Heineken Reports Lower Profits
In the last couple of years, Heineken has grown to become one of the largest brewers in the US and UK. However, this stunning growth has come with some setbacks.
The Dutch brewer, known for big brands like Dos Equis, Newcastle Brown Ale, and Murphy’s stout, hasn’t had an easy 2018. This week it reported a 3% dip in profits, which stood at £1.56 billion (€1.75bn).
Compared to the £9.6 billion (€10.8bn) it made last year, this is a significant drop.
Lowered Profit Prediction
Heineken’s shares fell by 6% after it lowered its profit prediction citing enormous volatility in the global financial markets. The company stated that profit margins were smaller because of the recent acquisition of Brazil’s Kirin –a Japanese beer brand.
According to Heineken N.V., its profit margin will shrink by 0.2 points by the end of 2018, which is contrary to the 0.25 percentage points it reported early this year.
In 2017, the drinks giant took over Kirin’s Brazilian operations for £532 million (€996m). It stated that the impact of Kirin Brazil’s consolidation was slightly higher than expected.
Aside from the low profits, Heineken is growing reasonably. It reported that the pubs it bought from Punch are performing “in line with expectation.”
The UK and U.S mature markets are volatile due to changes in drinking culture as well as consumer tastes. Nonetheless, the main focus for the top brewers is the emerging markets.
AB InBev continues to dominate Brazil’s beer market at 33%, with Heineken taking only 20% of the market share.
Heineken is currently focusing on investing heavily in Brazil, selling more Schin to bars, and introducing brands like Amstel. This growth, however, is coming at a cost –judging from the company’s most recent profit reports.
Meanwhile, AB InBev is also scrambling for the beer market in Nigeria, Mexico, and other countries where Heineken has a stronger influence.
The two brewers are expected to take advantage of the increasing beer volumes in South Africa, Vietnam, Russia, and Malaysia.
Ten years ago, things were tougher for Heineken when the beer volumes slipped in Britain. The Dutch brewer’s profit margins spiked during the second half of 2008, thanks to the hot summer weather in June.
If Heineken’s profit results are anything to go by, the beer market is now more competitive than ever.