1
00:00:02,440 --> 00:00:06,760
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

2
00:00:06,960 --> 00:00:08,640
Speaker 2: Let's go to one of our top ones coming out

3
00:00:08,640 --> 00:00:12,080
Speaker 2: this morning. Heineken has taken a one time impairment of

4
00:00:12,119 --> 00:00:14,480
Speaker 2: more than eight hundred and seventy million euros for its

5
00:00:14,520 --> 00:00:18,920
Speaker 2: steak in China's biggest brewer, on concerns over consumer demand,

6
00:00:18,960 --> 00:00:21,720
Speaker 2: now the world's second large brewer, also narrowing its forecast

7
00:00:21,920 --> 00:00:24,200
Speaker 2: for its full year operating profit. Let's get a little

8
00:00:24,200 --> 00:00:26,599
Speaker 2: bit more insight on some of these numbers and bring

9
00:00:26,640 --> 00:00:29,480
Speaker 2: in the CEO of the company, Dolph Band and Brink

10
00:00:29,600 --> 00:00:31,600
Speaker 2: joins us around the tay Well, I was gonna say

11
00:00:31,640 --> 00:00:33,120
Speaker 2: around the table, but next time you'll have to join

12
00:00:33,200 --> 00:00:35,720
Speaker 2: us around the table. Dolph, this morning, you join us

13
00:00:36,360 --> 00:00:39,080
Speaker 2: down the line, walk us through some of these numbers,

14
00:00:39,400 --> 00:00:42,640
Speaker 2: especially when it comes to this empairment charge. What should

15
00:00:42,640 --> 00:00:44,000
Speaker 2: our audience know about this?

16
00:00:44,680 --> 00:00:48,400
Speaker 1: Good good morning, and thanks for having me from Amsterdam.

17
00:00:48,440 --> 00:00:52,879
Speaker 1: Indeed before talking to China, if you allow me very shortly,

18
00:00:53,000 --> 00:00:56,680
Speaker 1: we are very pleased with our first half performance. Beer

19
00:00:56,760 --> 00:01:01,120
Speaker 1: volumes of two percent, revenue up six percent, operating profit

20
00:01:01,200 --> 00:01:03,960
Speaker 1: of twelve and a half percent, so very good operating

21
00:01:04,319 --> 00:01:08,679
Speaker 1: leverage there, broad based growth across our four regions and

22
00:01:08,720 --> 00:01:12,720
Speaker 1: the quality of the volume growth was very good and important,

23
00:01:13,080 --> 00:01:17,200
Speaker 1: with beer volume up two, premium volumes of five and

24
00:01:17,240 --> 00:01:20,080
Speaker 1: the Heineker brand of nine, so we had a very

25
00:01:20,120 --> 00:01:24,120
Speaker 1: solid and positive first half of the year. Also, we

26
00:01:24,160 --> 00:01:30,800
Speaker 1: are quite pleased with our China partnership. The impairment that

27
00:01:30,840 --> 00:01:34,400
Speaker 1: we had to take a non cash impairment, is a

28
00:01:34,600 --> 00:01:38,160
Speaker 1: technical adjustment that we have to do because as a

29
00:01:38,200 --> 00:01:42,559
Speaker 1: minority participation, we need to value this on the share price,

30
00:01:42,680 --> 00:01:45,280
Speaker 1: and the share price of CRB listed in Hong Kong

31
00:01:45,640 --> 00:01:48,480
Speaker 1: dropped below the level that we acquired a company or

32
00:01:48,480 --> 00:01:52,240
Speaker 1: the stake in back in twenty nineteen. We don't believe

33
00:01:52,320 --> 00:01:56,640
Speaker 1: this is a fair reflection of the underlying operating performance.

34
00:01:57,040 --> 00:01:59,920
Speaker 1: Since we took the stake in twenty nineteen, the network

35
00:02:00,360 --> 00:02:04,120
Speaker 1: or CB has gone up by three hundred percent. Brand

36
00:02:04,160 --> 00:02:07,680
Speaker 1: Heineken volume have gone up by four hundred percent. Also

37
00:02:07,760 --> 00:02:11,400
Speaker 1: here today this year the heinekenvolume in China is twenty

38
00:02:11,440 --> 00:02:14,920
Speaker 1: five percent. So we're very pleased by the performance of

39
00:02:15,040 --> 00:02:19,480
Speaker 1: the unit, but we had to take this non cash

40
00:02:19,520 --> 00:02:21,840
Speaker 1: impairment as a technical adjustment.

41
00:02:22,080 --> 00:02:24,600
Speaker 2: So Doten walk us through that broader consumer story because

42
00:02:24,600 --> 00:02:26,120
Speaker 2: there's a lot of analysts. A lot of investors that

43
00:02:26,120 --> 00:02:28,000
Speaker 2: are waking up this morning were looking at these numbers

44
00:02:28,040 --> 00:02:30,280
Speaker 2: and saying, well, how much of this is a broader

45
00:02:30,360 --> 00:02:33,280
Speaker 2: China story, given that in other sectors across Europe and

46
00:02:33,320 --> 00:02:37,000
Speaker 2: across the world, Chinese weakness is a broader theme, how

47
00:02:37,080 --> 00:02:39,120
Speaker 2: much of that eats into your bottom line?

48
00:02:39,360 --> 00:02:42,360
Speaker 1: Yeah, we are actually very pleased to see that broad

49
00:02:42,360 --> 00:02:46,520
Speaker 1: based volume growth with modest pricing across the world. We

50
00:02:46,600 --> 00:02:50,000
Speaker 1: still have high pricing in Africa due to devaluations and

51
00:02:50,040 --> 00:02:53,960
Speaker 1: local inflation. If you take that out and look across APEX,

52
00:02:54,160 --> 00:02:57,600
Speaker 1: across Europe, across the Americans, we see much more modest

53
00:02:57,600 --> 00:03:00,520
Speaker 1: pricing than we have had in prior years. It really

54
00:03:00,560 --> 00:03:04,800
Speaker 1: allowed for volumes to bounce back. We are really looking

55
00:03:04,840 --> 00:03:08,520
Speaker 1: for that kind of balance growth of our revenue between

56
00:03:08,639 --> 00:03:14,880
Speaker 1: volume and revenue per hector lead key markets like Mexico,

57
00:03:15,000 --> 00:03:18,720
Speaker 1: Brazil very pleased with mid to high single digit revenue growth.

58
00:03:19,080 --> 00:03:22,600
Speaker 1: India very important, high single digit growth. Last year. We

59
00:03:22,720 --> 00:03:26,280
Speaker 1: really challenged in Nigeria, where I'm proud of our teams

60
00:03:26,320 --> 00:03:29,600
Speaker 1: are navigating some of the local volatility, but volumes of

61
00:03:29,800 --> 00:03:34,080
Speaker 1: high single digit So our key major markets outside of

62
00:03:34,120 --> 00:03:39,000
Speaker 1: Europe performing well in Europe. We saw volumes, beer volumes

63
00:03:39,040 --> 00:03:43,040
Speaker 1: slightly up, pricing slightly up year to date may look better,

64
00:03:43,200 --> 00:03:45,440
Speaker 1: but we took a bit of a step back in June.

65
00:03:45,760 --> 00:03:48,720
Speaker 1: We were expecting in June July upside from the sports

66
00:03:48,760 --> 00:03:53,480
Speaker 1: events from the cycle of last year. That unfortunately didn't materialize,

67
00:03:54,160 --> 00:03:58,360
Speaker 1: we believe mostly due to weather being much worse than

68
00:03:58,400 --> 00:04:04,080
Speaker 1: we were hoping. You saw that particularly impact north western Europe.

69
00:04:04,200 --> 00:04:07,960
Speaker 1: East central Europe doing doing better in that regard, but

70
00:04:08,160 --> 00:04:10,920
Speaker 1: in the aggregate at a half here mark, we're very

71
00:04:11,000 --> 00:04:15,000
Speaker 1: pleased by the two percent volume, six percent revenue across

72
00:04:15,120 --> 00:04:19,760
Speaker 1: our global global footprint. We remain cautious. Indeed, consumer sentiment,

73
00:04:19,839 --> 00:04:23,839
Speaker 1: particularly in developed markets like North America Europe are yeah,

74
00:04:24,040 --> 00:04:25,080
Speaker 1: still a bit subdued.

75
00:04:25,400 --> 00:04:28,240
Speaker 3: We would say, yeah, well, it's really fascinating. The sports

76
00:04:28,279 --> 00:04:30,720
Speaker 3: wasn't wasn't a catalyst for the business. But as you say,

77
00:04:30,760 --> 00:04:33,720
Speaker 3: you're you're blaming the weather on that front in northern Europe.

78
00:04:33,800 --> 00:04:36,800
Speaker 3: What are current volumes looking like right now, dool in

79
00:04:36,800 --> 00:04:37,880
Speaker 3: this the current quarter.

80
00:04:38,440 --> 00:04:41,760
Speaker 1: Yeah, we're always cautious to make those statements. Say we

81
00:04:41,800 --> 00:04:44,880
Speaker 1: will update the market at the first or at the

82
00:04:44,920 --> 00:04:48,279
Speaker 1: third quarter updates d of October. What We did say

83
00:04:48,279 --> 00:04:51,680
Speaker 1: in our release that some of that subdued volume in

84
00:04:51,760 --> 00:04:55,960
Speaker 1: June was flowing out, you know, over into July, and

85
00:04:56,279 --> 00:04:59,240
Speaker 1: we believe mostly rather related. As I said, year to

86
00:04:59,320 --> 00:05:02,440
Speaker 1: date May, our volume, a revenue growth in Europe looked

87
00:05:02,560 --> 00:05:05,640
Speaker 1: very promising. We're very happy to see that we took

88
00:05:05,880 --> 00:05:08,440
Speaker 1: a bit of a step back in June and now July.

89
00:05:08,880 --> 00:05:11,960
Speaker 1: We still have good you know, prospects for the for

90
00:05:12,040 --> 00:05:14,720
Speaker 1: the remainder of the year. We believe, indeed, it's quite

91
00:05:14,760 --> 00:05:19,160
Speaker 1: important that we keep the pricing models to allow the

92
00:05:19,560 --> 00:05:23,839
Speaker 1: category to regain its affordability. We're also making a major

93
00:05:23,920 --> 00:05:27,359
Speaker 1: step up in our marketing and selling investments in the

94
00:05:27,400 --> 00:05:30,000
Speaker 1: second half of the year as we really intend to

95
00:05:30,040 --> 00:05:33,160
Speaker 1: propel growth in the second half and the years to come.

96
00:05:33,520 --> 00:05:36,720
Speaker 3: That is that caution on pricing. Does that indicate you're

97
00:05:36,760 --> 00:05:39,000
Speaker 3: seeing a little bit of softness, You're saying a consumer

98
00:05:39,040 --> 00:05:41,080
Speaker 3: that it is a little bit more conservative right now?

99
00:05:41,440 --> 00:05:43,560
Speaker 1: Now. I think it has most to do with the

100
00:05:43,640 --> 00:05:47,120
Speaker 1: recent past. Over the last one two years, we and

101
00:05:47,279 --> 00:05:51,279
Speaker 1: orders the industry have to take disproportioned amount of pricing

102
00:05:51,400 --> 00:05:55,960
Speaker 1: due to incredible inputs cost inflation that impacted our volumes.

103
00:05:56,040 --> 00:06:00,719
Speaker 1: Last year. We had negative volume growth in our European

104
00:06:00,760 --> 00:06:03,680
Speaker 1: markets launch here, and that's why we're very happy to

105
00:06:03,720 --> 00:06:08,520
Speaker 1: see volumes bouncing back slightly up in the year to date,

106
00:06:08,760 --> 00:06:12,159
Speaker 1: with pricing revenue projectory leaders still slightly up. That's a

107
00:06:12,200 --> 00:06:15,919
Speaker 1: good place to be because it's really about stabilizing the

108
00:06:15,960 --> 00:06:18,440
Speaker 1: category in that kind of market. And then still a

109
00:06:18,480 --> 00:06:21,760
Speaker 1: lot of goals coming out of our global footprints.

110
00:06:22,000 --> 00:06:24,960
Speaker 2: So do what's zero in on that pricing conversation as well,

111
00:06:25,000 --> 00:06:27,040
Speaker 2: specifically in the States, because one of the conversations we're

112
00:06:27,080 --> 00:06:28,880
Speaker 2: hearing at least on the consumer front out of the

113
00:06:29,000 --> 00:06:31,440
Speaker 2: UK and likes of NeSSI, Unilever, etc. Is that as

114
00:06:31,480 --> 00:06:34,159
Speaker 2: the volumes drop, the pricing is what's making up the difference.

115
00:06:34,200 --> 00:06:36,640
Speaker 2: I'm curious how much headroom you have that should your

116
00:06:36,720 --> 00:06:39,800
Speaker 2: volumes drop, how much room can you actually raise prices.

117
00:06:39,800 --> 00:06:42,280
Speaker 2: Specifically when it comes to the American consumer.

118
00:06:42,880 --> 00:06:46,840
Speaker 1: Yeah, we are a relative smaller player in the US market.

119
00:06:47,800 --> 00:06:52,640
Speaker 1: Our depletions to retail, we're download single digits. We outperform

120
00:06:52,720 --> 00:06:55,159
Speaker 1: the market a little bit. So indeed, we still see

121
00:06:55,160 --> 00:06:58,640
Speaker 1: a little bit of a consumer in the America in

122
00:06:58,680 --> 00:07:02,560
Speaker 1: their market. I think for control the controllables, we're deliberately

123
00:07:02,680 --> 00:07:07,160
Speaker 1: keeping our pricing modest but still in positive territory. And

124
00:07:07,200 --> 00:07:10,240
Speaker 1: what's most important is invest in our brands. In our portfolio,

125
00:07:10,360 --> 00:07:14,080
Speaker 1: premium beer continues to do very well, up five percent

126
00:07:14,200 --> 00:07:16,560
Speaker 1: and a half year. Mark brand Heinek and up nine

127
00:07:16,640 --> 00:07:19,840
Speaker 1: point two very important and there's a lot of momentum there.

128
00:07:19,840 --> 00:07:22,760
Speaker 1: In zero zero beer, we are by far the global

129
00:07:23,080 --> 00:07:27,400
Speaker 1: market leader. We calculated that we captured around fifty percent

130
00:07:27,440 --> 00:07:30,000
Speaker 1: of the growth of the segment over the last five years.

131
00:07:30,320 --> 00:07:33,240
Speaker 1: With Heinek zero zero. We have the number one zero

132
00:07:33,400 --> 00:07:36,720
Speaker 1: zero beer brand on the planet up fourteen percent. So

133
00:07:36,760 --> 00:07:40,160
Speaker 1: it's control the controllables, invest in our brand portfolio, invest

134
00:07:40,200 --> 00:07:43,640
Speaker 1: in premium beers, invest in zero zero, and that's that

135
00:07:43,760 --> 00:07:45,600
Speaker 1: is what we will focus on going forward.

136
00:07:46,080 --> 00:07:48,520
Speaker 2: So Dolph, listen, talk about one of your competitors, if

137
00:07:48,560 --> 00:07:52,160
Speaker 2: we can, Carlsberg is venturing in to the soft daring space.

138
00:07:52,560 --> 00:07:55,560
Speaker 2: Is that something you would consider broadening out beyond beer.

139
00:07:56,640 --> 00:08:01,000
Speaker 1: I cannot make make statements, you know, on on future

140
00:08:01,280 --> 00:08:05,800
Speaker 1: M and A. We are selling softwrinks in different parts

141
00:08:06,160 --> 00:08:09,400
Speaker 1: of the world. We are proud to be softwrink bottlers

142
00:08:09,560 --> 00:08:12,600
Speaker 1: in part of our global footprint. When it makes sense

143
00:08:12,640 --> 00:08:16,400
Speaker 1: to local markets. We will, you know, proudly continue and

144
00:08:16,880 --> 00:08:21,360
Speaker 1: contemplate that kind of diversification. But we remain first and

145
00:08:21,480 --> 00:08:25,400
Speaker 1: foremost a beer company, a beer and cider company, and

146
00:08:25,520 --> 00:08:30,320
Speaker 1: we believe there's still a lot of embedded growth to unlock.

147
00:08:30,440 --> 00:08:33,360
Speaker 1: And again that's giving us the confidence to plan for

148
00:08:33,480 --> 00:08:37,280
Speaker 1: this material increase in our marketing and selling expenses in

149
00:08:37,360 --> 00:08:39,720
Speaker 1: the second half of the year and going forward.

150
00:08:39,800 --> 00:08:41,880
Speaker 2: Well, we look forward to seeing how that all play.

151
00:08:41,960 --> 00:08:44,160
Speaker 2: That Hanekase, Dolphin and Brink will have to leave the

152
00:08:44,200 --> 00:08:46,520
Speaker 2: conversation there. We thank you so much for joining us.