Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Let's go to one of our top ones coming out
Speaker 2: this morning. Heineken has taken a one time impairment of
Speaker 2: more than eight hundred and seventy million euros for its
Speaker 2: steak in China's biggest brewer, on concerns over consumer demand,
Speaker 2: now the world's second large brewer, also narrowing its forecast
Speaker 2: for its full year operating profit. Let's get a little
Speaker 2: bit more insight on some of these numbers and bring
Speaker 2: in the CEO of the company, Dolph Band and Brink
Speaker 2: joins us around the tay Well, I was gonna say
Speaker 2: around the table, but next time you'll have to join
Speaker 2: us around the table. Dolph, this morning, you join us
Speaker 2: down the line, walk us through some of these numbers,
Speaker 2: especially when it comes to this empairment charge. What should
Speaker 2: our audience know about this?
Speaker 1: Good good morning, and thanks for having me from Amsterdam.
Speaker 1: Indeed before talking to China, if you allow me very shortly,
Speaker 1: we are very pleased with our first half performance. Beer
Speaker 1: volumes of two percent, revenue up six percent, operating profit
Speaker 1: of twelve and a half percent, so very good operating
Speaker 1: leverage there, broad based growth across our four regions and
Speaker 1: the quality of the volume growth was very good and important,
Speaker 1: with beer volume up two, premium volumes of five and
Speaker 1: the Heineker brand of nine, so we had a very
Speaker 1: solid and positive first half of the year. Also, we
Speaker 1: are quite pleased with our China partnership. The impairment that
Speaker 1: we had to take a non cash impairment, is a
Speaker 1: technical adjustment that we have to do because as a
Speaker 1: minority participation, we need to value this on the share price,
Speaker 1: and the share price of CRB listed in Hong Kong
Speaker 1: dropped below the level that we acquired a company or
Speaker 1: the stake in back in twenty nineteen. We don't believe
Speaker 1: this is a fair reflection of the underlying operating performance.
Speaker 1: Since we took the stake in twenty nineteen, the network
Speaker 1: or CB has gone up by three hundred percent. Brand
Speaker 1: Heineken volume have gone up by four hundred percent. Also
Speaker 1: here today this year the heinekenvolume in China is twenty
Speaker 1: five percent. So we're very pleased by the performance of
Speaker 1: the unit, but we had to take this non cash
Speaker 1: impairment as a technical adjustment.
Speaker 2: So Doten walk us through that broader consumer story because
Speaker 2: there's a lot of analysts. A lot of investors that
Speaker 2: are waking up this morning were looking at these numbers
Speaker 2: and saying, well, how much of this is a broader
Speaker 2: China story, given that in other sectors across Europe and
Speaker 2: across the world, Chinese weakness is a broader theme, how
Speaker 2: much of that eats into your bottom line?
Speaker 1: Yeah, we are actually very pleased to see that broad
Speaker 1: based volume growth with modest pricing across the world. We
Speaker 1: still have high pricing in Africa due to devaluations and
Speaker 1: local inflation. If you take that out and look across APEX,
Speaker 1: across Europe, across the Americans, we see much more modest
Speaker 1: pricing than we have had in prior years. It really
Speaker 1: allowed for volumes to bounce back. We are really looking
Speaker 1: for that kind of balance growth of our revenue between
Speaker 1: volume and revenue per hector lead key markets like Mexico,
Speaker 1: Brazil very pleased with mid to high single digit revenue growth.
Speaker 1: India very important, high single digit growth. Last year. We
Speaker 1: really challenged in Nigeria, where I'm proud of our teams
Speaker 1: are navigating some of the local volatility, but volumes of
Speaker 1: high single digit So our key major markets outside of
Speaker 1: Europe performing well in Europe. We saw volumes, beer volumes
Speaker 1: slightly up, pricing slightly up year to date may look better,
Speaker 1: but we took a bit of a step back in June.
Speaker 1: We were expecting in June July upside from the sports
Speaker 1: events from the cycle of last year. That unfortunately didn't materialize,
Speaker 1: we believe mostly due to weather being much worse than
Speaker 1: we were hoping. You saw that particularly impact north western Europe.
Speaker 1: East central Europe doing doing better in that regard, but
Speaker 1: in the aggregate at a half here mark, we're very
Speaker 1: pleased by the two percent volume, six percent revenue across
Speaker 1: our global global footprint. We remain cautious. Indeed, consumer sentiment,
Speaker 1: particularly in developed markets like North America Europe are yeah,
Speaker 1: still a bit subdued.
Speaker 3: We would say, yeah, well, it's really fascinating. The sports
Speaker 3: wasn't wasn't a catalyst for the business. But as you say,
Speaker 3: you're you're blaming the weather on that front in northern Europe.
Speaker 3: What are current volumes looking like right now, dool in
Speaker 3: this the current quarter.
Speaker 1: Yeah, we're always cautious to make those statements. Say we
Speaker 1: will update the market at the first or at the
Speaker 1: third quarter updates d of October. What We did say
Speaker 1: in our release that some of that subdued volume in
Speaker 1: June was flowing out, you know, over into July, and
Speaker 1: we believe mostly rather related. As I said, year to
Speaker 1: date May, our volume, a revenue growth in Europe looked
Speaker 1: very promising. We're very happy to see that we took
Speaker 1: a bit of a step back in June and now July.
Speaker 1: We still have good you know, prospects for the for
Speaker 1: the remainder of the year. We believe, indeed, it's quite
Speaker 1: important that we keep the pricing models to allow the
Speaker 1: category to regain its affordability. We're also making a major
Speaker 1: step up in our marketing and selling investments in the
Speaker 1: second half of the year as we really intend to
Speaker 1: propel growth in the second half and the years to come.
Speaker 3: That is that caution on pricing. Does that indicate you're
Speaker 3: seeing a little bit of softness, You're saying a consumer
Speaker 3: that it is a little bit more conservative right now?
Speaker 1: Now. I think it has most to do with the
Speaker 1: recent past. Over the last one two years, we and
Speaker 1: orders the industry have to take disproportioned amount of pricing
Speaker 1: due to incredible inputs cost inflation that impacted our volumes.
Speaker 1: Last year. We had negative volume growth in our European
Speaker 1: markets launch here, and that's why we're very happy to
Speaker 1: see volumes bouncing back slightly up in the year to date,
Speaker 1: with pricing revenue projectory leaders still slightly up. That's a
Speaker 1: good place to be because it's really about stabilizing the
Speaker 1: category in that kind of market. And then still a
Speaker 1: lot of goals coming out of our global footprints.
Speaker 2: So do what's zero in on that pricing conversation as well,
Speaker 2: specifically in the States, because one of the conversations we're
Speaker 2: hearing at least on the consumer front out of the
Speaker 2: UK and likes of NeSSI, Unilever, etc. Is that as
Speaker 2: the volumes drop, the pricing is what's making up the difference.
Speaker 2: I'm curious how much headroom you have that should your
Speaker 2: volumes drop, how much room can you actually raise prices.
Speaker 2: Specifically when it comes to the American consumer.
Speaker 1: Yeah, we are a relative smaller player in the US market.
Speaker 1: Our depletions to retail, we're download single digits. We outperform
Speaker 1: the market a little bit. So indeed, we still see
Speaker 1: a little bit of a consumer in the America in
Speaker 1: their market. I think for control the controllables, we're deliberately
Speaker 1: keeping our pricing modest but still in positive territory. And
Speaker 1: what's most important is invest in our brands. In our portfolio,
Speaker 1: premium beer continues to do very well, up five percent
Speaker 1: and a half year. Mark brand Heinek and up nine
Speaker 1: point two very important and there's a lot of momentum there.
Speaker 1: In zero zero beer, we are by far the global
Speaker 1: market leader. We calculated that we captured around fifty percent
Speaker 1: of the growth of the segment over the last five years.
Speaker 1: With Heinek zero zero. We have the number one zero
Speaker 1: zero beer brand on the planet up fourteen percent. So
Speaker 1: it's control the controllables, invest in our brand portfolio, invest
Speaker 1: in premium beers, invest in zero zero, and that's that
Speaker 1: is what we will focus on going forward.
Speaker 2: So Dolph, listen, talk about one of your competitors, if
Speaker 2: we can, Carlsberg is venturing in to the soft daring space.
Speaker 2: Is that something you would consider broadening out beyond beer.
Speaker 1: I cannot make make statements, you know, on on future
Speaker 1: M and A. We are selling softwrinks in different parts
Speaker 1: of the world. We are proud to be softwrink bottlers
Speaker 1: in part of our global footprint. When it makes sense
Speaker 1: to local markets. We will, you know, proudly continue and
Speaker 1: contemplate that kind of diversification. But we remain first and
Speaker 1: foremost a beer company, a beer and cider company, and
Speaker 1: we believe there's still a lot of embedded growth to unlock.
Speaker 1: And again that's giving us the confidence to plan for
Speaker 1: this material increase in our marketing and selling expenses in
Speaker 1: the second half of the year and going forward.
Speaker 2: Well, we look forward to seeing how that all play.
Speaker 2: That Hanekase, Dolphin and Brink will have to leave the
Speaker 2: conversation there. We thank you so much for joining us.