Consumers no longer like Heineken’s higher prices

Heineken looks back on a disappointing first half of the year, as sales volumes are falling as consumers seek cheaper alternatives. Still, the Dutch brewery group’s turnover went 5.5 % higher as it increased its prices.

Prices will moderate

Heineken’s turnover rose to 17.4 billion euros thanks to price increases, but the brewer sold 5.6 % less in volume. In the important Asian market, volumes even fell 13.2 % as consumers there preferred cheaper beers, following the group’s steep price increases. As a result, operating profit fell by almost 9 %, net profit by 12 %.

For the full year, the brewer now expects profit growth of 0 to 5 %, instead of the previously forecast 5 to 10 %. The company expects prices to rise less in the second half of the financial year and volumes to gradually improve. Incidentally, the sale of the Russian operations continues to drag on: although Heineken has found a buyer, the deal still needs government approval.

Turnaround?

Last week, several food multinationals reported good half-year results mainly due to hefty price increases, with generally only slightly falling volumes. Still, some alarm bells went off: for instance, Unilever saw volumes in Europe – where inflation is hitting hard – fall by almost 10 % in the second quarter. Mondelez also saw stronger volume declines in Europe, partly due to price discussions with food retailers.

Observers therefore question whether consumers are going to continue to accept these ongoing price increases. Possibly, Heineken’s poor figures point to a turnaround. On Thursday, rival AB InBev publishes its half-year results.