Heineken CFO: Deadly Ebola virus has only hit our Sierra Leone business


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Heineken CFO: Deadly Ebola virus has only hit Sierra Leone business

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Heineken CFO Rene Hooft Graafland says the deadly Ebola virus has only hit the brewer’s business in Sierra Leone thus far, as lower European beer sales hit its bottom line in Q3 2014.

Quarterly group revenue rose 0.7% to €5.577bn ($7.08) on an organic basis, while net profit fell 4.8% to €460m – with Heineken hit by Central and Eastern Europe and poor weather in Western Europe.

Despite fears regarding the effects of Ebola, Heineken performed strongly in Africa Middle East during Q3, with group beer volumes up 6.3% on an organic basis, with strong growth in Ethiopia, Burundi, Algeria, Cameroon and Tunisia, although Nigeria was hit by poor weather.

Discussing the impact of Ebola, Hooft Graafland said today: “Obviously, it affects our business in Sierra Leone, but the impact on the overall African figures is not very significant. It’s not something that’s really changing the growth figures in Africa and the Middle East.”

Nigeria declared Ebola free: ‘Let’s hope it stays like that’

“For the time being, Sierra Leone is our only market that’s been affected, which is very good news. There were a few cases in Nigeria, but the Nigerian authorities acted very adequately, and just recently in Nigeria has been declared again Ebola free. So let’s hope that it stays like that.”

Turning to Russia, within the context of a Central and Eastern European beer business where volumes fell 6.3% in organic terms in Q3 (due to challenging trading in Russia, Poland and Romania, and poor weather in Austria) while group revenue fell 7.8%.

Despite reporting a low single-digit volume decline in Russia, Heineken’s CFO said the brewer saw strong growth for its premium portfolio.

Russia, Christopher Schmidt,Flickr
Map of Russia: Christopher Schmidt/Flickr

“It’s much more important to see how our premium portfolio is going. We‘ve clearly chosen, given our relatively small position in Russia, to focus on the premium part of our portfolio – but in declining Russian beer mark this is growing well, which ultimately also results in positive profit development despite lower volumes,”​ Hooft Graafland said.

“The overall market sentiment and conditions in these markets not very positive and still a lot of uncertainty around regulation framework…but our strategy is working and we see our premium brands developing very healthily,”​ he added.

Central and Eastern Europe: ‘Our innovation champion’

Talking generally about Central and Eastern Europe, Hooft Graafland described it as the most competitive region in the world, since there are three to four major players in each market.

He said Heineken’s ‘value growth’ strategy (raising prices, in other words) remained vital in the region, but in a competitive environment the brewer sometimes had to react – presumably with lower pricing.

“Mix is becoming more important in that region than just pricing. Mix means much more focus on premium brands – in that respect [brand] Heineken grew 5% in Q3,”​ Hooft Graafland said.

Heineken is also building local premium brands with a more ‘affordable premium’ positioning in this region, he added, while innovation (in terms of products, packaging) is also crucial in a region Hooft Graafland said was “the champion of innovation in the company”​, exceeding the 7% group average

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