Gloomy Heineken casts shadow on brewing

The news from the world No.3 brewer, the most exposed of the big players to western Europe’s struggling economies, drove its shares down as much as 16 percent to a 21-month low and hit others in the sector.

The Dutch group, which saw first half profits fall short of expectations, was the last of the world’s top four beer makers to report, but the picture it painted of economic uncertainty and unemployment driving Europeans and Americans away from bars and cafes was seen as a stark one for the food and drink sector.

“It’s an implicit profit warning of 13 per cent,” said Trevor Stirling, beverage analyst at Bernstein Research.

“If you were an optimist you could say that tourists will go back to Egypt and summer in Europe would not be as bad next year, but Greece is unlikely to be better, Russia maybe not and barley prices will be a lot higher.”

Heineken is Europe’s largest beer maker and the market leader in Greece and Italy.

It holds the number two spots in Ireland, Portugal and Spain, other countries either bailed out or seen by many in the financial markets as in line for rescue.

Analyst Philip Morrisey at Berenberg Bank said: “Heineken is the first beverage company, maybe the first consumer company, to warn of an impact on consumer demand from the current crisis.”

The company’s shares were the weakest in the FTSEurofirst 300 index of leading European stocks in initial trading, dropping by as much as 16 percent to 30.40 euros, their lowest level in 21 months.

Heineken trading conditions remained favourable in Latin America, sub-Saharan Africa and Asia-Pacific, but not in developed markets.

Chief executive Jean-Francois Boxmeer commented: “We have seen a very bad summer ... At the same time, we also see in a number of markets, more in Europe and the USA, weak consumer confidence. You see uncertainty reflected in lower on-premise sales.”

Heineken has pushed into Mexico with its purchase of FEMSA’s brewing activities and has been buying breweries in Africa.