Operating conditions have remained challenging for brewers, particularly brewers like Heineken N.V. (OTCQX:HEINY) with above-average exposure to on-premises channels (basically, beer consumed outside the home), as pandemic lockdowns have seriously hurt business in Western Europe and some Latin American countries. The good news, such as it is, is that the first quarter will likely be the last really poor one ahead of recovery for the rest of 2021.
Navigating the pandemic isn’t Heineken’s only challenge. The company is really the last of the major brewers (depending upon your definition of “major”) to launch a large-scale restructuring program, and management is targeting significant expense reductions, but only expecting to get back to around pre-pandemic margins in 2023. While bulls see this as a conservative guide, that may not be the case given Heineken’s model.
These shares have done okay since my last write-up, mostly tracking with the S&P 500 and other brewers like Anheuser-Busch InBev (BUD), Carlsberg (OTCPK:CABGY), Diageo (DEO), while Constellation (STZ) has outperformed and Molson Coors (TAP) has significantly outperformed (much to my own surprise). At this point, I would say Heineken is an okay hold, with some positive leverage to premiumization, volume growth, and self-improvement, but with some fundamental challenges as well.
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