Heineken expresses caution
Heineken’s new CEO Dolf van den Brink was more cautious about the sales and profit recovery in global beer than Anheuser-Busch InBev, and Molson Coors were last week. This is mostly due to the world’s second-largest brewer’s exposure to the European on-premise channel, which was down by half. “Going forward, we do expect a gradual recovery, but it will be very much two steps forward, one step backward as we’re seeing renewed flares of the crisis, renewed constraints in the on-trade across a couple of the markets.” As the on-premise channel began to reopen in June, the company benefited from refilling the supply chain with inventory. The CEO said, “We are a bit concerned that people would see the ... rate of June and extrapolate that going forward.”
The first half revenue declined 16.4% with volume down 13.4% and price/mix down 1.3% in constant currencies. The lower price/mix was entirely due to the decline in European on-premise sales (it was up in the US). The cost per hectoliter (volume) increased by 10% due to operating profit fell 52.5%. Diluted EPS of €0.39 declined from €1.84 last year. Beer volume declined 11.5% organically in the first half of the year. The Heineken brand fell 2.5%, and excluding South Africa would have been up. In Africa, the Middle East, and Eastern Europe region, beer volumes declined by 15.9% with the largest impact in South Africa due to the suspension of operations in April and May. In the Americas, beer volume declined 15% negatively impacted by the shutdown in Mexico. June benefited from restocking in Mexico. In the US, non-alcoholic beer drove Heineken sales (60% of the brand’s marketing budget) while the lack of Mexican imports caused a 12.2% decline. Operating profit in the Americas declined 31%. Asia Pacific volumes declined 4.7% and revenue declined 10.4%. In Europe, volumes declined 8.1%, and revenue declined by 20.8%. On-premise was down 50%, and off-premise grew mid-teens. On-premise represents 35-40% of the region’s volumes. 90% of the company’s on-premise customers have reopened, but social distancing has limited demand. Operating profit for the region fell 87% due to significant deleverage. Investors should probably heed management’s warning when it comes to the challenges in European on-premise and the benefit from inventory restocking in Q2.
Beer category sales stable for the past four weeks (BUD)
Total alcohol sales in off-premise channels grew 18.6% for the week ended July 25, decelerating slightly from 19% the previous week. Off-premise beer category sales increased by 14.7%, according to Nielsen, as seen in the following chart. Spirits grew 31% while wine grew 18.2%. Core beer sales (ex. FMBs and hard seltzer) increased 8.1%, down slightly from 8.6% in the prior week. Hard seltzer sales grew 132%, decelerating from 142% in the prior week. Hard seltzer’s market share for the week was 10.5%, just below craft beer’s 11.7% share. Super premiums increased 19.7%, driven by Michelob Ultra, craft beer increased 12.8%, FMBs increased 4%, premium light beer increased 6.2%, and below premium was flat. Non-alcoholic beer increased 40%.
Publix reports similar SSS trend to ACI and KR
Publix Super Markets reported a 19.9% increase in comparable sales in Q2. Management attributed ~70% of the sales increase to the pandemic. In comparison, Albertson’s ID sales grew 26.5% in the quarter ended in May, while Kroger reported ID sales growth of 19% in the quarter ended in May. The period is not the same, but similar. Adjusted net income grew 56% to $.89 per share. Publix is employee-owned, but its shares are available for sale to current Publix associates and board members. The shares were priced at $54.35 on Aug. 1, up 8% from when the company reported the first quarter. Publix operates 1,252 stores in the Southeast, up 2.5% from the prior year.