Netherlands: Heineken warns of drop in profits

Heineken N.V. today released its half year results and warned of falling profits. “Overall, we expect full year financial results to remain below 2019,” Dolf van den Brink, Chairman of the Executive Board and CEO of Heineken said.”Firstly, COVID-19 remains a factor, with the biggest impact currently in key markets in Asia and Africa. Secondly, we see a rise in commodity costs, which, at current levels, will start affecting us in the second half of this year and have a material effect in 2022,” he added.

Despite that, the company reported a strong set of results for the first half year.

Consolidated beer volume grew +9.6% with double digit growth in Africa, Middle East & Eastern Europe and the Americas. The second quarter beer volume grew by 19.3%, as the previous year was most heavily impacted by widespread lockdowns and the suspension of operations in Mexico, South Africa and Malaysia, among other markets.

Net revenue (beia) increased 14.1% organically, driven by an 8.2% increase in total consolidated volume, and a 5.5% increase in net revenue (beia) per hectolitre. The results could profit from top-line leverage, continued cost mitigations and structural cost savings, and phasing of marketing and sales expenses into the second half. However, compared to the first half of 2019, net revenue (beia) remained 12.9% below in total.

Premium beer volume outperformed the broader portfolio with growth in the mid-teens, led by the Heineken brand, that grew grew volume by 26.8% in the second quarter to close the first half with a 19.6% increase, an increase of 16.7% versus 2019. The brand grew double digits in more than 50 markets, most notably in Brazil, China, Vietnam, Nigeria, South Africa, Italy, Poland, Colombia and Mexico. Heineken 0.0, now available in 95 markets, grew close to 40% in volume, with a particularly strong performance in Brazil, the USA, Mexico, the UK and Poland. Heineken Silver more than quadrupled its volume, driven by strong growth in China and Vietnam.

The international brands portfolio grew in the mid-teens, supported by launches in new markets and consumer-focused innovations, with Amstel, Desperados and Birra Moretti ahead of 2019 volume.

Amstel grew in the high-twenties driven by strong growth in Brazil, Mexico, South Africa, Nigeria and had an encouraging start in China following its introduction in December 2020. In partnership with tennis legend Rafa Nadal, the "Choose Your Way to Live" campaign was launched to support Amstel 0.0 and Amstel Ultra, reinforcing the importance of moderation as part of an active and balanced lifestyle. Desperados increased in the high-twenties, recruiting a more unisex and young adult consumer base in established European markets, Ivory Coast and Nigeria with its expanding portfolio of flavoured and 0.0 line extensions.

Birra Moretti, with high-twenties growth, benefited from strong demand in the UK and Romania, a successful launch in the Netherlands and a new premium line extension in Italy - Birra Moretti Filtrata a Freddo.

Sol grew in the low-teens driven by Chile, Mexico and South Africa. In contrast, Tiger was negatively impacted by restrictions in Vietnam and Cambodia, only partially offset by growth in Nigeria, Malaysia and South Korea. Tiger Crystal continued its strong performance across Asia Pacific and was launched in Brazil in July.

Cider volume grew mid-single digits to 2.2 million hectolitres. Strong growth in South Africa, Russia and Mexico, plus the addition of Strongbow in Australia, more than offset the high-single digit decline in the UK. The UK launched Inch's Cider, a brand with sustainability at its heart and aimed at young adults.

Low & No-Alcohol (LONO) volume increased in the low-twenties to 7.5 million hectolitres, with double digit growth across all regions other than Europe, which grew close to 10%. The non-alcoholic beer and cider portfolio grew in the high-teens as growth continues in Europe, and volume more than doubled in the Americas. The growth was led by Heineken 0.0 and was complemented by a range of new zero line extensions, including Desperados Virgin Mojito and Lagunitas Non-Alcohol IPA.

Following Heineken’s  entry into the Hard Seltzer category last year, the company launched Pura Piraña in Portugal, Ireland, the UK, Spain, Austria, the Netherlands and France. The portfolio was expanded in Mexico with Amstel Ultra Seltzer. In the US, Heineken entered this competitive category by leveraging the portfolio, with Dos Equis Ranch Water, and with the AriZona SunRise brand through a long-term partnership.

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