just On Call - Europe "not an easy place to operate in" - Heineken CEO
Heineken said it is back to where is wants to be in Russia
The outlook for brewers in Europe remains poor as imploding economies compound the continent's myriad problems, Heineken's boss has said.
In a conference call with investors following the company's H1 results today (22 August), Jean-François van Boxmeer said the collapse of Greece, which he described as “in meltdown”, has had a big impact on Heineken's Europe first-half results. But Greece, along with bad weather and a strong comparison from last year, were just some of the headwinds Heineken faced in the region, van Boxmeer said.
“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,” he said.
“Europe is not an easy place to operate in, but our outlook has not fundamentally changed from where we stood at the beginning of the year.”
But, Van Boxmeer said that Spain, which also has underlying financial difficulties, has so far proved resilient in beer sales.
“The good news is that in Spain people still go to the tapas bar and consumption of beer is still growing,” he said.
Heineken posted sluggish H1 growth and warned that full-year growth is likely to be flat. Much of the pessimism centred on Europe and its performance over the past year in most regions.
In Russia, the Dutch brewer is focused on clawing back market share after pricing “mistakes” two years ago led to drops, van Boxmeer said. But he said it is up to Carlsberg, Russia's biggest player, to initiate increases before Heineken can implement its own.
“We are obviously not market leaders in Russia, so in pricing we have to be mindful of the steps people who are bigger than us are taking,” van Boxmeer said referring to Carlsberg.
“We have been concentrating on gaining back share on the backdrop of our big losses when we made mistakes on how we could price in the market two years ago.
“You move always with a certain delay to [the market leader's] own price moves. People buy brands because they see a value price relation.”
In April, Heineken's CFO René Hooft Graafland accused Carlsberg of “not behaving like a market leader” in Russia by failing to pass on price rises to combat rising raw material costs and a stricter excise environment. Graafland made similar accusations in 2010.
In response, Carlsberg said it had made seven price increases in 2010 compared to two or three in an average year. Last week, Carlsberg reported it was “back on track” in Russia after a tough 2011 that saw market share decline.
Van Boxmeer today said Heineken is “back to where we want to be” in Russia and pricing in the second half of the year will be better than in the first half.
He also said the brewer's moves to focus on premium brands in the country are starting to pay off. “Our strategy is to play a good game in the value segment of the Russian market that is paying for our infrastructure,” he said.
“We now have a good base to dedicate a lot of work in the premium end of the portfolio and reinforce our position there.”
Meanwhile, Nigeria continues to grow, though at a slower pace than last year, and Van Boxmeer said the African country's fundamentals remain strong,.
“The oil pricing is working for Nigeria,” he said. “The high growth in urban areas, particularly in the south, is working for Nigeria so even if we notice a pause in the second quarter we don't think that that is a trend going forward.”
Van Boxmeer also praised Heineken's performance in the US, where its 2.4% volumes growth beat the country's overall 1% rise.
“Share wise and performance wise we do well,” he said. “It's early days. You don't change things from one quarter to another, but it's good to see the new approach we are taking in the US is resonating and we will bring that further.”
Heineken has a "low appetite" for China's mainstream beer sector and will continue to concentrate on the premium end of the market, the head of the Dutch brewer has said....
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