Heineken today released its 2021 results and the numbers appear to be defying the pandemic. However, the Dutch brewer also warned that the company might be forced to increase prices to offset the sharp increase in the prices of commodities, energy, and freight.
Net revenue for the full year 2021 increased by 12.2% organically, with total consolidated volume growing by 3.6% and net revenue per hectoliter up 8.3%. The underlying price-mix on a constant geographic basis was up 7.1%, driven by assertive pricing and premiumization, with the regions Americas and Africa, Middle East and Eastern Europe (AMEE) growing double-digits.Currency translation negatively impacted net revenue by €515 million or 2.6%, mainly driven by the Brazilian Real and the Nigerian Naira.
The consolidation of United Breweries Limited (UBL) in India positively impacted net revenue by €280 million or 1.4%.
In the second half of the year, net revenue grew 10.6% organically. Heineken took further pricing actions and accelerated net revenue per hectoliter growth to 11.0%.Underlying price-mix in the second half was up 8.8% primarily driven by Nigeria, Brazil, Mexico and Europe, the latter benefiting from an improved channel mix.
Total consolidated volume declined slightly by 0.3%, mainly impacted by the restrictions in the Asia Pacific region. Beer volume grew 4.6% organically for the full year.
In the fourth quarter, beer volume grew 6.2%, benefiting from fewer restrictions in Europe relative to last year, continued momentum in the Americas and AMEE, and a sequential recovery in Asia Pacific (APAC) relative to the third quarter.
Operating profit grew 43.8% organically with a strong recovery in Europe, AMEE and the Americas, partially offset by the impact of the pandemic in APAC.
Currency translation negatively impacted operating profit by €98 million, or 4.0%, mainly driven by the Brazilian Real, the Surinamese Dollar, the Vietnamese Dong and the Ethiopian Birr.
Operating profit grew by 476.2% mainly due to the exceptional gain this year from the remeasurement to fair value of the previously held equity interest in UBL in India, and the exceptional losses from last year's impairments and restructuring provisions.
Net profit grew 80.2% organically to €2,041 million (2020: €1,154 million), driven by the increase in operating profit. Currency translation negatively impacted net profit by €43 million or 3.7%, mainly driven by the Brazilian Real, the Vietnamese Dong and the US Dollar. Net profit after exceptional items and amortization of acquisition related intangibles was €3,324 million (2020: €204 million loss), driven by the same variances in exceptional items as operating profit.
Looking forward, Heineken expects COVID-19 to still have an impact on revenues in 2022. The company assumes markets in APAC to progressively bounce back during the year, yet full recovery of the on trade in Europe may take longer.
Heineken also expects to be significantly impacted by inflation and supply chain resilience pressures. More specifically, the brewer expects its input cost per hectoliter to increase in the mid-teens given its hedged positions and the sharp increase in the prices of commodities, energy, and freight.
"These kind of price increases and inflation, I think we have not seen in a generation," said Dolf van den Brink, Chairman of the Executive Board and CEO of Heineken.
Heineken will offset these input cost increases through pricing in absolute terms, which may lead to softer beer consumption.
Reflecting its confidence in the long-term, Mr. van den Brink intends to reverse the cost mitigation actions undertaken in 2021 and to further step up investments in brand support and digital and sustainability initiatives. This investment will be partially offset by further delivery of gross savings from Heineken’s productivity program.
These changes are expected to have a greater impact in the first half of the year. Overall, the brewer expects a stable to modest sequential improvement in operating profit margin in 2022. Whilst continuing to target 17% operating margin in 2023 and operating leverage beyond, there is increased uncertainty given current and evolving economic and input cost circumstances, Heineken said.
"We delivered a strong set of results in 2021 in a challenging and fast-changing environment,” commented Mr. van den Brink. “I am proud of how our colleagues, customers, and suppliers continued to adapt, support one another, and deliver these results. We made a big step towards recovering to pre-pandemic levels, and in parts going beyond,” he added.
“I am pleased with the great momentum of the Heineken brand, the renewal of our brand and product portfolio, the acceleration of our digital transformation and how we are strengthening our footprint with the acquisition of UBL in India and our announced intentions for Southern Africa. We raised the bar on sustainability and responsibility and are making big strides in rightsizing our cost base. Looking ahead, although the speed of recovery remains uncertain and we face significant inflationary challenges, we are encouraged by the strong performance of our business and how EverGreen is taking shape. This gives me confidence we are on course to deliver superior and balanced growth to drive sustainable long-term value creation,” Mr. van den Brink finished his comment.