Chairman’s Message

Tuncay Özilhan

CHAIRMAN

Esteemed stakeholders,

Anadolu Efes continues to conduct its operations successfully as one of the leading players in beer and soft drink markets across a broad geographical region. Europe’s fifth and the world’s tenth largest brewer as measured by production volume, Anadolu Efes makes exports to hundreds of millions of people around the world. In the countries–Turkey, Russia, Ukraine, Kazakhstan, Moldova, and Georgia–in which it conducts its beer operations, the company is the market leader. Russia, the company’s most important market, is the world’s fifth largest beer market and makes a strong contribution to the beer group’s results in terms of both volume and value. Coca-Cola İçecek, of which Anadolu Efes is the major shareholder and which is one of the most important bottlers in the Coca- Cola system, is either the market leader or the second player in seven of the ten countries in which it has operations. Generating more than two-thirds of its sales revenues in international markets, Anadolu Efes exports its products to more than seventy countries around the world. A youthful and novelty-seeking consumer target in our broad operational territory which embrace different cultures and consumer habits provides a strong support to our growth dynamics and preference rates of our products.

The ongoing pandemic has been confronting us with extraordinary conditions unlike anything ever experienced before. I would like to make it clear that the production and management model which we’ve built up at Anadolu Efes in the course of more than a half a century continues to prove that our organization has both the flexibility and the agility to rapidly adapt to new conditions even under such extraordinary challenges. From the beginning of Covid-19 pandemic, we laid out a people focused roadmap based on our multi stakeholder approach, we followed it so as to make our value-creation sustainable, and we took actions in line with our strategic priorities. Within this framework, we took every possible measure to ensure the health and safety of our employees. While supporting our society we ensured that all our processes from supply chain to production and distribution to provide uninterrupted service to our consumers and customers. On the other hand, we stood by our dealers, distributors, and business partners with a strong solidarity by helping them with payment terms and conditions. In the conduct of all of our operations, we took part in various social support initiatives in aid of sectoral employees and others affected by the pandemic.

The impact of the pandemic on our markets varied according to measures taken by governments and the share of on-trade within our total sales. From time to time, due to the tightening and loosening of these measures in the normalization process, initially a decrease and then an increase was observed in beer consumption.

The volume performance which Anadolu Efes achieved in 2020 in both business lines has once again proven the company’s effectiveness in managing risks and fast adaptation skills for the changes in the operational environment.

Despite the difficulties posed by governments’ pandemic measures, as a result of our focus on brands as well as our efforts to enhance visibility and to strengthen our relationship with consumers, beer group volumes remained almost at the same level as last year.

Despite the adverse impact of the pandemic, sales volumes in the soft drinks group were slightly down year-on-year driven by the strong performance achieved in our international operations. During this period, we strengthened our communication with consumers through digital sales tools and platforms and partly mitigated the negative effects of the pandemic. Our product portfolio, our leading position in the countries in which we operate, the geographical diversity of our operations and our sustainable financial discipline in creating free cash flow constitute our most important competitive advantages.

In order to reduce the impact of quarantines, lockdown restrictions, and the slowdown in economic activity on our business activities, we formulated strategies according to various scenarios, sustained our financial discipline and managed our working capital and capital expenditures using our ability to make quick decisions.

I am very pleased to say that we have completed 2020, a year in which we managed great risks, with a strong balance sheet and a healthy liquidity position. Thanks to our commitment to financial discipline and to the proactive measures we took during such a difficult period, we improved our financial performance and leverage ratios compared to even pre-pandemic period. As a result of the highest ever generated free cash flow, the company’s leverage ratio was at a record low level. I am very pleased to report the sustainability of our operational and financial performance is also acknowledged by credit rating agencies. Fitch Ratings then subsequently S&P both confirmed Anadolu Efes’ investment-grade credit ratings. As a result of these confirmations, Anadolu Efes maintained to be the only “Investment Grade Issuer” in Turkey.

Another point I should emphasize is that during this pandemic we have maintained the momentum of our Research & Development and innovation capabilities and even strengthened them. The new “+1” resting process developed by our technical team and recently put into production is an innovation that will enter the global beer industry’s literature as a third brewing technique. Apart from this, we are accelerating the pace of the company’s digital transformation, a matter which has gained strategic importance in terms of economic sustainability in the face of a global pandemic. While positioning digitalization as one of the basic components of our business model, we internalize it as one of the determinants of our roadmap that shapes our future in all our processes from production to marketing and sales.

Within the framework of our Positive Impact Plan, we continue to focus on creating added value for our employees, society, the environment, and our value-creation chain and on contributing to the realization of Sustainable Development Goals when addressing our sustainability practices. Aware of the threats posed by global climate change and for the sake of our planet and of future generations, we strive to minimize the environmental impact of our operations in line with the responsible production attitudes that we have internalized; we develop and implement projects and solutions on such matters as energy efficiency, efficient use of natural resources, and waste management; we seek to make an increasingly greater contribution to the transition to a low carbon economy.

Recognizing that our strength is derived from this geography, we make an effort to build a better future with the support we give to agriculture. Agriculture is not only vital to our own company but is a matter of strategic importance for our nation. For forty years we have been working shoulder-to-shoulder with our country’s farmers. We support sustainable and reliable agriculture through the long-term, coherent business model that is embodied in the “Future is in Agriculture” project. As the first company to produce malt barley in Turkey, Anadolu Efes engages in Research & Development and innovation efforts aimed at improved barley and hops varieties while also providing training and other resources to farmers in order to encourage their cultivation. The smart-agriculture practices that Anadolu Efes promotes not only make life easier for farmers but also create positive impact for the environment. Joining forces with our suppliers and dealers, we support local socioeconomic development through the conduct of joint projects. At Coca-Cola İçecek, raw material supply constitutes a large part of our economic, social and environmental footprint. We recognize that sustainable farming is critical to our ability to satisfy the expectations of our consumers, customers, and other stakeholders as well to the continued growth of our operations.

While continuing to contribute to social development through long-term projects in the areas of culture, art, and sports, we are also expanding the scope of our contributions by supporting young entrepreneurs and the tourism industry. As an employer of close to 17 thousand people including the subsidiaries in many different countries, Anadolu Efes commits itself to providing them with a workplace environment which espouses a culture of inclusiveness, which is based on equality of opportunity, is mindful of diversity, is focused on professional and occupational progression, and is healthy and safe, and which conforms to global standards.

Anadolu Efes will continue to supply global consumers with indispensable products during their moments of pleasurable companionship and with brands whose taste and quality are undisputable.

Hoping to share better days and success; I would like to express my sincere thanks to our esteemed members of the board of directors, shareholders, dealers, distributors, suppliers, business partners and all of my colleagues for their dedicated efforts and devoted work.

Sincerely,

Tuncay Özilhan
Chairman of the Board of Directors