World: Heineken volumes up 2.2% in Q2 in Europe, Carlsberg increases yearly profit guidance

Unusually warm weather across Europe this summer helped the world’s second-largest brewer Heineken and smaller rival Carlsberg to sell more beer in the third quarter, despite persistent concerns about beer consumption stagnating in developed markets, The Financial Times reported.

The boost from the hot summer, as well as cost cuts, led Carlsberg to increase its full-year profit guidance on October 24, a week ahead of its results. The world’s third-largest brewer now expects underlying profits to increase 10-11 per cent, up from a previous forecast of a high single-digit percentage. But currency impacts are expected to be worse than expected, lopping off Dkr500 mln ($76.5 mln) from operating profit instead of Dkr425 mln.

Separately, Heineken confirmed its 2018 targets after underlying volume growth rose 4.6 per cent in the quarter, with European strength balanced by a slowdown in Asia and Africa. Investors are still smarting from a July profit warning in which the brewer of Heineken lager, Tiger, Sol and Strongbow cider said margins would suffer because of currency weakness and the cost of expanding in Brazil.

Heineken’s volumes in Europe rose 2.2 per cent in the quarter compared with a 0.7 per cent rise in the first half of the year, while volumes in Asia rose 4.8 per cent compared with 10.1 per cent in the first six months. Beer volumes in the US, where consumers have been drinking less beer than previously, were largely flat.

Carlsberg shares are largely flat this year, outperforming a 9 per cent decline at Heineken and a 21 per cent fall for number one player Anheuser-Busch InBev.

Investors will be watching to see how beer companies handle the rising costs of raw materials, energy and packaging, and whether they can pass them on to consumers or if they will dent profitability. Big consumer goods companies including Unilever and Nestlé have begun passing on such costs in the form of higher prices.

Brewers have also had to contend with stagnating beer consumption in the US and Europe, and have struggled to deliver as much growth as they had done in the past. Consumers have increasingly turned away from big brand lagers and flocked instead to smaller, niche craft beers, or switched to spirits like tequila and gin.

Growth in emerging markets, such as Vietnam and Mexico, has picked up some of the slack, however, prompting companies including Heineken and Anheuser-Busch InBev to focus their efforts there.

In August, Heineken bought a 40 per cent stake in the parent company of China’s largest beer company for $3.1 bln, in an attempt to better compete with AB InBev in the region.

AB InBev will report third-quarter results on October 25, and Carlsberg results are due on November 1.

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