Heineken shares slump as customers balk at brewer's hiked prices

By Louis Goss

Heineken shares fell on Wednesday after the Dutch brewer reported a slump in the volumes of beer it sold, caused by customers balking at higher prices.

The Amsterdam headquartered company, which makes beer brands including Red Stripe and Birra Moretti as well as its namesake lager, saw its volumes drop 4.7% year-on-year, to 242.6 million hectoliters (mhl), following a series of hikes that saw its average prices increase by 10.2% worldwide.

"Strong pricing to offset very high input and energy cost inflation and volatile macro-economic conditions in some key markets affected our volume momentum," Heineken CEO Dolf van den Brink said.

The slowdown saw the Dutch company fall short of analysts' forecasts in posting a sharper-than-expected 14.1% drop in its net profit to EUR2.3 billion ($2.5 billion), compared to the EUR2.6 billion predicted by 16 analysts.

Shares in Heineken (NL:HEIA), which is currently the second largest brewer in the world, fell 5% on Wednesday having lost 3% of their value over the previous 12 months. Heineken Holding (NL:HEIO), which owns a majority of the brewer, fell by a similar percentage.

Heineken said lower sales in Nigeria and Vietnam were responsible for more than 60% of the drop in volumes in 2023, as the world's second largest brewer pointed to recent slowdowns in both countries' economies.

In Vietnam, a sharp drop in sales of Tiger beer, caused by a slowdown in the country's economy and a zero-tolerance crackdown on drunk driving, led to a high-single digit slump in volumes sold, that in turn resulted in a low-twenties plunge in its revenues from the country.

Heineken's Nigerian business saw its volumes drop in the high-teens as its Nigerian customers' spending power were hit by inflationary pressures and a series of structural economic reforms that have been introduced in the country, including the removal of fuel subsidies.

A sharp drop in the value of Nigeria's currency, which has seen the value of the naira (USDNGN) plunge to all time lows, also hit Heineken's sales in the country.

In Europe, the volumes of beer Heineken sold fell 5.4% year-on-year, as customers turned away from the company's brands in the face of higher prices.

Looking ahead into 2024, Heineken said it is now aiming to boost the volumes of beer it sells, as it predicted it will see a low to high single digit increase in its operating profits throughout the year - as it expects to continue dealing with wider geopolitical and macroeconomic uncertainties.

The company also said it expects its costs to increase by a low-single-digit percentage over the coming year, due to higher input costs, currency devaluations, and wage inflation, as the company also outlined plans to make EUR500 million worth of cost savings.

Analysts at Citi, led by Simon Hales, noted new tax laws in Brazil - Heineken's second biggest market - will likely hit the brewer's business in 2025 in seeing its global tax rate increase to 29% from 26.8% in 2023.

-Louis Goss

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02-14-24 0528ET

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