Heineken has had its hands full this week

Heineken has had its hands full this week

All brewing eyes were on Heineken this week and the release of its first-half results. Interest was further piqued by the twists and turns the Dutch brewer has been forced into in its drawn-out chase of Asia Pacific Breweries (APB), especially as the company just announced it had raised its direct stake in APB to 12.18%.

So, it was something of a disappointment when executives on the investor conference call to talk about the results said that was the one thing they wouldn't discus.

Not that it stopped anyone else chipping in with an opinion.

“At stake for Heineken is a chance to boost its presence in Asia's lucrative beer market at a time when it faces lacklustre sales in its home base of Europe, where recession and government austerity measures have curbed consumer spending in recent years,” the Wall Street Journal said

Spiros Malandrakis, an alcoholic drinks analyst from Euromonitor, told CNBC that the pace of acquisitions is heading for a slowdown as the number of players reduces. “That’s why (APB) is so important as well, it’s probably one of the last relatively major targets out there,” Malandrakis said.

It was a theme picked up by Heineken CEO Jean-François van Boxmeer, who told CNBC that he is looking to boost his company's footprint in Latin America, Asia and Africa. “The four big brewers have over half of the total beer market in the world. Obviously, consolidation is a never ending story, we have seen very, very large deals but I suppose there will be further consolidation ahead of us.”

But has van Boxmeer spoken too soon? Some commentators warned Heineken needs to secure the APB deal before looking elsewhere. “It ain’t over till it’s over,” Wall Street Journal blogger Isabella Steger said, highlighting moves made by Thailand's Kindest Place to cause problems for Heineken.

“What is certain is that the Thais have been canny in this takeover saga,” Steger said. “By forcing Heineken to raise its offer, Kindest Place, an entity connected to ThaiBev’s billionaire owner Charoen Sirivadhanabhakdi, will make S$177m (US$142m) on its 8.6% stake in APB, or an 18% return.”

In Asia One Business, Kwanchai Rungfapaisarn said Sirivadhanabhakdadi has previous form in this kind of boardroom battle, and could walk away with more than just money in a settlement with Heineken.

“In 2005, ThaiBev forced Denmark-based Carlsberg to pay US$120m to settle a legal dispute and end their 12-year relationship in Thailand's beer market,” Rungfapaisarn wrote.

“During that long relationship, ThaiBev had gained both brewing and management know-how from Carlsberg, knowledge that helped the company establish its Chang beer in the Thai market.

One positive Heineken could take from the murky waters surrounding the deal is that less attention was paid to its poor results performance. Slight lifts in sales and profits were tempered by the company's expectations that full-year profits will be flat.

“Modestly disappointing,” was the verdict from analysts quoted in The Telegraph.

“Heineken has lagged its brewing peers in creating shareholder value over the past decade, despite the advantage of owning the largest international premium brand during a period when aspirational consumption flourished,” the analysts said.

Most of the problems were in Europe, where bad weather and difficult trading conditions held back growth.

Consumer confidence is not coming back under the current circumstances and you see in a number of markets VAT increases that have put the on-premise sales under pressure,” van Boxmeer said.

Gerard Rijk of ING, quoted in the Financial Times, said the results “show that the transformation of the company towards the Americas, Africa and Asia-Pacific is really needed”. 

“Europe is a difficult continent, which is still responsible for about 45% of Heineken’s profitability,” he said.

Yesterday, top European rugby clubs threatened to quit the Heineken Cup, the sport's most prestigious trophy, which is sponsored by the brewer. But, with its manifest difficulties on the continent, perhaps it is Heineken who has the greater call right now to kick Europe into touch.