UPDATE: NETHERLANDS: Flagship brand buoys Heineken
Heineken CFO Rene Hooft Graafland has insisted the brewer still needs to cut costs throughout the business, despite posting a healthy set of first-half results today (6 September).
The Dutch brewing giant is targeting cost cuts of EUR360m by the end of 2008 and has earmarked a series of cost-savings under its "Fit 2 Fight" programme.
Heineken yesterday announced that it was to close a brewery in Slovakia with the loss of 95 jobs, a move that comes after restructuring in France and the Netherlands.
The brewer posted a 13.8% rise in operating profit to EUR726m (US$931m) for the first half of the year as sales of its eponymous brand jumped 13%. Revenues rose 11.6% to EUR5.7bn. However, Hooft Graafland said further cost-savings were necessary to ensure Heineken stayed competitive.
"We need to adjust our cost basis. A very big part of our business is in mature markets that are not growing from a volume point of view," he said. "We have to look at cost-savings to become more competitive. We are reducing costs to make the company more focused, more agile and more competitive."
Heineken CEO Jean-Francois van Boxmeer said the brewer was in the "execution phase" of carrying out its cost-cutting measures. Over half of the cost-savings will come from Western Europe, he said, with a further 25% coming from Heineken's operations in Central and Eastern Europe.
Beer volumes in Western Europe were flat. Heineken said good weather in May and June boosted volumes, which inched up 0.7%. Revenues from the region rose 3.4% to EUR2.6bn. Volumes in the Netherlands, Italy and France were down but picked up in Spain and the UK, where volumes soared 27%.
Volumes in Central and Eastern Europe rose almost 19%, thanks to a "strong performance" in Poland, Germany and Russia.
Heineken also enjoyed rising volumes throughout the Americas, buoyed by surging sales in South America and rising sales of Heineken and Heineken Premium Light in the US.
Van Boxmeer said the launch of Heineken Premium Light had "exceeded expectaions" and caused the caused brewer to raise its sales forecast for the brand to 600,000 hl by the end of the year.
"It's a bit early to cry victory but we are absolutely encouraged by the early success. The launch of Premium Light has had a halo effect on Heineken lager, which has seen growth of 8% year-on-year. We have seen growth in all geographies in the US with particular strength in the north-east of the States."
US sales of Amstel Light were down 5% but van Boxmeer insisted there was "absolutely no cannabalisation" of sales from Heineken Premium Light. Amstel Light, he said, needed "rejuvenation".
"It's been more of an erosion phenomenon that we have had to cope with on Amstel Light. This is not the effect of the cannibalisation from Heineken Premium Light - the target market is very different. It's more relevant to the rejuvenation of the brand and we are giving increased support to Amstel Light in the US."
In Russia, van Boxmeer said, the brewer is focusing on integrating its business after a slew of acquisitions last year. He labelled Heineken's performance in its biggest market by volume as "so far so good".
"It's a gigantic task to integrate all the businesses. We are in the middle of identifying the key 14 premium brands where we will put our support. The whole integration process is going very well."
Heineken's share of the Russian beer market stands at around 14% and the brewer's "ambition" there is to have a market share of 20% "five or six years from now", he added.
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