​Heineken's UK summer beer sales subdued by surging prices and inclement weather

​Heineken's UK summer beer sales subdued by surging prices and inclement weather

Posted by Emily on 26th Oct 2023

Global sales volumes witnessed a 4.2% decline as prices escalated by 9.5%, contributing to a 2% sales increase, reaching €9.6bn.

Beer @ Heineken factory @ Schiltigheim @ Strasbourg (45468013502) Guilhem Vellut from Annecy, France, CC BY 2.0, via Wikimedia Commons

Heineken experienced a downturn in its UK beer sales over the summer, attributable to a price hike exceeding 7% and the cool, rainy weather thwarting barbecues and outdoor gatherings. This decline mirrored a 7.6% plunge in beer volumes sold throughout Europe, with the average price surging by 12%, fuelled by inflation and augmented sales of premium ales and lagers. Heineken's portfolio includes Amstel, Birra Moretti, and Tiger, alongside its eponymous brand.

Globally, sales volumes receded by 4.2% while prices jumped by 9.5%, resulting in a 2% ascent in sales to €9.6bn (£8.4bn) for the year's third quarter.

Dolf van den Brink, Heineken's chief executive, attributed this to "the impact of adverse weather in July and August". He noted an upturn in sales trends come September. The company made gains in on-trade sales across most of its markets but acknowledged there was "more to do to recover" within retail sales, he remarked. He also observed that although price inflation was subsiding, there had been a "slowdown of consumer demand" in certain markets grappling with "challenging macroeconomic conditions".

Steve Clayton, the manager of equity funds at brokerage firm Hargreaves Lansdown, described the figures as a "response to endless weeks of cloud and drizzle", yet, in spite of the weather, Heineken had performed better than anticipated.

"Overall, Heineken believes they have maintained or expanded market share in over half of their markets, even under conditions where volumes have been difficult to augment," he stated. "The group are persisting with their full-year forecasts; Heineken anticipates delivering stable to mid-single-digit growth in operating profit in 2023, in the face of the challenging environment."

These disclosures coincided with Reckitt Benckiser, the producer of Dettol, Nurofen, and Durex, also admitting to a fall in the number of products sold as it implemented a price increase – in its instance, by 7.5%.

The firm reported underwhelming sales of its baby milk merchandise, following an advantage gained from competitors' supply issues in the US the previous year. However, Kris Licht, the chief executive, asserted that Reckitt was "on track to achieve our full-year objectives".

Birra Moretti, Italian beer Dudva, CC BY-SA 4.0, via Wikimedia Commons

The company unveiled a £1bn share repurchase scheme – a strategy to gratify investors – citing significant surplus cash generation. Nonetheless, analysts at Jefferies pointed out the company had reined in aims to boost profit margins to roughly 20% by 2025.

The performances of Heineken and Reckitt are perceived as additional indicators that consumers are becoming prudent with their weekly expenditure, as inflation impacts essential prices, from butter to rice.

Despite seemingly robust sales figures, the volume of products sold in UK supermarkets has regressed, the figures inflated due to price rises.

Though inflation shows signs of relenting, recent statistics reveal it's more persistent than expected, standing at an annual rate of 6.7%. This persistence is compounded by rising labour and energy expenses affecting basic household items, coupled with severe weather disturbances associated with the climate crisis disrupting harvests globally.

112,113,118,122,125,126,131,116