Will
Heineken
(HEIA)
revive
growth?
That
is
the
main
question
investors
are
focused
on
ahead
of
the
beer
giant’s
earnings
this
week.
Several
quarters
of
declining
beer
volume
sales
have
been
offset
with
price
increases,
but
through
2023
consumers
began
to
complain
about
inflation.
The
good
news
is
that,
looking
back
into
2023,
volume
declines
lessened
somewhat
in
the
third
quarter
of
the
year
(4.5%
vs
6.6%
in
the
first
half
of
2023). Nevertheless,
overall
revenue
growth
slowed
because
Heineken
had
to
back
down
on
price
increases.
Will
Heineken
bottle
it?
In
Europe
beer
volumes
have
been
declining
for
a
long
time,
by
6.5%
in
the
third
quarter
of
2023,
despite
double-digit
price
increases.
Other
mature
markets
saw
declines
too,
such
as
the
Americas,
which
includes
the
US,
where
volumes
were
down
by
5.8%.
Heineken’s
net
profit
for
the
first
nine
months
of
2023
declined
by
12.5%
to €1.9
billion
(£1.6
billion),
affected
by
a
write-down
on
the
business
in
Russia
which
Heineken
has
exited.
Nevertheless,
Morningstar
analysts
say
the
company
is
undervalued.
What
is
Heineken’s
Business
Strategy?
Heineken’s
strategy
to
pursue
higher
pricing
and
rising
profit
margins
is
based
on
“premiumisation”.
That
means
drinks
with
a
more
sophisticated
brand
image
can
justify
higher
prices
and
therefore
bigger
margins.
In
growth
markets
like
Asia
and
South
America
there
is
still
plenty
of
room
for
premiumisation.
And
there
is
not
always
a
need
for
developing
new
products.
For
example,
the
namesake
Heineken
brand
is
considered
mainstream
in
its
Dutch
homemarket,
but
elsewhere,
such
as
the
United
States,
it
is
considered
a
premium
brand
with
a
premium
price
tag.
But
the
the
taste
is
no
different.
Morningstar-analyst
Philip
Gorham
expects
inflation-driven
price
increases
to
ease
in
the
fourth
quater
of
2023,
supporting
a
pick-up
in
volumes.
That
would
result
in
volume
stabilisation
in
2024
and
a
low
single-digit
growth
in
2025.
Key
Morningstar
Metrics
for
Heineken
Stock
•
Fair
Value
Estimate:
€96,00
•
Current
Share
Price:
€93,75
• Morningstar
Rating:
★★★
• Morningstar
Economic
Moat
Rating:
Narrow
• Morningstar
Uncertainty
Rating:
Medium
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