Economic woe weighs on Heineken

Updated: 
HeinekenHeineken has said economic woes were impacting sales across the UK and Western Europe after a weather-hit first half of the year.

The Dutch group, whose products include Foster's, Newcastle Brown Ale and John Smith's, said interim sales showed a marginal increase across Western Europe and were expected to remain "subdued" throughout the second half as the UK recession and eurozone crisis take their toll.

Beer sales in the UK are understood to have remained flat against a falling market, but cider sales came under pressure from the wet start to the summer and intense competition.

Sales of beer across the wider business performed better - up 3.3% - thanks to more robust demand across emerging markets and the US, with Heineken cheering an "excellent" first half from Africa, the Middle East, Asia Pacific and Americas regions.
But higher costs of raw materials offset the sales growth, leaving interim underlying net profits 4% down on an organic basis, to 705 million euro (£556.5 million).

Heineken said input costs rose by a more-than-expected 6.9% in the half-year and were expected to increase by 8% over 2012 as a whole as it faces soaring grain prices and higher energy and utility bills.

Jean-Francois van Boxmeer, chairman and chief executive of Heineken, hopes to offset rising costs by driving further sales growth, while also continuing to slash costs after cutting 85 million euro (£67 million) in the first half. These efforts should see full-year net profits remain "broadly in line" with 2011, he added.

He said: "Our profitability in the first half of the year was impacted by difficult trading conditions across Europe as well as higher input costs and planned capability investments. In the second half, we expect continued top-line momentum to benefit from ongoing high-impact brand marketing as well as capital investments in higher growth markets."

Heineken's troubles across Europe highlight the importance of its struggle to gain full control of Tiger brewer Asia Pacific Breweries as it battles to fight off bid interest from rival Thai Beverage.

Mr van Boxmeer said Heineken was "working towards a swift completion" of its deal to buy partner Fraser & Neave's stake in APB, which brews Tiger and distributes Heineken's brands in prized south-east Asian markets.

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