Heineken CEO Jean-François Van Boxmeer says the company’s flagship brand cannot directly compete with a craft beer sector that has hogged US beer growth over the past decade.
“Craft beers have been taking the lion’s share of beer market growth over the last decade – practically exclusively,” he told Societie Generale analyst Jamie Norman on a call this morning.
“You cannot compete with Heineken or any other brand against the craft beer phenomenon. We have elected not to go into craft beers ourselves in the US, but have elected to grow in the cider category,” Van Boxmeer added.
“Bringing back home our Strongbow brand, integrating that into our US portfolio, and trying to emulate what we did with the Mexican brands close to a decade ago,” he said.
Weak consumer sentiment
Heineken suffered a lacklustre H1 2013 performance in the six months ending June 30, with group sales down 1% on an organic basis to €10.375bn ($13.897bn) and volumes down 3%.
While the company’s revenue per hectolitre was up 2%, net profit fell 1% to €679m.
The brewer expects economic uncertainty and weak consumer sentiment to affect results across key markets for the rest of 2013, despite benefit from better Western European weather in July.
But Heineken performed strongly in the US in H1 – with revenue up 1.77% to €2.208bn in H1 and EBIT up 5.7% to €313m – and Van Boxmeer said the firm was pleased with high growth from its Mexican beer portfolio – brands licensed from FEMSA include Dos Equis, Tecate and Sol.
“What we have been doing is transforming our US business from a segment leadership business – so we only target the upper side of the market, because we don’t have the scale to compete in the mainstream – from a monobrand company (Heineken with a little bit of Amstel) into a portfolio company.”
‘Breathing again’ with brand Heineken
He added: “That transformation we began eight years ago and it is yielding fruits. Indeed, the Mexican brands have been growing double digit and represent an important part of our sales and profitability today in the US.
“Heineken as a brand has been under pressure for a couple of years – now for second year in a row we are breathing again with the brand."
In reply to Marco Gulpers, ING analyst, who asked about US pricing trends, Van Boxmeer said: “In the US prices increased in October – last year we followed [Grupo] Modelo in a few markets where they increased prices. We’ll see what happens in October of this year.
“We find it difficult to increase prices ourselves, so will see what the market development is and if there is an opportunity to raise prices we will certainly take it,” he added.