Heineken is experiencing double-digit growth thanks to more expensive beers and the recovery from Covid. Still, Alken Maes‘ parent company warns of substantially higher prices this year due to inflation.
Profit back on track
The Dutch beer giant is recovering nicely after the Covid disaster year 2020: last year, sales were 11.8 per cent higher, mainly due to price increases and premiumisation. Consumers often opted for more expensive premium beers, such as Affligem and IPA brand Lagunitas. Volume rose by 4.6 per cent, accounting for 231 million hectolitres of beer. In Europe, the brewery group sold 3.8 per cent more beer, mainly due to an easing of Covid measures in the last quarter.
At the beginning of last year, CEO Dolf van den Brink announced a radical cost-cutting plan of two billion euros. No fewer than 8,000 positions would be lost, equivalent to one-tenth of all jobs. Today, that reorganisation is on track, and 1.3 billion euros have already been saved. The result: the operating profit is already nearly back at pre-Covid levels. While gross profit had fallen by 49.4 per cent in 2020, it has now risen by 43.8 per cent. Net profit reached 2.04 billion euros, compared to 200 million euros below zero a year earlier.
Will we be drinking less beer in 2022?
Despite the billion-dollar profit, Van den Brink is already warning of significant price increases in 2022. Heineken expects production costs to rise by around 15 per cent due to high inflation and ongoing pressure on the supply chain. Especially the prices of raw materials, energy and shipping are rising sharply, according to the world’s second-largest brewer. Heineken is obliged to compensate with higher prices, “which could lead to lower beer consumption”, Van den Brink admits.
In the longer term, the beer group is focusing on renewing its brand and product portfolio, digital transformation and acquisitions. Heineken acquired industry peer UBL in India and strengthened its position in South Africa by acquiring Distell, a distributor and producer of cider and spirits.
