Heineken hit by UK beer slump

19 February, 2009

Heineken has admitted that it does not expect the Scottish & Newcastle business to contribute to its profits for four years.

The Dutch brewing giant bought S&N in a joint £7.8 billion deal with Carlsberg last year, and took direct control of the UK operations. Although Heineken said the integration has progressed quickly, the deal coincided with a huge fall in UK beer sales which has forced it to lower its expectations.

Heineken now believes S&N was a significantly less profitable business in 2007 than it had previously calculated. Some analysts have criticised the company for paying too much for the business, the UK’s last domestically-owned major brewer.

For the year to Dec 31, Heineken’s reported net profit fell by 74% to €209m and the company has warned it must cut global capital expenditure and reduce employee numbers.

In a statement the company said Foster’s volumes in the UK had slumped by 10%. Most of the company’s problems derived from the struggling on-trade where its volumes were down 9.5%. In take-home, volumes were up 0.5%.

But Heineken was keen to stress some positives. “Since the acquisition of S&N, Heineken has strengthened the UK brand portfolio with the inclusion of Heineken and selected other brands from the Heineken Group. The business now has the strongest and most complete brand portfolio in the market and is the leader in cider,” it said.

“Increased marketing investments in the beer brands will further strengthen the brands’ equity and performance. The Heineken brand performed strongly, growing 24% to more than half a million hectolitres thanks to the success of the Extra Cold beer programme, the extension of the distribution network and new commercial activations.

“Cider volume grew 6.5% and market share in cider reached 48%, driven by the excellent performance of both the premium Bulmers brand and of the mainstream Strongbow brand.”

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