Heineken cut its annual profit growth forecast today after seeing a sharp decrease in demand for its beer as consumers baulked at another round of price hikes.
The world’s second-largest brewer saw its underlying operating profits slide 8.8% in the first half of the year after seeing beer volumes decline 5.6% – a much steeper fall than the 3.4% forecast by analysts – with declines in all regions.
Net revenue increased 6.6% organically after the volume decline was offset by higher prices and premiumisation trends.
The company blamed the volume fall on the “cumulative effect” of price rises and a “challenging economic backdrop”, marked by a particularly weak showing in Vietnam, where Heineken is the largest brewer.
Chief Executive Dolf van den Brink said he expected price increases to ease in the second half of the year. He is also hoping for a second-half turnaround in profits, helped by lower energy and commodity costs, and accelerated savings from productivity improvements.
“We have taken the vast majority of our pricing in the first half. That was deliberate and by design. That of course impacted to some extent the volume performance in the first half, but in the second half we see that effect moderating,” van den Brink told Reuters.
Heineken’s CFO Harold van den Broek also saw inflationary pressures easing, but not necessarily lower costs, so did not envisage a reversal of beer price hikes.
Last week, Unilever posted better-than-expected first-half sales figures, boosted by higher prices to offset increased costs. However, the consumer goods giant stated that food inflation has now peaked, with the business shifting its focus towards volume growth amid concerns that the hefty increases in selling prices over the past two years are alienating some consumers and pushing them towards cheaper own-label products.
Following the weak first-half figures, Heineken said that its operating profit growth for the full year would likely be zero to mid-single digits, down from a previous prediction of mid-to-high single digits.
Shares in Heineken fell over 6% this morning, erasing some of their gains this year.
