Heineken results highlight frailty of global brewing sector

Heineken results highlight frailty of global brewing sector

Heineken has become the latest brewer to fall flat this summer, highlighting the frailty of global brewing.

Heineken's shares lost a tenth of their value today (24 August) after the brewer surprised investors by saying that net profits will not grow at all in 2011, compared with 2010. Profits in the first half of the year missed analysts' expectations by around 8%, despite a rise in worldwide beer sales for the group.

It's not quite as bad as Carlsberg, but the firms' results do have similarities. It's no secret that summer, after a promising beginning, hasn't really happened in Europe; that'll teach us for belly-aching about droughts. Heineken today blamed weak weather in July and August as being partly responsible for its gloomy profits outlook. 

Once a company starts pulling out the weather charts, though, isn't this always a bad sign? For me, the story of multinational brewers in 2011 is, so far, one of frailty. 

Beer markets in Western Europe and the US remain lacklustre, as do many national economies there. There is another problem, too, and it relates to more western consumers shifting from on-trade to off-trade. I've seen the profits disparity between on- and off-trade and, trust me, it calls for a stiff drink.

At the same time, Russia and Brazil haven't picked up the slack this year for a variety of reasons. China is still booming, but no one can make any money there. Africa is in a similar situation.

Higher commodity costs have only added to the pressure, particularly for the European brewers, who have found themselves more exposed.

For now, brewers must try to sell their beers for more money in mature markets, at the same time as cutting costs to the bone, as they wait for emerging markets to start generating more returns on investment. I bet that there are more than a few fingers crossed that this happens sooner rather than later.