Most investors are familiar with Heineken Holding NV (XAMS:HEIO) (“Heineken”), in particular because of its dark green premium beer bottle. Second only to Corona in U.S. imported beer, Heineken is sold virtually everywhere in the world. Growing from a single brewery in Amsterdam in 1864 to the second-largest beer company in the world today, Heineken brews more than 250 brands, with widespread name recognition of Amstel, Dos Equis, Sol and Tiger, in addition to its premium flagship brand. The company is focused on continued growth in emerging markets. Five years ago only about 20% of its profits came from developing markets. That percentage now exceeds 60%. The company has been able to combine sales growth with stable and improving margins, forming one of the pillars of our investment thesis in the company. Heineken’s management also keeps a sharp eye on efficient capital deployment, adhering to hard RONA (Return on Net Assets) metrics. In combination with well-defined executive compensation plan determinants, this properly ties management pay to performance. Make no mistake, the global beer business is extremely competitive, but we believe Heineken management is out in front seeking major growth opportunities. At the time of this writing, the company is working on a transaction intended to increase its business in India and has just finalized a deal in Brazil.
From David Winters (Trades, Portfolio)' Wintergreen Fund (Trades, Portfolio) 2016 annual report letter to shareholders.
