Inbev Western Europe Chief Vows Better Days, 2006 Growth

14/06/06 InBev's incoming western Europe chief vowed on Tuesday to revive his sluggish region and indicated he expected it to become more profitable this year.

Western Europe provides 23 percent of operating profit for the world's largest beer producer, but generates just 1 percent of the actual growth in operating profit. This year, InBev expects that figure to be above 1 percent.

"We absolutely have to reverse this trend. We have no choice," Stefan Descheemaeker told journalists in a centuries-old cellar on Brussels' grandiose Grand Place, where he presented his strategy for growth.

The presentation shows how InBev expects western Europe to perform in terms of revenues, operating profit and costs. For 2006 it projects higher operating profit with flat revenues, though no figures were given.

It shows InBev, maker of popular brands Becks, Leffe and Stella Artois, expects both revenues and operating profit to rise in 2007.

Beer sales in Western Europe have been affected by many factors, including consumers switching from beer to wine or drinking more beer at home rather than in bars, where beverages are more expensive.

Costs are also rising, with the main drivers being higher oil and commodities prices, and an increasing number of private labels are drawing customers away from large brewers such as InBev.

"We've nicknamed western Europe, in InBev, as 'the mother of all challenges'," Descheemaeker said.

InBev's solution to the challenge is to continue its stringent cost-cutting programme -- which has included zero-budgeting, the closure of a brewery in Great Britain and restructuring in Belgium -- and to reinvest the savings.

It points to peers such as Heineken, Carlsberg and Scottish & Newcastle, which have all either cut costs or shut breweries.

Heineken only on Monday reported it would cut 93 jobs in France, though it would also create another 34.

InBev said innovation -- launching new beers, or creating new technology in production and presentation of beers -- is a key factor to growth. It said it expects new beers launched in 2005 and 2006 to account for 4 percent of volume this year.

It has launched 15 new products so far this year, including Becks Green Lemon and Hoegaarden Citron. Another six product launches are expected before September, it said.

One of InBev's successes has been its PerfectDraft machine. The machine, which looks like an espresso maker, provides draft beer using the familiar handle seen in bars across the world. It takes 6-litre kegs of InBev's brands.

One InBev senior manager said the company has already sold more than 100,000 of the machines, which sell at 200 euros ($251.6) each, since they were launched in 2004.