Heineken Beer Sales Decline in Q3, Impacted by European Woes

22 Oct 2014 --- Heineken has reported that group revenue increased 0.7%, organically, reflecting a total group volume decline of 0.2% and higher group revenue per hectolitre of 0.9%. Consolidated revenue decreased 1.5% to €5,101 million. This includes a negative net consolidation impact of 1.3% (-€67 million) mainly from the divestment of the Hartwall business in Finland in August 2013 and an unfavourable foreign currency translational effect of 0.5% (-€24 million). Organically, consolidated revenue grew 0.2%.

Group beer volume grew by 0.1% organically, led by sustained growth of the Asia Pacific, Africa Middle East and the Americas regions. Volume performance in Europe (compared to the first half of 2014) was slightly below expectations owing to unseasonably wet weather conditions.

Heineken volume in the international premium segment grew by 3%. Heineken brand growth was particularly strong in markets including China, Brazil, Mexico, Taiwan, Russia, Canada and the UK. This growth was supported by continued activation of the 'Open Your World' marketing campaign.

Reported net profit in the quarter was €460 million compared with €483 million in the third quarter of 2013. Net profit (beia) was lower compared to last year.

HEINEKEN reaffirmed all elements of its full year outlook for 2014 as stated in its half year 2014 earnings release dated 20 August 2014.

Jean-François van Boxmeer, Chairman of the Executive Board & CEO, commented: "Amidst a volatile global environment and poor weather during the high selling season in Europe, we maintained top-line growth. This was led by broad-based growth across our developing markets. Our performance in the first nine months of the year underlines the benefit of sustained investments in long-term brand building, innovation and strengthened sales execution. This gives us confidence in reaffirming our full year outlook for operating profit (beia) margin expansion in 2014 to be ahead of our medium-term guidance."

In Africa Middle East, consolidated revenue grew 4.1% organically with solid total volume growth of 8.1% partly offset by lower revenue per hectolitre of 4.0%, primarily reflecting the impact of negative country and product mix. Over half of the decline in revenue per hectolitre is due to the faster growth of HEINEKEN branded volume licensed to third parties. Group beer volume increased 6.3% organically, led by continued strong growth in Ethiopia, Burundi, Algeria, Cameroon and Tunisia. The beer market in Nigeria was impacted by a prolonged wet season leading to reduced consumer spending and a stable volume development. Ethiopia saw strong double-digit volume growth in the quarter as we benefited from the recent addition of a new brewery which has been operational since July. Volume in the quarter was also higher in Rwanda, Egypt and the Democratic Republic of Congo. A continued challenging economic environment in South Africa led to marginal volume decline.

In the Americas, consolidated revenue grew 4.1% organically, driven by 2.9% total volume growth, and higher revenue per hectolitre of 1.2% from continued effective revenue management. Group beer volume grew by 2.9% organically in the quarter, led by ongoing growth in Mexico and higher volumes in the Caribbean. In Mexico, strong activation of marketing programmes and outlet execution drove continued portfolio growth, led by the Tecate Light and Dos Equis brands. Brazil volumes were lower due to lower consumer spending following the World Cup football event and a softening economic environment. The Heineken brand continued to grow in the double-digits in Brazil. In the U.S, sales to retailers were positive, outperforming a declining market. This reflects continued solid growth of the Mexican beer portfolio in the U.S, with performance of the Heineken lager also outperforming the market.

In Asia Pacific, consolidated revenue grew 11.9% organically, with total volume growth of 9.6% and revenue per hectolitre growth of 2.3%. Group beer volume was up 9.7% organically, with this improved growth momentum reflecting strong performances in India, Vietnam, China, Indonesia, New Zealand, Cambodia and the export markets of Taiwan and South Korea. Volume in Vietnam increased in the high-single digits reflecting improved consumer sentiment and the benefit of our brand portfolio strategy, resulting in further market share gains. Volume of the Tiger brand grew in the double-digits in the region led by strong growth in Vietnam and Malaysia.

In Central & Eastern Europe, consolidated revenue declined by 6.4% organically, with a total volume decline of 7.0% partly offset by higher revenue per hectolitre of 0.6%. Group beer volume declined by 6.3% organically, reflecting continued challenging trading conditions in Russia, Poland and Romania and the effect of unfavourable weather. The beer market in Russia continued to be adversely impacted by legislation and a softening economic environment. This led to a low-single digit volume decline, with lower volume of mainstream brands only partly offset by solid growth of the premium brand portfolio. Volume in Poland continued to be negatively impacted by sustained competitive pricing pressure. In Austria, volume was lower following unseasonably wet and cold weather. Volume in the quarter grew in Serbia and Germany and was marginally higher in Greece. We continue to execute against our value growth strategy in the region with a focus on pricing initiatives, investment in premium brands and innovation and ongoing cost efficiencies.

In Western Europe, consolidated revenue declined by 2.4% organically, reflecting lower total volume of 3.8%, partly offset by revenue per hectolitre growth of 1.4%. The ongoing success of innovation contributed to improved sales mix and higher revenue per hectolitre growth versus the first half of the year. Group beer volume was 3.1% lower organically, following exceptionally high levels of rainfall across the region in July and August as well as a higher comparative volume base from the prior year quarter. Volume in the UK, France and Italy all declined in the mid-single digits and was marginally lower in The Netherlands. Volume in Spain grew in the low-single digits underpinned by higher consumer confidence and improved trends in both on- and off-premise channels. The benefit of higher commercial investments focused on brand equity building, premium-led innovation and improved promotional effectiveness again led to broad-based share gains across the region.