> Ltd. Durham (United Kingdom) 2) 100% 100%<br />
<strong>Refresco</strong> Poland Sp Z.o.o. Warsaw (Poland) 100% 100%<br />
Kentpol Zywiecki Krysztal p. Z.o.o. Kenty (Poland) 100% 100%<br />
1) See note 6.1 of the notes to the consolidated financial statements.<br />
2) Histogram Ltd has been renamed <strong>Refresco</strong> Ltd.<br />
Furthermore, some legal restructuring was carried out in the United Kingdom, Germany and France.<br />
page _ 114 / 115
Financial review 2009<br />
3.2 Sharehol<strong>de</strong>rs’ equity<br />
Movements in capital and reserves<br />
Equity is analyzed in more <strong>de</strong>tail in the consolidated statement of changes in equity.<br />
At December 31, 2009 the authorized share capital comprised the following:<br />
5,436,153 ordinary shares with a nominal value of EUR 1.00 each and a subscription price of EUR 10.00 each.<br />
107,682 preference shares with a nominal value of EUR 0.01 each and a subscription price of<br />
EUR 1,000.00 each.<br />
All issued shares are fully paid. There were no shares issued during 2009.<br />
The hol<strong>de</strong>rs of ordinary shares are entitled to receive divi<strong>de</strong>nds as <strong>de</strong>clared from time to time. The hol<strong>de</strong>rs of pref-<br />
erence shares have a priority right to a fixed cumulative divi<strong>de</strong>nd of 10% in the event of divi<strong>de</strong>nd distribution plus a<br />
first priority right in the event of winding up. Both the Company and the Sharehol<strong>de</strong>rs, including Preference<br />
Sharehol<strong>de</strong>rs, agreed in an Additional Agreement to the Articles of Association that notwithstanding article 26.1<br />
(Divi<strong>de</strong>nd distribution) of the Articles of Association, distribution of divi<strong>de</strong>nds or other payments on the preference<br />
shares will be subject to the prior approval of the General Meeting of Sharehol<strong>de</strong>rs of the Company. Any such <strong>de</strong>cision<br />
of the General Meeting of Sharehol<strong>de</strong>rs of the Company shall be taken with a 80% majority vote in accordance<br />
with article 12.4 sub (xviii) of the Articles.<br />
All shares rank equally with regard to the Company’s residual assets, except that preference sharehol<strong>de</strong>rs participate<br />
only to the extent of the face value of the shares. Each ordinary share carries the right to one hundred votes<br />
and each preference share carries the right to one vote.<br />
The Company can acquire fully paid-up shares (ordinary as well as preference shares) void the General Meeting of<br />
Sharehol<strong>de</strong>rs has authorized the acquisition with a majority of at least 80% of the votes attached to all shares in<br />
the capital of the company.<br />
Translation reserve<br />
The translation reserve comprises the foreign currency differences arising from the translation of the financial state-<br />
ments of foreign operations as well as from the translation of liabilities hedging the Company’s net investment in a<br />
foreign subsidiary.<br />
Divi<strong>de</strong>nds<br />
In 2009, the Group paid a divi<strong>de</strong>nd of EUR 75,000 from the share premium to Okil Holding B.V. and Go<strong>de</strong>tia II B.V.<br />
As at December 31, 2009, the unpaid cumulative divi<strong>de</strong>nd on the preference shares amounts to EUR 36,617,000<br />
(2008: EUR 23,499,000).
3.3 Non-current liabilities<br />
Subordinated bank loans<br />
The subordinated bank loans consist of a Mezzanine loan and a PIK loan.<br />
The Mezzanine loan (EUR 59,801,705 principal and EUR 6,439,957 accrued interest) is repayable in 2016. The interest<br />
rate on the Mezzanine loan is variable (LIBOR / EURIBOR) and has a cash interest percentage of EURIBOR +4%<br />
per annum plus an additional interest of 5.5% per annum. The Mezzanine loan is subordinated to the other syndicated<br />
facility bank loans dated April 12, 2006. The PIK loan (EUR 65,693,362 principal and EUR 20,064,863 accrued<br />
interest) bears interest at EURIBOR +12%. There is no fixed re<strong>de</strong>mption scheme for the first 10 years. The PIK loan is<br />
subordinated to all the syndicated facility bank loans dated April 12, 2006 and the Mezzanine loan.<br />
EUR’000<br />
Principal amount 125,495<br />
Accrued interest as at December 31, 2008 12,006<br />
Balance as at January 1, 2009 137,501<br />
Accrued interest as at December 31, 2009 14,499<br />
Balance as at December 31, 2009 152,000<br />
Non-current 152,000<br />
Current 0<br />
3.4 Contingencies<br />
The Company has issued a guarantee pursuant to article 403, Book 2 of the Dutch Civil Co<strong>de</strong> in respect of all<br />
subsidiaries in The Netherlands.<br />
The Company forms a fiscal unity for income tax purposes with <strong>Refresco</strong> B.V., Menken Drinks B.V., <strong>Refresco</strong><br />
Onroerend Goed B.V. and Frisdranken Industrie Winters B.V. In accordance with the standard conditions,<br />
the Company and the subsidiaries that are part of the fiscal unity are jointly and individually liable for taxation<br />
payable by the fiscal unity.<br />
Dordrecht, March 17, 2010<br />
Executive Board Supervisory Board<br />
Hans Roelofs – Chief Executive Officer Marc Veen – Chairman<br />
Aart Duijzer – Chief Financial Officer Aalt Dijkhuizen<br />
Thorsteinn Jonsson<br />
Hilmar Thor Kristinsson<br />
Jon Sigurdsson<br />
Adam Shaw<br />
Peter Paul Verhallen<br />
page _ 116 / 117
Financial review 2009<br />
Other information<br />
Provisions in the Articles of Association governing the appropriation of profit<br />
According to article 26 of the Articles of Association, the result for the year is at the free disposal of the General<br />
Meeting of Sharehol<strong>de</strong>rs. Both the Company and the Sharehol<strong>de</strong>rs, including Preference Sharehol<strong>de</strong>rs, agreed in an<br />
Additional Agreement to the Articles of Association that notwithstanding article 26.1 (Divi<strong>de</strong>nd distribution) of the<br />
Articles of Association, distribution of divi<strong>de</strong>nds or other payments on the preference shares will be subject to the<br />
prior approval of the General Meeting of Sharehol<strong>de</strong>rs of the Company. Any such <strong>de</strong>cision of the General Meeting of<br />
Sharehol<strong>de</strong>rs of the Company shall be taken with a 80% majority vote in accordance with article 12.4 sub (xviii) of<br />
the Articles.<br />
Proposal for profit appropriation<br />
The Executive Board proposes to add the net result to the other reserves as retained earnings. This proposal has<br />
not yet been reflected in the financial statements.<br />
Subsequent events<br />
There have been no subsequent events to report.
Auditor’s report<br />
To the General Meeting of Sharehol<strong>de</strong>rs of <strong>Refresco</strong> Holding B.V.<br />
Report on the financial statements<br />
We have audited the accompanying financial statements 2009 of <strong>Refresco</strong> Holding B.V., Dordrecht as set out on<br />
pages 64 to 117, which comprise the consolidated and company balance sheet as at 31 December 2009, the consolidated<br />
and company income statement, the consolidated and company statement of comprehensive income, the<br />
consolidated and company changes in equity and consolidated and company cash flows for the year then en<strong>de</strong>d<br />
and the notes, comprising a summary of significant accounting policies and other explanatory information.<br />
Management’s responsibility<br />
Management of the company is responsible for the preparation and fair presentation of the financial statements in<br />
accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of<br />
Book 2 of the Netherlands Civil Co<strong>de</strong>, and for the preparation of the management board report in accordance with<br />
Part 9 of Book 2 of the Netherlands Civil Co<strong>de</strong>. This responsibility inclu<strong>de</strong>s: <strong>de</strong>signing, implementing and maintaining<br />
internal control relevant to the preparation and fair presentation of the financial statements that are free from<br />
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and<br />
making accounting estimates that are reasonable in the circumstances.<br />
Auditor’s responsibility<br />
Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit<br />
in accordance with Dutch law. This law requires that we comply with ethical requirements and plan and perform the<br />
audit to obtain reasonable assurance whether the financial statements are free from material misstatement.<br />
An audit involves performing procedures to obtain audit evi<strong>de</strong>nce about the amounts and disclosures in the financial<br />
statements. The procedures selected <strong>de</strong>pend on the auditor’s judgment, including the assessment of the risks<br />
of material misstatement of the financial statements, whether due to fraud or error.<br />
In making those risk assessments, the auditor consi<strong>de</strong>rs internal control relevant to the entity’s preparation and fair<br />
presentation of the financial statements in or<strong>de</strong>r to <strong>de</strong>sign audit procedures that are appropriate in the circumstances,<br />
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also<br />
inclu<strong>de</strong>s evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates<br />
ma<strong>de</strong> by management, as well as evaluating the overall presentation of the financial statements.<br />
We believe that the audit evi<strong>de</strong>nce we have obtained is sufficient and appropriate to provi<strong>de</strong> a basis for our audit opinion.<br />
Opinion<br />
In our opinion, the financial statements give a true and fair view of the financial position of <strong>Refresco</strong> Holding B.V. as at<br />
31 December 2009, and of its result and its cash flows for the year then en<strong>de</strong>d in accordance with International Financial<br />
Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Co<strong>de</strong>.<br />
Report on other legal and regulatory requirements<br />
Pursuant to the legal requirement un<strong>de</strong>r 2:393 sub 5 part f of the Netherlands Civil Co<strong>de</strong>, we report, to the extent of<br />
our competence, that the management board report is consistent with the financial statements as required by 2:391<br />
sub 4 of the Netherlands Civil Co<strong>de</strong>.<br />
Eindhoven, 17 March 2010<br />
PricewaterhouseCoopers Accountants N.V.<br />
drs. W.C. van Rooij RA<br />
page _ 120 / 121
Ten years <strong>Refresco</strong><br />
EUR ‘000<br />
INCOME STATEMENTS<br />
2009 2008 2007 2006 2005 2004 2003 2002 2001 2000<br />
Revenue 1,139,574 1,146,082 951,613 660,139 606,001 557,626 544,463 450,229 269,540 274,638<br />
Gross margin % 46.1% 39.2% 42.1% 43.4% 46.3% 47.9% 45.2% 42.7% 46.5% 44.0%<br />
EBITDA 119,590 109,793 77,451 63,889 64,112 62,230 49,709 39,333 21,334 21,052<br />
EBITDA % 10.5% 9.6% 8.1% 9.7% 10.6% 11.2% 9.1% 8.7% 7.9% 7.7%<br />
EBITA 67,704 64,859 37,694 38,059 39,329 40,964 29,508 22,069 11,688 11,100<br />
Profit / (loss) after<br />
income tax<br />
BALANCE SHEETS<br />
7,693 (13,783) (26,946) (6,097) 7,897 9,211 10,747 4,892 4,183 1,972<br />
Property, plant and<br />
equipment<br />
328,807 323,023 333,625 226,064 207,481 215,906 179,455 138,521 81,950 83,096<br />
Working capital 89,561 97,045 99,401 81,378 77,786 72,743 72,374 62,037 40,449 40,062<br />
Capital employed<br />
excluding Goodwill<br />
349,944 362,686 377,583 263,369 240,125 229,257 185,111 147,306 84,174 85,855<br />
OTHER INDICATORS<br />
Note: Figures for 2008 have been restated to comply with IFRS. 2000-2007 are reported un<strong>de</strong>r Dutch GAAP<br />
Volume in liters (*1,000) 3,393,779 3,142,258 2,524,776 1,803,335 1,783,993 1,667,019 1,672,695 1,338,356 808,000 806,000<br />
Employees in fte’s<br />
(year end)<br />
2,318 2,241 2,267 1,229 1,210 1,127 1,045 964 575 580<br />
Return on capital<br />
employed %<br />
19.8% 18.1% 9.9% 14.4% 16.4% 17.9% 15.9% 15.0% 13.9% 12.9%<br />
Working capital days 28.7 30.9 38.1 45.0 46.9 47.6 48.5 50.3 54.8 53.2<br />
Investments 48,531 36,824 40,131 30,282 18,234 38,052 28,952 21,606 8,527 7,518<br />
Note: Figures for 2008 have been restated to comply with IFRS. 2000-2007 are reported un<strong>de</strong>r Dutch GAAP<br />
page _ 122 / 123
Contact<br />
REFRESCO HOLDING B.V.<br />
www.refresco.com<br />
Stationsweg 4<br />
P.O. Box 240<br />
3300 AE Dordrecht<br />
The Netherlands<br />
T +31 78 632 1313<br />
F +31 78 632 1311<br />
info@refresco.com<br />
REFRESCO BENELUX<br />
www.refresco.nl<br />
www.refresco.be<br />
<strong>Refresco</strong> Benelux B.V.<br />
Oranje Nassaulaan 44<br />
NL-6026 BX Maarheeze<br />
The Netherlands<br />
T +31 495 596 111<br />
F +31 495 593 637<br />
info@refresco.nl<br />
info@refresco.be<br />
REFRESCO GERMANY<br />
www.refresco.<strong>de</strong><br />
<strong>Refresco</strong> Deutschland GmbH<br />
Speicker Straße 2-8 (2nd floor)<br />
P.O. Box 41061 Mönchengladbach<br />
Germany<br />
T +49 2 161 2941 0<br />
F +49 2 161 2941 300<br />
info@refresco.<strong>de</strong><br />
REFRESCO FRANCE<br />
www.refresco.fr<br />
P/A Délifruits S.A.S.<br />
B.P. 13, Margès<br />
F-26260 Saint Donat sur<br />
l’Herbasse<br />
France<br />
T +33 475 45 4444<br />
F +33 475 45 4445<br />
info@refresco.fr<br />
REFRESCO IBERIA<br />
www.refrescoiberia.com<br />
<strong>Refresco</strong> Iberia S.L.<br />
Ctra. N-332, Km 206, 9<br />
E-46780 Oliva (Valencia)<br />
Spain<br />
T +34 96 285 0200<br />
F +34 96 285 0208<br />
info@refrescoiberia.com<br />
REFRESCO SCANDINAVIA<br />
www.vip-juicemaker.fi<br />
P/A Vip-juicemaker Oy<br />
Kellolah<strong>de</strong>ntie 20<br />
FI-70460 Kuopio<br />
Finland<br />
T +358 17 5858190<br />
F +358 17 5800597<br />
juicemaker@vip-juicemaker.fi<br />
REFRESCO POLAND<br />
www.kentpol.pl<br />
P/A Kentpol-Zywiecki Kryszta<br />
Sp.zo.o.<br />
ul. Fabryczna 8<br />
32-650 Kêty<br />
Poland<br />
T +48 33 845 11 56<br />
F +48 33 845 39 06<br />
sekretariat@refrescopolska.pl<br />
REFRESCO UK<br />
<strong>Refresco</strong> Ltd<br />
Belmont Industrial Estate<br />
DH1 1ST Durham<br />
United Kingdom<br />
T +44 191 386 7111<br />
F +44 191 386 3481<br />
info@refresco.co.uk
Colophon<br />
This Annual Report is a publication of:<br />
<strong>Refresco</strong> Holding B.V.<br />
www.refresco.com<br />
Design and realization:<br />
Buffel! Reclame<br />
Dordrecht, The Netherlands<br />
Text:<br />
<strong>Refresco</strong> Holding B.V.<br />
Photography:<br />
Richard Sinon<br />
Print:<br />
AlbeDeCoker<br />
Antwerp, Belgium