Heineken volumes dip as drinkers pull back from high prices

Heineken, the Netherlands-headquartered beer company, was under pressure on announcing its half year results as investors looked for signs that its brands are strong enough to withstand hefty price rises.

Why Heineken’s results matter

Most major multinationals have had to raise prices over the last 18 months, increases that are beginning to affect volumes. Unlike some FMCG giants reporting this earnings season, price rises in less essential categories like beer are harder to pull off without buyers pulling back – a phenomenon that Heineken anticipated last February as inflation began to rocket.

With inflation beginning to ease and Heineken having front-loaded price rises of 11.8% globally this year, the trick now will be whether the company can protect market share considering its premiumisation-at-scale strategy – a gamble that some investors have deemed “less than wholly successful”. Hope comes in the form of commodity and energy prices, which are expected to fall next year, and the strength of its brands.

In brief

According to Heineken’s half year earnings release, the brewer saw:

• 6% drop in volumes (worse than the 3.4% analysts had predicted), though it did see slight volume growth in its flagship Heineken brand of 1.7%.
• Revenues grew 6.6%.
• The group reported that profits were down 8.6%. While it forecasts an eventual full year of profit growth the company has revised its projections downwards slightly.

The company reports that its vital premium beer volumes also declined 6.5%, but driven mostly by heavy declines in Vietnam and Russia (which it is in the process of exiting). Elsewhere, its premium brands held share, even growing in the low single digits thanks to brands like Birra Moretti, Beavertown, and Desperados.

The brewer faced weaker-than-expected demand across Asia, its most profitable region, especially in Vietnam where it owns three of the top four brands in the country, according to Global Data. Across the region, half year volumes fell 13.2%

Looking ahead

The company expects pricing growth to moderate while it hopes to see volume trends “gradually improving to a low-single-digit decline.” In profit terms, the company expects a full year operating profit growth in the low single digits.

Sourced from Heineken, WARC, Financial Times, Global Data