Comment: Cold spring warms up chocolatiers

PERHAPS unsurprisingly, it seems cold weather is a boon for confectionery groups but turns the performance taps down for brewers.

Martin Flanagan

After a lengthy winter and the coldest spring for half a century, Dutch brewer Heineken revealed yesterday that beer sales volumes in the UK fell nearly 10 per cent in the first six months of the year.

It came the day after Swiss upmarket chocolate maker Lindt & Spruengli said its sales bounced up over 9 per cent in the period, suggesting comfort‑eating kicks in strongly when times grow very chilly even if people drink less “long” alcoholic drinks.

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Sprinkling salt into the beer for Heineken, the burst of warm weather in July and August that has given much of the UK and Europe the best summer since 2006 has failed to improve things since the period end.

Chief executive Jean-Francois van Boxmeer says although sales volumes have improved as the sun has shone, consumer spending has been crimped in several core markets by an unhelpful economic backdrop.

Weather factors aside, Heineken’s latest results suggest a continuation of its underlying strategy. To wit, shake out costs wherever possible, both organically and by de-duplication following acquisitions, and throw the money behind ramped-up marketing in faster-growing emerging markets.

Heineken made the significant acquisition of Asia Pacific Breweries, maker of Tiger beer, last year, mopping up the last shares early this year, and that business registered interim profit growth of 20 per cent and volume growth of 10 per cent.

Emerging markets posted 7 per cent organic profit growth for the Dutch brewer, and now compromise half of group operating profit.

That geographical profit breakdown and strategic direction is very similar to that at Diageo, the world’s biggest spirits company and Scotland’s largest whisky producer, showing this trend towards emerging markets is now a given in the worldwide drinks industry.

Treasury’s clocking up the miles to stand still

DEPRESSINGLY, in terms of public borrowing, we seem to be running hard to stand still. Austerity programmes are hard-wired into the coalition government’s strategy, but still the books don’t balance.

The City was wrongfooted yesterday by a surprising deficit last month. July is normally a banker for Treasury good news as the month typically, although not invariably, shows a surplus in public finances due to an influx of corporation tax payments and self-assessed income tax returns.

Austerity sceptics will say if we can’t get a public finances boost with such a tailwind then how authentic are the prospects for getting Britain out of borrowing intensive care?

Government hopes, by contrast, will reside with an apparently widening and deepening economic recovery. Growth is more likely than not to outstrip the expectations built into the fiscal forecasts over the coming months.

But the recovery is not settled enough yet to make yesterday’s news anything but disappointing.