Heineken anticipates disappointing 2019

Heineken

Heineken is already preparing itself for less success this year than in 2018. On top of the rising costs of raw materials and the ongoing shortage of truck drivers, the world’s second-largest brewer is seriously taking the likelihood of a no-deal Brexit into account.

According to CEO Jean-François van Boxmeer in the Dutch newspaper FD, the prices of raw materials are set to rise by approximately 5% because the 2019 contracts were signed in the autumn of last year. “This is the case for cereal grains in general and barley in particular. The prices are rising due to the growing demand and the poor harvests last year. In addition, our main packaging materials – aluminium and glass – are becoming more expensive, primarily because of rising energy prices,” states Van Boxmeer.

The higher energy prices are also impacting on the transport costs, plus the Heineken boss foresees the shortage of transport capacity becoming a long-term problem: “The rapid growth of e-commerce is creating a desperate shortage of delivery drivers in some countries.” Despite these setbacks, Van Boxmeer still expects Heineken’s revenue growth to be above the industry average in 2019 and the aim is for approximately 5% autonomous growth in operating profit.

Brexit

Heineken has a strong presence in the UK, where it sells various beer brands and owns a network of pubs, but this doesn’t necessarily mean that Heineken will be severely affected by Brexit, according to Van Boxmeer. The company has brewing activities locally and sources many of its ingredients and packaging materials in the UK too. However, as a precaution it is stockpiling the hops that are imported from Germany and the Czech Republic. Hence, Van Boxmeer regards an economic downturn as the biggest Brexit-related threat for Heineken.

The brewing giant once again invested heavily in emerging markets such as Mexico, Vietnam and South Africa last year, and is also pursuing growth in the Chinese beer market. In summer 2018 Heineken signed a deal to acquire a 40% share in China Resources Beer Holdings, which owns China’s biggest brewer, paving the way for CR Beer to sell Heineken throughout the whole of China. Van Boxmeer: “CRB has got a strong distribution network. Becoming part of that will enable us to sell much more Heineken.”

Source: FD