First-quarter figures from Heineken confirm it was hit hard by the recent closure of the hospitality sector in the UK and other markets across Europe, although resurgent out-of-home drinking in Asia and Africa helped compensate.
The world’s second-largest brewer saw overall beer volumes stable organically after it sold 5.4% more beer in the Asia Pacific region and 9.9% more in Africa, the Middle East and Eastern Europe, helping to make up for a 9.7% decline in European sales.
In the UK, total volume was down around 30% due to on-trade demand being close to zero as pubs and restaurants halted trading during the lockdown. However, the brewer highlighted that the off-trade grew ahead of the market in the low-thirties, driven by its Heineken, Strongbow, and Birra Moretti brands.
Global volumes of its flagship Heineken brand grew 12.1% in the quarter, providing a boost to the company which in February announced that it was cutting thousands of jobs and seeking €2bn of cost savings to help rebuild the business and its profit margins after taking a major hit from the pandemic.
Heineken reported a net profit of €168m for the quarter – up from €94m a year earlier, though down from €299m in 2019 – thanks in part to its cost-cutting measures.
“We had a solid start to the year, despite facing severe restrictions across many markets and the closure of the on-trade in Europe due to the pandemic,” said Chief Executive Dolf van den Brink.
He added the business was making “great strides” with its ‘EverGreen’ turnaround plan.
The company reaffirmed its previous forecasts that sales growth would accelerate in the second half of 2021 if the vaccination programmes around the world prove successful.
Commenting on the figures, Carmen Bryan, Consumer Analyst at GlobalData, said: “While Heineken’s Q1 2021 earnings are a step in the right direction, the company’s full recovery potential is dampened by ongoing challenges in the foodservice industry, paired with rising teetotalism trends – both of which are prominent in the company’s home region of Europe.
“The negative health image attached to beer is leading many consumers to moderate their alcohol consumption. Although low-ABV alternatives are rising in popularity, market share is not enough to offset the decline at this time. Premiumization, on the other hand, could mark a promising opportunity as consumers shift away from casual drinking to dedicated leisure occasions.”
She added: “With the economy reopening and lockdowns gradually lifting, Heineken will see an uptick in sales over the next few months as consumers flock back to their favourite watering holes for a short-lived celebratory period. In the long-term, however, the outlook for the beer industry, and large players such as Heineken, is not so bright.”
