Heineken’s 2H takes a step back (HEIA-AMS)
Consolidated volume on an organic basis grew 19.3% in Q2 compared to 8.2% in the first half of the year. Three-quarters of the volume growth in the 1H came from Mexico, South Africa, and Nigeria. The first two countries were comparing against industry lockdowns. Spain, Italy, and the U.S. also saw significant volume increases. Africa, Middle East, & Eastern Europe organic beer volume growth was 24.4% in Q2 while the Americas was 36.6%, the Asia Pacific was -8.2%, and Europe was 13.0%. Asia Pacific was the only region to decelerate sequentially, which was attributed to an increase in COVID-19. The Heineken brand volumes accelerated to 26.8% growth in Q2, representing 16.7% growth to 2019.
In the U.S., management is seeing on-premise bouncing back to or above 2019 levels in big parts of the country. In the 1H, on-premise was still down by half compared to 2019, and in Q2, it was down by 30%. In Europe, the exit rate of Q2 in June was down HSD% compared to 2019. Input costs grew MSD% per hectoliter in Q2 due to Fx, despite little commodity pressure from hedging. Management noted that “input commodity costs have really risen very, very materially in the last couple of months to the tune of 20%, 30%, even sometimes 50% on commodities like barley, like plastics, like aluminum.” Operating profit more than doubled in the 1H driven sales growth and region in Mexico, South Africa, Brazil, Spain, and France.
Management expects Vietnam to be a headwind with the surge in COVID-19 cases, and it is one of Heineken’s largest and most profitable businesses. Management intends to raise prices in the 2H to offset higher commodity and input costs, but margins are expected to be impacted. Due to the higher input costs operating profit is expected to be lower in the 2H than the 2H of 2020.
On-premise recovery (BUD)
According to market research firm CGA, on-premise sales velocity increased 72% YOY and 26% over 2019 for the week ended July 24. Over the latest 12 weeks, sales velocity was up 91% YOY and 30% over 2019. The states that had the most restrictions last summer are currently experiencing the strongest growth. Bars and restaurants in California were up 108% YOY, while New York was up 104% for the week. Illinois was up 74%, while Florida was up 82%. Texas, which opened earlier than other states, was only up 6% YOY. Compared to 2019, Texas was up the most. On-premise businesses were up 37% compared to the same week in 2019. Florida was up 34%, California was up 30%, Illinois was up 10%, and New York was up 7%.
New product categories for plant-based sugar-free (ZVIA)
In an interview, CEO Paddy Spence said that Zevia could enter a “tremendous amount” of beverage categories it could enter except alcohol, protein, and nondairy. Zevia has launched brand extensions in sparkling, energy, kids, mixers, and organic tea, all since 2016. Coffee and sports drinks were highlighted as potential categories it could enter next. Food is another possibility.
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