Below is a brief excerpt from a complementary research note written by our Consumer Staples analysts Howard Penney and Daniel BiolsiWe are pleased to announce our new Sector Pro Product Consumables Pro. Click HERE to learn more.

Beer Sales Prepare For Further Lockdowns In Europe - 10 30 2020 10 37 31 AM

Heineken reported a sales update for Q3 on Wednesday. Heineken volumes increased 7.1% in the quarter, while overall beer volumes declined 1.9%.

Beer volume decreased 2.5% in AMEEE (vs. -15.9% in 1H), increased 2.5% in the Americas (vs. -15% in 1H), decreased 12.3% in APAC (vs. -4.7% in 1H), and decreased 2.4% in Europe (vs. -8.1% in 1H).

On-premise declined by 20% in Europe while off-premise increased HSD%, faster than the overall market in most countries. In Mexico, beer volume declined MSD% due to the shutdown and inventory shortages earlier in the quarter. In contrast, in the U.S., beer volume increased in the low-teens as distributors replenished inventories and on-premise improved.

Heineken brand volumes increased 28.8% in the Americas and DD% in the U.S. as Mexico resumed beer production. France and Germany are both planning on month-long shutdowns to turn the tide of COVID-19 cases.

Europe has a higher mix of on-premise at 35% than in the Americas. Heineken announced that it would look to reduce headcount in its headquarters and regional offices by 20% starting in Q1 to prepare for an extended period of volatility from the pandemic.

In contrast, Carlsberg raised its full-year earnings growth guidance yesterday from -HSD% to -MSD% after reporting Q3 results. Carlsberg sales declined 6.8% in Q3, improving from 16.9% in Q2.

Organic beer volumes increased 2.4% in Q3, with momentum continuing into Q4. Management cited improvements in Russia and China and cost-cutting providing enough visibility to raise expectations despite looming lockdowns.

We recently lowered BUD on our long bias list due to an outlook for further on-premise restrictions delaying the recovery that has been underway.