Heineken’s margins to contract in 2018 because of Brazil

Heineken’s effort to expand in Brazil, where AB-InBev is the market leader, has put pressure on its margins during the first half of 2018, it was reported on 30 July 2018. Heineken said its beer volumes increased 4.5 percent from January to June, with Europe the only region to see a decline, though the amount it was earning per hl fell 8.2 percent.

The company said it hiked net profit 9.1 percent to EUR 950 million (USD 1.1 billion) on turnover of EUR 10.8 billion, a 4.2 percent increase over the first six months of 2017. But, the company added, it was updating its operating profit margin guidance for the full year to a decrease, due in part to its activities in Brazil.

Heineken became Brazil’s number two brewer in 2017 when it bought Japanese brewer Kirin’s operations there for just under USD 600 million. The deal doubled Heineken’s market share in Brazil to over 20 percent (or around 28 million hl beer according to data by Barth), but it still trails AB-InBev with an estimated market share of 66 percent.

Heineken decided to increase marketing expenditures, which caused a decline in overall profitability despite selling more beer. Its beer brands in Brazil now include Schincariol in the mass-market segment as well as more expensive Devassa and Eisenbahn lagers.

Big Brewers’ margins first half of 2018