Heineken to hike prices as inflation rises

[LONDON] Heineken warned its prices would rise this year to cope with soaring inflation and supply chain bottlenecks.

The world's second biggest beer maker after AB InBev issued the warning after posting a net profit of US$3.8 billion last year as Covid lockdowns were lifted in Europe.

The group - which produces more than 300 brands, including Amstel, Strongbow cider and Tiger - had fallen in the red when the pandemic emerged in 2020.

The company sold 4.6 per cent more beer last year, with growth in every region except Asia-Pacific, according to its annual earnings statement. The quantity was also "well ahead" of 2019, before the pandemic pummelled the world economy.

Heineken's revenue rose 11.8 per cent to 26.6 billion euros (S$40.69 billion).

The brewer said it will raise prices for its beer by "courageous" amounts as it seeks to offset rising raw material and energy costs and "crazy" shipping rates.

This is likely to dent demand for beer in households already strained from the rising cost of heating, food and clothing.

"If you look at the inflation that we're currently experiencing, it's the highest in 10 years and it's not just in our product categories - there might be a macroeconomic thing happening here," chief executive officer Dolf van den Brink said in a phone interview.

Heineken delayed updating its guidance for 2023 until later in the year amid the increased uncertainty about economic growth and inflation.

It's the latest consumer goods company to warn of the impact of rising prices. Earlier this month, Danish rival Carlsberg set a bearish tone for the industry, saying it's possible that earnings might not grow this year.

The stock traded 1 per cent higher at 9:55 am in Amsterdam, erasing an earlier decline.

The company's forecast for stable to modestly improved margins this year is better than recent warnings by companies like Unilever, said James Edwardes Jones, an analyst at RBC Europe said.

Consumer-goods giant Unilever said last week inflation will weigh on profitability for 2 years.

It could take several years for the European bar and restaurant industries to fully recover from the impact of the pandemic given the number of outlets permanently closed by the crisis, van den Brink said.

Still, the company's premium brands, which include its namesake label and Amstel lager, have been especially resilient, the CEO said. Gains in Brazil and Nigeria have been helping offset some of the weakness in Europe.

Chief financial officer Harold van den Broek said the company aims to raise prices for its beer by "courageous" amounts across the world to offset soaring expenses related to aluminum, which has risen 50 per cent from January 2021, barley, which has doubled in cost, and freight from China to the US, which has "been going absolutely crazy."

Still, Heineken said premium beer has been performing strongly, with its namesake brand growing 17 per cent in 2021 and higher-priced beers accounting for more than 60 per cent of its sales growth.

CEO van den Brink said the brewer isn't seeing consumers trading down to cheaper brands.

Heineken said it's continuing to target a 17 per cent operating margin in 2023, though signalled that may become more difficult.

This week, shareholders of South African wine and spirits maker Distell Group Holdings voted in favor of being acquired by Heineken, which creates a new regional group to compete with larger competitors Anheuser-Busch InBev and liquor giant Diageo. BLOOMBERG,AFP