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Heineken raises beer prices to make up for falling demand

Heineken today said it was expecting beer consumption to fall in many parts of the world but will look to increase prices.

The company, owner of Scottish and Newcastle breweries, suffered last year as people cut down on beer drinking in the recession but pushed through price increases.

“The global economic environment will continue to lead to lower beer consumption and down-trading in a number of regions in 2010,” Heineken said.

The Dutch company, which also brews Amstel beer, said it was committed to maintaining or raising prices and would pass on excise duty rises — although increases this year will not be as steep as in 2009.
Breweries’ ingredients costs will fall because of a decline in the price of brewing barley, but Heineken said this would be offset by higher energy and marketing costs and rising advertising rates.

Heineken said underlying profit rose by 14 per cent on a like-for-like basis to €2.095 billion last year, broadly in line with forecasts, despite a 5.4 per cent fall in underlying consolidated beer volumes. A 4.5 per cent improvement in pricing and sales made for a 0.2 per cent drop in revenue.
The figures were helped by a €155 million saving from Heineken’s three-year cost-cutting programme.

Rival London-listed SabMiller said last month that its underlying beer volumes were flat in the last three months of 2009 as demand in emerging markets offset declines in Europe, North America and South Africa.
Heineken’s pain has been greater than its peers given that 70 per cent of its operating profit comes from Europe and North America. It has increased its emerging market presence to 40 per cent by buying the beer business of Mexico’s Femsa.

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