Heineken Profits As Europe Toasts Low-Alcohol Beer -- WSJ

By Nick Kostov Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 1, 2017).

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Heineken NV has lifted sales in Europe -- but the extra beer isn't all going to drinkers' heads.

The Dutch brewer posted higher profit for the first half of 2017, fueled by strong sales in Europe -- including double-digit revenue growth for no- and low-alcohol drinks there. The lift represents an early vote of confidence after an investment push into the sector by Heineken and its competitors.

Heineken joins the world's largest brewer, Anheuser-Busch InBev NV, in reporting better-than-expected results, thanks in part to a rebounding European beer market. Last week, AB InBev said sales grew by double digits across Western Europe -- a market that has lagged in recent years amid a stop-and-start recovery after the global financial crisis.

"It was a really good performance of Europe, with the growth coming from a number of countries," Chief Financial Officer Laurence Debroux said. "It was pretty balanced."

The world's second-largest brewer by sales said profit growth was strongest in Europe, as beer volumes rose in France, Italy, Spain and Portugal, helped by warmer weather.

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Global beer sales have been hit in recent years by a shift among drinkers toward wine and spirits. Consumers in the developed world have also pivoted to healthier drinking options, putting added strain on the market. That has led the world's biggest brewers to invest heavily in a product that has been hit-or-miss for decades: non-alcoholic or lower-alcohol beer.

In May, Heineken launched an alcohol-free version of its flagship lager and results "already look promising", including in the U.K. and France, the company said. Brewers earn fatter profit margins from nonalcoholic beer because of the absence of excise tax and the fact that these beers often sell at a premium. But various products have proved tough sells, in large part due to consumer complaints about taste.

Despite the upturn in Europe, Heineken said low- and no-alcohol sales around the world fell slightly, to 6.1 million hectoliters from 6.2 million last year. It blamed weakness in malt products in Nigeria and Egypt.

However, overall beer volumes, revenue and profits grew on a like-for-like basis in all four of its regions, with turnarounds in Africa and the Americas after a slow start to the year.

Net profit rose 49% to EUR871 million ($1.02 billion) on the comparable period in 2016 when the company booked an impairment charge on its business in the Democratic Republic of Congo. Revenue rose 5.7 % on an organic basis to EUR10.48 billion.

Consolidated beer volumes rose 2.6% organically in the period, beating analyst expectations of a 1.7% rise.

Write to Nick Kostov at Nick.Kostov@wsj.com

(END) Dow Jones Newswires

August 01, 2017 02:47 ET (06:47 GMT)