Brewing giant Heineken eyes pub reopening boost but margins remain in sharp focus

Heineken, the global brewer that owns Edinburgh’s historic Caledonian Brewery and has its UK corporate headquarters in the city, will this week cheer the gradual reopening of the hospitality sector though margins are likely to remain squeezed.

The Dutch group is due to update investors on its first-quarter trading and analysts are concerned that fresh costs could impact profits profit margins.

The update comes after the brewer recently announced plans to cut some 8,000 jobs including up to 100 in the UK. That represent nearly 10 per cent of its global workforce.

The cuts will affect less than 100 of the 2,300 or so employees in the UK, but jobs will go across the business.

Heineken is present in Scotland with its Caledonian Brewery, and its corporate base at Edinburgh’s Gyle, which is also home to its Star Pubs & Bars arm. Picture: Ian Georgeson

William Ryder, equity analyst at financial services group Hargreaves Lansdown, said: “Pub gardens [in England] are back open and trading should be picking up for Heineken – at least in the UK.

“In truth, the UK’s not a big enough market to turn Heineken’s performance around by itself; worldwide progress against the virus is needed. Nonetheless, bars and restaurants around the world should, if all goes to plan and vaccine rollouts are successful, reopen over the course of the next year or so.

“At full-year results Heineken expected business to pick up in the second half of 2021, but recent trading and vaccine developments may have altered these forecasts. Any commentary on this will be essential reading.”

He added: “As society normalises sales are likely to shift back away from supermarkets and shops and back to bars and restaurants.

“The initial disruption damaged margins, and we suspect there may be further additional costs as we reopen. While brand strength and market share measures are probably more important long term, margins still matter this year.”

The company, which also owns the Birra Moretti, Tiger and Sol brands, is the world’s second-largest brewer, with Heineken being Europe’s top selling lager. In the UK it also runs a pubs and bars business.

In February, the firm reported that UK retail volumes were strong, with its eponymous Heineken brand reporting double-digit growth in the UK.

Birra Moretti and Sol also saw strong growth in the UK, although cider sales decreased as it was heavily affected by pub closures.

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