Dutch brewer Heineken reported net profits down 32.7 per cent at €537 million for 2004, partially as a result of the €190 million charge relating to the write down of its investment in Brazilian brewer Kaiser. But the company - which describes itself as the world's most international brewer - also struggled to cope with currency fluctuations during the year, with the US dollar contributing in particular to a €99 million negative impact.
Turnover was up by 8.1 per cent to €10 billion, however, with a strong performance from Heineken's premium beer brands, which reported a 4.1 per cent increase in volumes to 19.2 million hectolitres.
This premium segment, in particular in the US, will continue to play an important role in Heineken's development in 2005, with the company pledging an additional €100 million in marketing expenditure to "reinforce the Heineken brand equity in the US, to further improve volumes and to address the changing consumer dynamics in western Europe".Sales in most of western Europe were well down on 2003's heatwave-boosted performance - in contrast to central and eastern Europe where sales continued to rise steadily. Focusing on those western European countries where Heineken is sold as a premium brand - such as France, for example - should allow it to take advantage of one of the few areas of growth in the mature beer markets.
Thony Ruys, the company's chairman, said that Heineken would continue to look for selective investment opportunities (China in particular has been highlighted as a market of interest) but acknowledged that the benefits of additional volumes from acquisitions were likely to be more than offset by the impact of currency exchanges and additional marketing expenditure.
Net profits at Carlsberg were also lower than in 2003, dropping over 50 per cent to DKK477 million as a result of increased amortisation and exceptional charges, relating primarily to the acquisition of Norwegian group Orkla's minority stake in the company. Excluding these additional charges, profit was up 21 per cent to DKK1.4 billion.
Western Europe also proved tough for Carlsberg, with volumes rising 19 per cent only as a result of its acquisition of the Holsten brewery in Germany. Unlike Heineken, however, the majority of Carlsberg's sales come from western Europe, and the failure of its Swedish unit to recover after extensive restructuring in 2004 is a particular cause for concern.
Like Heineken, Carlsberg will step up its promotional activities in 2005, not least because of the boost to revenues from its 2004 sponsorship of the European Football Championship in Portugal.
But also like Heineken, Carlsberg's best opportunities for growth lie in Asia and eastern Europe. The company put its ill-fated Carlsberg Asia joint venture behind in 2004 to post increases in both sales and operating profits in Asia, boosted by a solid performance in China, where the company is one of the few western players in the under-exploited western regions.
In eastern Europe, Carlsberg's Baltic Beverages Holding joint venture with S&N continued to grow, helped by increased marketing and promotional expenditure in the increasingly competitive Russian market.
BBH contributed to the good performance at S&N as well, but Britain's biggest brewer contributed its 37 per cent gain in net profits (to £59 million) to more than just its eastern European investment.
While Heineken's international growth has exposed it even more to the vagaries of currency exchange rates, S&N said that its international growth (until very recently it was all but unheard of outside the UK) had allowed it to offset problems in some markets with excellent performances elsewhere.
One such performance was in the UK, where the group's core brands recovered strongly after a poor 2003 (a particularly disappointing year for S&N given the hot summer weather) thanks both to increased marketing expenditure (up 20 per cent year-on-year) and operating efficiencies gained from its acquisition of cider maker Bulmer.
A 10 per cent hike in advertising support for Brasseries Kronenbourg in France was not enough to bolster its performance there, however, with the weak French economy, poor comparisons with the hot summer of 2003 and a 1 per cent cut in off-trade prices (enforced by the government to stimulate consumption) all taking their toll.
Already well-established in eastern Europe through BBH, S&N will focus on Asia in particular for future growth generation, and took its first real steps into this region in 2004 with acquisitions in China (19 per cent of Chongqing brewery) and India (a joint venture with local player United Breweries).
However, with (good) takeover opportunities in China becoming increasingly limited, S&N (and Heineken and Carlsberg, for that matter) may find it hard to catch up with the more established players such as InBev, Anheuser-Busch and SABMiller, at least through acquisition. Market growth in China is now reaching sufficiently high levels to support investment in new brewery development, but Heineken for one will be wary of committing to the Chinese market in such a way after struggling to turn a profit from its earlier investments there.
For all three companies, reducing costs and increasing brand investments in western Europe will be key in 2005, as will focusing on those brands with the best growth prospects - a factor which is likely to lead to major reductions in the size of all three companies' product portfolios. But all three also need to ensure that they do not focus too closely on cost saving that it obscures the need for genuine revenue growth - and that opportunities for real growth, be they in premium beers or emerging markets, are truly exploited.