Heineken profits fall after poor weather

Dutch brewing giant Heineken suffered from a profits hangover in the first half of the year as miserable weather cooled drinkers’ thirst for lager.

Daniel Craig as James Bond. Bond drank Heineken in last year's Skyfall, after a £28m deal was struck. Picture: Contributed
Daniel Craig as James Bond. Bond drank Heineken in last year's Skyfall, after a £28m deal was struck. Picture: Contributed

The world’s third-largest brewer, which joined forces with Danish rival Carlsberg in 2008 to break up Edinburgh-based Scottish & Newcastle (S&N), is fighting back against weak sales by introducing a range of “radler” drinks, which mix beer with fruit juice.

A low-alcohol Foster’s radler, which includes lemon juice, has been introduced in the UK along with more fruit variations of its Bulmers cider brand.

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Yet beer sales volumes still dropped by nearly 10 per cent in the UK during the opening six months of the year.

Chief executive Jean-François van Boxmeer warned: “We continue to operate in a challenging trading environment. Although the volume trends have improved in July with the warm summer weather in Europe, economic conditions in several of our core markets continue to constrain consumer spending.”

Heineken – which owns the Caledonian brewery in Edinburgh, as well as beer brands such as Cruzcampo, Desperados and Sol – posted a 17 per cent drop in half-year pre-tax profits to €639 million (£546m).

While the company has been suffering in Western Europe, Heineken has been expanding in emerging markets, taking full control last year of Tiger beer-maker Asia Pacific Breweries (APB) and Mexican brewer Femsa in 2010.

Revenues rose by 3 per cent to just under €10.4 billion, but fell by 1 per cent when the effect of the APB takeover and price rises was stripped out.

The group’s radler drinks are now on sale in 24 countries, after 12 were added during the opening half of the year, and Strongbow has also gone on sale in Mexico.

Operating profits in developing markets rose by 7 per cent, compared with a 9 per cent fall in Western Europe.

As well as the wet spring in Europe and the United States, Heineken was hit by lower sales in France, where wholesalers had been stocking up ahead of an alcohol duty rise in January.

Scotch whisky distillers had also been affected by the tax changes in France, which is a key market for the spirit.

Richard Withagen, an analyst at SNS Securities, said: “Heineken’s first-half performance was slightly weaker than expected, especially on volumes and net profit. First-half beer volumes were down about 7 per cent on an organic basis across Europe, as the decrease in Western Europe did not abate much in the second quarter and the decrease in Central and Eastern Europe even accelerated.”

Last year Heineken spent a reported $45m (£28m) turning James Bond into a lager drinker, with its product appearing in Skyfall, the most-successful 007 outing, and actor Daniel Craig starring in its cinema and television advertising.

News of the fall in first-half profits comes just days after the brewer’s Star Pubs & Bars unit, formerly the Scottish & Newcastle Pub Company, unveiled plans to pump £13m into refurbishing its UK outlets, in a fight back for the “great British pub”.