Beer sales waver for Heineken as prices shoot up

Beer prices have shot up but sales have begun to decline, alcohol giant Heineken said as the business and punters have felt the effects of higher inflation.

Heineken, which owns hundreds of brands including Amstel, Birra Moretti, Beavertown and ciders Strongbow and Orchard Thieves, said average selling prices were 12% higher in the latest quarter compared with the previous year.

It helped lift the global brewer’s revenues by around 5% in the UK over the first three months of the year.

Average prices have gone up in regions around the world to offset the impact of inflation, and also because it is selling more premium brands, the group said.

But the total volume of sales including beer declined globally during the first quarter.

In the UK, Heineken’s total volumes declined by nearly 10%, suggesting consumer demand was dampened by higher prices.

“Heineken owns high-end favourites such as Heineken, Birra Moretti and Amstel,” Aarin Chiekrie, an equity analyst for Hargreaves Lansdown said.

“When it comes to raising prices, brand power is key – allowing the group to raise prices to combat inflation.

“But Heineken’s beginning to show the first signs that continuous price hikes are leaving a bad taste in consumers’ mouths.

“Volumes declined in the first quarter, as some consumers struggle to justify ever-higher prices for their favourite beers amidst a cost-of-living crisis.”

Heineken made 7.6 billion euros (£6.7 billion) in revenues in the first three months of the year, up from 7 billion euros (£6.2 billion) in the same period last year.

Premium beer volumes fell by nearly 6% which the company said was driven by a decline in Vietnam, and because it stopped sales in Russia following its invasion of Ukraine in March last year.

But sales of Heineken lager grew by more than 2%, outperforming other brands in the group’s portfolio and seeing particularly strong growth in Brazil and China.

Looking forward, Heineken said it was remaining cautious in the face of a volatile global economy and the impact it has on consumer demand.

But sales in Europe held up better in the first quarter than the firm had expected.

Dolf Van Den Brink, the chairman and chief executive of Heineken, said: “We start the year with strong revenue growth driven by pricing and disciplined revenue management, while we materially increase investment behind our brands.

“Business performance in Europe and the Americas regions is encouraging, with consumer demand holding up better than expected in the first quarter.

“Results in the Asia Pacific and Africa, Middle East and Eastern Europe regions were disappointing, hindered by temporary volatility in Vietnam and Nigeria, leading to demand softness.

“We see the economic environment as volatile and uncertain, making us vigilant and focused.

“Our gross savings programme continues at force, providing fuel to invest behind our strategy. All in all, our full year expectations remain unchanged.”

Published: 19/04/2023 by Radio NewsHub