What's going on?
Heineken – the world’s second-largest beer brewer – reported better-than-expected annual results on Wednesday. But that wasn’t just thanks to it selling more alcohol…
What does this mean?
Back in July, Heineken (whose trademark yeast owes its existence to pioneering chemist Louis Pasteur) warned that the relative strength of the euro was making its global earnings worth less when brought home to the Netherlands, and that its profit for the year would therefore be lower than hoped.
On Wednesday, however, the company behind everything from Amstel to Żywiec breezed past those estimates, and raised a glass half full to the year ahead. Heineken enjoyed 6.4% profit growth last year – and it thinks it’ll have the same again in 2019, thanks to sales growth forecasts ahead of the beer industry’s 5.2% average and a weak European economy potentially reducing the value of the euro.
Why should I care?
For you personally: I don’t always drink beer…
Heineken’s flagship beer brand – Europe’s most popular brew – enjoyed its frothiest growth in over a decade last year, with sales up almost 8%. But that was helped by the launch of an alcohol-free version in 22 new markets last year (tweet this). Beer consumption continues to decline, both in the US (Heineken’s biggest market, accounting for 13% of sales, according to FactSet) and globally. Even teenagers are shunning the Duff as health and wellness become increasingly important to young and old alike. With less intoxicating brews, Heineken might be hoping to replicate the buzz light beers gave the industry in the 1970s.
For markets: Investors go bottoms up.
Investors took a good swig of Heineken’s stock on Wednesday, sending it up 6%. Analysts’ average 2019 profit forecast for the company had been steadily dropping, according to FactSet data, which may have encouraged investors to “short” the stock – betting it’d fall. The surprisingly positive earnings may have caused those investors to change their minds and buy Heineken’s shares instead.