Heineken: The Heineken brewer under pressure on the stock market, even if beer consumption resists

(BFM Bourse) – The chief executive of the Dutch group told Reuters that demand was holding up, as premium beers were perceived as “an affordable luxury” by consumers.

The demand for beer bends but does not break. This is the optimistic message sent by the managing director of the Dutch juggernaut in the Heineken sector, Dolf van den Brink. Speaking to Reuters on Friday on the sidelines of a day dedicated to investors, the leader acknowledged that the group had observed a deceleration in demand in September, after a robust summer.

Faced with the threat of recession, his group has decided to be vigilant in its forecasts. The group indicated that it anticipates stable or slightly increasing volumes next year, with an expected drop in Europe.

“For next year, we are deliberately a little cautious in forecasting a decline in volumes in Europe, not because we see it but because of the (economic) situation,” he told Reuters. However, demand “is still very resilient and we believe this is linked to employment levels which even in Europe are still robust”, he added.

According to him, even with the potential downturn in the economy, consumers are still willing to pay more for good quality foam. “A good premium beer is a luxury you can afford,” he sums up.

The manager is also preparing to launch the Heineken Silver brand in the United States, an extra-refreshing beer first introduced in 2019 in Vietnam and then last year in around fifteen European countries. An envelope of 100 million dollars will be devoted to this launch.

Regarding its financial outlook, the company confirmed that it expects a stable or slightly higher operating margin for 2022 compared to last year, while the margin for 2023 should be between 5% and 9%. To achieve this goal, the company expects to achieve savings of more than 2 billion euros next year compared to its 2019 cost base.

The title fell 2.2% on Monday on the Amsterdam Stock Exchange, after gaining more than 3.3% in the sessions of Thursday and Friday, when Capital Market Day took place. Since the beginning of the year the brewer has dropped 9%, a less steep drop than that of Carlsberg (-21%) but down from the progression of the Belgian Anheuser-Busch InBev, of 6%.

Reassuring announcements

For UBS, the group delivered positive announcements during its day dedicated to investors, with reassuring elements both on its organic growth and on the progression of its margins.

“Heineken is one of the last global FMCG companies whose low-hanging fruits are standardization of back-office operations/systems and significant supply chain efficiencies to come,” points out Credit Suisse, which believes that these efforts should become increasingly visible as costs normalize.

“Heineken’s profitability has become too dependent on price increases and declining marketing at the expense of volume growth, a short-term expedient that rarely ends well,” said Royal Bank of Canada.

Julien Marion – ©2022 BFM Bourse