Heineken's Summer Beer Sales in the UK Affected by Price Hikes and Poor Weather

Heineken experienced a decline in beer sales in the UK during the summer season, attributed to a price increase of over 7% and inclement, rainy weather that dampened outdoor gatherings and barbecues. This drop in sales was part of a broader 7.6% reduction in the volume of beer sold across Europe, accompanied by a 12% increase in average prices. The price hike was driven by inflation and heightened sales of premium ales and lagers. Heineken, known for its flagship brand, also owns Amstel, Birra Moretti, and Tiger.

Heineken says sales trends improved in September.

Globally, sales volumes dipped by 4.2% while prices rose by 9.5%, resulting in a 2% increase in sales, totaling €9.6 billion (£8.4 billion) for the third quarter of the year.

Dolf van den Brink, Heineken's CEO, attributed the decline to "the impact of adverse weather in July and August," noting that sales trends showed improvement in September. While the company managed to gain market share in sales through pubs and restaurants in most of its markets, it faced challenges in retail sales. Van den Brink also mentioned that price inflation was moderating, but some markets were grappling with "challenging macroeconomic conditions" leading to a "slowdown of consumer demand."

Steve Clayton, Head of Equity Funds at Hargreaves Lansdown, acknowledged that the figures were influenced by the weather but pointed out that despite unfavorable conditions, Heineken outperformed expectations. He noted, "Heineken believes they have held or gained market share in over half of their markets, even when volumes have proven hard to grow." The company remains committed to its full-year expectations, aiming to achieve stable to mid-single-digit growth in operating profit in 2023, despite the challenging environment.

These results came alongside Reckitt Benckiser's announcement that it had also experienced a decline in the number of items sold while raising prices, with a 7.5% increase. Reckitt Benckiser, known for brands like Dettol, Nurofen, and Durex, cited disappointing sales of baby milk products, despite benefiting from supply issues faced by competitors in the US the previous year. The company's CEO, Kris Licht, emphasized that Reckitt remained on track to meet its full-year targets. Additionally, the company introduced a £1 billion share buyback program as a means to reward investors, considering its substantial surplus cash. However, analysts at Jefferies noted that the company had scaled back its ambitions to achieve approximately 20% profit margins by 2025.

The performance of Heineken and Reckitt is seen as further evidence that households are becoming more cautious in their spending due to rising inflation, which is affecting the prices of essential items ranging from butter to rice. While sales figures in supermarkets might appear strong, actual volumes of items sold have declined, largely due to the impact of inflation. Inflation, despite showing signs of easing, remains stubbornly high, with an annual rate of 6.7%, driven by increased labor and energy costs, along with extreme weather events linked to the climate crisis that are affecting global harvests.