Brands

Heineken boosted  by main beer brands as Volume grew double-digit in Nigeria

Heineken boosted  by main beer brands, Volume grew double-digit in Nigeria despite stiff competitive conditions

Heineken recorded a 3.9% rise in full-year net revenues, as the Dutch brewer continued to profit from the strong performance of its namesake beer brand.

The world’s second largest beer maker – and owner of brands such as Tiger, Cruzcampo and Amstel – posted net revenues of €22.47 billion for 2018. Operating profit grew 2.9% to €3.89 billion.

Top-line performance in 2018 was strong with robust volume growth throughout the year, and net revenue accelerating in the second half driven by price mix.

Operating profit (beia) increased 6.4% organically, at a faster rate in the second half of the year (2H18: 11.1%) than in the first (1H18: 1.3%) driven by higher revenue growth and overall slower growth of expenses despite continued pressure from higher input and logistics costs.

Heineken® volume grew 7.7%, its strongest performance in more than a decade. Ten markets now sell more than 1 million hectolitres of Heineken®. Volume grew double-digit in Brazil, South Africa, Russia, the UK, Nigeria, Mexico, Poland and Germany, and China returned to growth. In Nigeria, consumer discretionary spend remained under pressure and competitive conditions continued to be challenging. Beer volume decreased mid-single digit for the full year, with improved trends in the last quarter as volumes were in line with the previous year.

Volumes in Nigeria were adversely impacted by the weak macro-economic environment and SKU rationalisation.

HEINEKEN continued to invest in key developing markets with the expansion of production capacity in Mexico, Vietnam, Ethiopia, Brazil, Cambodia, Haiti and South Africa, and the construction of a new brewery in Mozambique.

READ  Promasidor Launches ‘Chatbox’ for Cowbellpedia Candidates

Net revenue (beia) increased 6.1% organically, with a 4.0% increase in total consolidated volume and a 2.0% increase in revenue (beia) per hectolitre. The underlying price mix impact was 2.9%. In the second half of the year net revenue (beia) increased 6.5% (1H18: 5.6%), with total consolidated volume growth of 3.7% (1H18: 4.4%), net revenue (beia) per hectolitre up 2.8% (1H18: 1.1%) and underlying price mix impact of 2.9% in line with the full year. Reported net revenue (beia) per hectolitre declined 3.9% mainly due to the translational currency impact and from the dilutive effect of the acquisition in Brazil.

Consolidated beer volume grew 4.2% organically in 2018, with 4.5% growth in the first half and 4.0% growth in the second half. Beer volume in the fourth quarter was up 3.3%, against a challenging comparable base (Q4 2017: 4.6%).

The Heineken® brand also saw healthy growth across European markets from both Heineken® Original as well as the ongoing success of Heineken®0.0. These results more than offset weaker volumes in Vietnam and the US. Heineken® 0.0 is available in 38 markets (2017: 16) and further roll-out is planned for 2019.

Jean-François van Boxmeer, Chairman of the Executive Board / CEO, commented: “In 2018 we delivered another year of superior top-line growth. The Heineken® brand grew 7.7%, its best performance in over a decade, with Heineken® 0.0 now available in 38 countries. Our premium portfolio grew double-digit, led by our international brands, craft & variety and cider portfolios. All regions grew and Brazil recorded a strong performance following the successful integration of our two businesses. Our operating profit margin (beia) decreased by 17 bps due to the first time consolidation of Brazil, rising input costs and adverse currency developments. A key milestone in 2018 was the announcement of the strategic partnership with CRE to join forces in China, a big opportunity for both companies, which is pending regulatory approval.

READ  Mouka Partners Supa Strikas in Strategic Business Deal

Our strategic priorities are growth-oriented with an ever-increasing emphasis on the sustainability of this growth, both socially and environmentally. We focus on innovation and operational excellence so our consumers enjoy our brands and we exceed our customers’ expectations, whilst seeking productivity improvements and constantly reassessing our spending behaviour. Going into 2019, we expect the environment to remain uncertain and volatile. Overall, we anticipate our operating profit (beia) to grow by mid-single-digit on an organic basis.”

The international brand portfolio grew double-digit. Volume was up double-digit for Tiger, Desperados, Birra Moretti and Krušovice. Amstel grew high single digit driven by strong growth in Brazil. Tecate grew mid-single digit as robust performance in Mexico more than offset a decline in the US.

Cider volume increased double-digit to 5.6 million hectolitres (2017: 4.9 million). In the UK volume grew mid-single digit and outside of the UK volume reached more than 2 million hectolitres. Strongbow and its flavour variants continue to gain share in South Africa. Performance of our recently introduced Ladrón de Manzanas in Spain and Strongbow in Vietnam is promising.

Low & No-Alcohol (LNA) volumes increased mid-single digit, delivering 13.1 million hectolitres in 2018 (2017: 12.5 million). In Europe, volumes grew high-single digit due to the continued success of Heineken® 0.0 and Radler. In Ethiopia, Sofi Malt and its new coffee variant Sofi Buna boosted the growth of the LNA portfolio.

Our Craft & Variety volume grew double-digit. Affligem launched a lower alcohol variant driving double-digit growth. Lagunitas continues to expand outside the US and is now also brewed in the craft brewery in Wijlre in the Netherlands. Mort Subite grew double-digit. Craft line extensions such as Brand IPA in the Netherlands and Birra Moretti Regionale in Italy also grew double-digit.

READ  Mr Bigg's Remodel Restaurants With New Initiatives, Set To Open New Outlets

Among the key innovations, rolled-out in 2018 was The Blade, a counter-top draught system for small outlets introduced in late 2017. Sales of The Sub, an at home draught device, accelerated. HEINEKEN continues to develop and roll out e-commerce Business-to-Business and Business-to-Consumer platforms across the group.

Operating profit (beia) grew 6.4% organically, as a result of higher revenues and cost efficiencies which more than offset higher input and logistic costs. Including consolidation, currency, and exceptional items, most notably an impairment in the Democratic Republic of Congo (DRC) in 2018 and exceptional gains and benefits in 2017 (due to the sale of non-beer and cider wholesale operations in the Netherlands), Operating profit declined -6.4%.

2019 OUTLOOK

For 2019, Heineken expects the following:

– Continued volatility in economic conditions
– Superior top-line growth driven by volume, price and premiumisation
– Mid-single digit increase of input and logistic costs per hectolitre on an organic basis
– Continued cost management and productivity initiatives
– Given this, Heineken expect operating profit (beia) to grow by mid-single-digit on an organic basis, excluding any major unforeseen
macroeconomic and political developments.

Heineken also anticipates:

– An average interest rate (beia) broadly in line with 2018 (2018: 3.2%)
– An effective tax rate (beia) between 27% and 28% (2018: 26.4%)
– Capital expenditures related to property, plant and equipment around €2 billion (2018: €1.9 billion).