HKHHY - Heineken flexes pricing power to overcome inflation issues

Dutch brewing giant Heineken’s ( OTCQX:HEINY ) indicated price increases are not deterring consumers from stocking up on its products.

According to a half-year earnings release on Monday, the brewery’s revenues increased by 37% to €16.4B through June despite Omicron impacts early in the year. Additionally, operating profits jumped 20.6% to €2.1B.

According to the press release, underlying price-mix on a constant geographic basis was up 15.3% over the first six months of the year as inflation impacts bore down on the business. Despite the significant price increases, beer volume increased 7.6% versus the prior year and came in 4.2% above 2019 levels. The Asia Pacific region led recovery with a 17% jump from the prior year.

“We benefited from the recovery in Asia Pacific and the on-trade in Europe as consumers returned to the bars, with demand resilient until now despite mounting inflationary pressures on consumers' disposable income,” CEO Dolf van der Brink said. “Our actions on pricing, revenue management and productivity offset significant inflationary pressures in our cost base. As a result, operating profit is now firmly ahead of 2019.”

Still, van der Brink noted that the outlook for the longer term remains uncertain.

“We expect significant inflationary pressures on our cost base and ongoing investment in our business to continue and impact the second half of 2022 and into 2023,” a company statement acknowledged. “The recent softening in some commodities is being offset by the unprecedented price levels and availability risk of natural gas, most notably affecting Europe, our biggest region.”

While guidance for 2022 was reiterated, the company tempered targets on operating profits for 2023 given growing uncertainty. Management moved toward delivering operating profit (BEIA) as opposed to the prior “stable to modest sequential improvement in operating profit margin” forecast in February.

Read more on resilient beer sales in Germany .

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