Exhibit 13.7 Heineken—Sensitivity Analysis

that market barriers such as government intervention in emerging markets and local oligopolies will slow globalization and tend to keep prices stable. When we weight the scenario values by their probabilities, we arrive at an equity value of NLG 114 per share, about the same as Heineken's market value in December 1998. Thus, our view of Heineken's prospects is basically the same as what the market sees. This is not surprising given the stability of the beer industry and the company's strategy.

Sensitivity Analysis

It is important to understand how the model is affected by changes in growth and ROIC. We first performed a sensitivity analysis on growth, EBITA margin, capital turnover, and WACC. Exhibit 13.7 summarizes the results. We see that, aside from changing WACC, a change in EBITA margin and growth has greater relative impact on the equity value of Heineken than capital turnover. The impact of WACC on the model is especially curious given the current capital structure; it seems that taking on debt can create the greatest value.

The result of the sensitivity analysis is not surprising. Given the already relatively high return on invested capital (above 10 percent), Heineken's best bet would be to increase its growth rate.


Heineken is a healthy company that the market expects to maintain its attractive return on capital with moderate growth (slightly better than the beer market overall). Since these expectations are already built into the market value, Heineken will have to come up with something new to increase shareholder returns.

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