Heineken increased its marketing and sales spending fivefold last year to €2.7 billion as the world’s second-biggest brewer seeks to lure inflation-hit consumers to higher-end beers.
The Dutch group, which also makes Tiger, Amstel and Birra Moretti, increased marketing and sales expenses by 22.4 percent to pre-pandemic spending levels, boosted by advertising and promotion of its products.
That brought the figure to 9.5 percent of net profit, or about €2.7 billion, during the company’s first Super Bowl ad in decades and as it launched its lighter lager, Heineken Silver.
Dolf van den Brink, chief executive, said the group would spend more on marketing to capitalize on the trend of drinkers switching to higher-end products – a shift he said continued despite the pressures of life.
“Consistently, our premium brands are growing faster than our total portfolio,” he said. “There’s a lot of concern about . . . pricing and consumer durability, but we actually saw, through the fourth quarter, our premium portfolio outperformed our total portfolio,” he said.
Van den Brink added that Heineken is focusing on growth in existing brands as the industry moves on from a period of consolidation. “The relative importance of [mergers and acquisitions] it will not be like before,” he said. “Increasing our marketing spend is important.”
Marketing spending remains the same as a proportion of revenues from 2021, but it is in the context of a sharp increase in revenue – like-for-like revenue growth of 19.1 percent – as the group increases its large expenses for consumers.
James Edwardes Jones, an analyst at RBC Capital Markets, said the spending was “consistent with our view that brewers are collectively raising their competitive game”, partly in response to gains made in key markets by the spirits industry.
The group’s growth strategy also includes a push in non-alcoholic beer, which van den Brink said has the potential to make up 5 to 10 per cent of the global beer market and Heineken sales.
The Super Bowl ad featuring Paul Rudd as the Marvel character Ant-Man — returning to the sporting event after three decades in which the world’s largest brewer Anheuser-Busch InBev was the only alcohol advertiser — was the first to feature a non-alcoholic beer, Heineken 0.0.
Van den Brink added that Heineken aims to sell its Russian business in the first half of 2023 after promising to exit the market following Moscow’s invasion of Ukraine.
He said the beer was talking to potential buyers of the Russian arm, which employs 1,800 people, but hinted that the deal would take longer than previously indicated.
Heineken is withdrawing its flagship brand from Russia in the first half of 2022 but is still selling other brands in the country. “We are still operating [the business] so we can continue to pay our employees because otherwise there is no risk of nationalization,” said van den Brink.
The group reported that profit before exceptional items rose 19.1 percent to €34.6 billion, generating an operating profit of €4.5 billion – above analysts’ expectations – as the volume of beer sold by the group increased by 6.9 percent.
Heineken expects higher revenues and profits in 2023, but forecasts a decline in beer sales in Europe as inflation weighs on consumers. Shares in the group were up 1.9 percent at €92.98 by mid-morning.