European success is going flat at No 3 brewer Heineken

WEAK demand for beer in mature markets was yesterday blamed for a fall in volumes at Heineken.

The world's third-largest brewer, which bought Scottish & Newcastle two years ago, said austerity measures and low consumer confidence hit its businesses in both Europe and the US.

Although the Amsterdam-headquartered firm reported strong demand in a number of emerging markets including Africa, Asia and Latin America, this was not enough to offset subdued sales elsewhere.

Overall volumes in the third quarter slipped 2.2 per cent, causing its shares to hit a seven-week low at one point in trading yesterday.

However, costs savings and favourable shifts in the currency markets saw net profit rise 10 per cent to €520 million (454m).

Revenue grew 13 per cent to €4.619 billion but this was at the lower end of analysts' expectations. A Reuters poll had previously estimated revenues at between €4.62bn and €5.01bn.

Despite yesterday's disappointing news on volumes, Heineken - whose brands include Foster's. John Smith's and Amstel - said it still expected full-year profits to record a double-digit percentage increase as a result of further cost efficiencies and the effect of price hikes.

Gerard Rijk, an analyst at ING, said despite poor beer sales in Britain, Spain, Holland and Russia, the global outlook was positive.

"I am relatively positive on beer due to the growing profit pools, revenue synergies and cost savings," he said. "This could be a buying opportunity."

Although there is optimism about the worldwide market, concerns are growing over Britain, where the amount of beer consumed dropped by 9.7 per cent in the past three months.

The figures from the British Beer and Pub Association (BBPA) dashed hopes that the industry was on the road to recovery after a difficult time during the recession. In the second quarter of this year, sales rose unexpectedly by 2. 9 per cent - marking the first quarterly increase for four years.

However, the latest statistics revealed the second-quarter surge to be a blip caused by the World Cup.

Earlier this week, Brigid Simmonds, chief executive of the BBPA, called on the government to give the embattled industry a break by cutting regulation and reducing VAT.

"As has occurred after every World Cup, the beer market hit a bump in the road, which was not helped by a wet summer," Simmonds said.

"But these exceptional factors are underlaid by lingering economic and consumer uncertainty.Concern about the impact of public-spending cuts on jobs and incomes and the forthcoming VAT and beer tax rises are feeding that unease."

Last week, SABMiller, the world's second-biggest brewer by volume, reported a 1 per cent increase in volumes in the six months to the end of September, fuelled by growth in Africa and Asia.

Europe and North America only made up a third of SABMiller's core profit last year as brewers increasingly turn to emerging markets for expansion.

Global leader Anheuser-Busch InBev, which accounts for half of the US market and two thirds of Brazilian beer sales, will report third-quarter results on 3 November while world number four Carlsberg will follow on 9 November.

Heineken bought Edinburgh-based Scottish & Newcastle in collaboration with Carlsberg in 2008 for 7.8 billion.

The deal called time on S&N's 250-year history as an independent brewer. Heineken owns two of Europe's top three best-selling beers. Heineken claims the top spot while Amstel is the third most consumed beer in Europe.