Heineken sees more expensive beer and lower consumption with impact of inflation

Heineken cast doubt on its mid-term profit margin target due to the uncertain impact of inflation on beer consumption in its operating markets, after reporting a stronger-than-expected result in 2021 on account of higher prices and reduced sales. costs.

The world’s second-largest brewer said on Wednesday the pandemic would still affect the company’s revenue in 2022 and said the impact of inflation and supply chain pressures would be significant.

The company said it will offset rising input costs with higher prices, but this could lead to lower beer consumption.

Chief Executive Dolf van den Brink said emerging markets are typically more resilient in absorbing price increases.

“This kind of price increase and inflation I don’t think we’ve seen in a generation,” said the executive. “The big uncertainty is how this will affect developed markets that have never seen this type of pricing.”

The Dutch brewer said input costs will rise by around 15%, with barley doubling in price from a year ago and aluminum up around 50%. Energy and freight costs also rose sharply.

The company said it expects its 2022 operating profit margin to equal or be slightly above the 15.6% achieved in 2021.

Heineken had forecast an operating profit margin of 17% in 2023, but there is “increased uncertainty” due to inflation and its impact on consumer spending. The company now intends to update its 2023 forecast later this year.

Heineken launched a €2 billion cost-savings program a year ago to increase margins through 2023, with the €1.3 billion achieved so far already helping to boost profit.

The company sold 4.6% more beer in 2021, up in all regions except Asia. Price increases and a shift in focus to more expensive products boosted net revenue by 12.2%.

Operating profit rose 43.8% on a like-for-like basis to €3.41 billion, above the company’s compiled market consensus of €3.30 billion but still below the pre-pandemic 2019 level.