After beer sales fell short of projections amid escalating inflationary pressures, Heineken NV said it is noticing signs of deterioration in consumer demand. The second-largest brewer in the world reported that organic beer volume growth for the third quarter was 8.9%, less than the 11.8 percent average analyst projection. Higher prices discouraged some customers from purchasing more alcohol, which hurt profitability. In a statement released on Wednesday, Chief Executive Officer Dolf van den Brink said, ‘We increasingly perceive grounds to be cautious on the macroeconomic outlook, particularly some indicators of weakening in consumer demand’.
Heineken maintained its outlook for modest growth this year as a rebound in the beer business is clouded by Russia’s war in Ukraine and price pressures. Brewers have managed to largely protect margins this year by raising prices to cope with soaring costs. But there’s a limit to how much customers may be able to handle that as rampant inflation and higher food and energy costs destroy discretionary purchasing power.Earlier this year, Heineken itself warned it was facing the worst inflation in a decade and said consumers may cut back on beer, threatening the industry’s recovery from the pandemic.
Heineken had earlier in August reported better-than-anticipated first-half earnings due to consumers purchasing more beer amid inflationary pressures, despite the fact that it anticipated growing prices to reduce its profit margins in 2023. CEO Dolf van den Brink had told Reuters that the beer business appeared to be quite resilient and that there had been no indication that rising living expenses were causing people to drink less. While the estimate for this year is for stability or a slight increase, Heineken had noted that its target for 2023 was for an operating profit gain of a mid to high single-digit percentage. It had also raised doubts about achieving its earlier goal of increasing its operating margin to 17% in 2023 because of higher input prices.
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