City Snapshot: Heineken warns of price rises as it battles on several fronts

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Dutch brewing giant Heineken is the latest fmcg group to warn of higher prices in the face of rising costs and supply chain challenges as volumes slumped in its third quarter.

Beer volume declined 5.1% in the three months ended 30 September as the brewer was hit by strict lockdowns in the Asian market as the coronavirus pandemic continued to restrict trade around the world.

Lockdowns in Vietnam, Malaysia and Cambodia led to a 37.4% slump in volumes in the Asia Pacific region.

Volumes were also down in the Americas and Europe, with Africa, the Middle East and Eastern Europe the only region in growth (up 5.5%).

Heineken blamed poor weather for a 2.3% decline across Europe, but highlighted the logistic disruptions and HGV driver shortage as the cause of a low single-digit fall in the UK.

The Heineken brand continued its strong momentum, with volume growth of 8% in the quarter. The brand - and the popular no-alcohol variant - registered double-digit growth in more than 50 countries, with growth strongest in the Africa, the Middle East and Eastern Europe region.

Despite the challenges in the quarter, Heineken stuck to its full-year guidance, with CEO Dolf van den Brink warning the macro environment remained “volatile”.

“We are taking an assertive approach to pricing and cost across all of our markets to meet this challenge,” he said. “Therefore, our expectations stay unchanged, with full year results remaining below 2019.”

Shares in the group fell 2.9% to €91.30 this morning as markets opened.

Morning update

Morrisons shares have been delisted from the London Stock Exchange this morning as the takeover by Clayton, Dubilier & Rice takes effect, ending the Yorkshire supermarket chain’s more than 50 years as a publicly listed company.

It follows the £7.1bn offer from CD&R receiving overwhelming support from Morrisons shareholders earlier this month.

As a result, chairman Andy Higginson and directors Rooney Anand, Susanne Given, Kevin Havelock, Lyssa McGowan and Jeremy Townsend have all tendered their resignations and stepped down from the board with immediate effect.

David Potts, Trevor Strain and Michael Gleeson will remain on the board, with CD&R yet to announce its own appointments. Senior advisor Terry Leahy is expected to be named chairman of the newly private group.

Food inflation has ramped up to its highest level since November 2020 as spiralling costs led to higher prices on supermarket shelves, with fresh food becoming more expensive for the first time in ten months.

The British Retail Consortium warned this morning of likely further hikes in the run up to Christmas as the labour shortage continues to affect retailers.

Food prices accelerated to 0.5% in October, up from 0.1% in the previous month, according to the latest BRC-NielsenIQ shop price index.

It’s above the 12- and six-month average price growth rates of 0.1% and -0.1%, respectively, and is the highest inflation rate since November 2020.

Following ten months of deflation, fresh food prices rose by 0.3% this month, compared with a fall of 0.4% in September, while ambient food inflation held steady at 0.8%.

Non-food deflation was also steady at 1% in October as ongoing global shortages of materials and supply issues with logistics and shipping continued to put upward cost pressures on products such as furniture.

Overall shop price deflation eased to 0.4% last month, down from a fall of 0.5% in September.

The full story can be read on thegrocer.co.uk.

Kerry Group has benefitted from continued strong consumer demand in supermarkets and the return of the foodservice channel in the third quarter.

Volumes at the Irish group increased 6.6% in the period and 8.2% for the first nine months of the year.

The taste and nutrition division logged a 6.3% rise in the quarter and 8.7% for the year so far, while consumer foods increased 5.6% in the past three months and 7.5% over nine months.

Group trading margins expanded by 60 basis points in the nine months, with pricing rising 0.7%.

CEO Edmond Scanlon said: “We are pleased with overall performance through the period, reflecting continued good growth in our retail channel and strong performance in foodservice.”

He added that Europe delivered an “excellent” performance, while the Americas saw “good” overall volume growth and growth in Asia-Pacific, the Middle East and Africa remained strong with varying conditions across the region.

“We have made some significant strategic developments through the year. We further enhanced our position as a market-leading taste & nutrition company, completing the acquisition of Niacet and the sale of our consumer foods’ meats and meals business. At our recent capital markets day, we shared our refreshed strategic priorities, key growth platforms and mid-term targets, all key enablers of achieving our vision - to be our customers’ most valued partner, creating a world of sustainable nutrition.

“Our outlook for the full year is unchanged and we expect to deliver strong volume and earnings growth.”

Shares in Kerry nudged 0.3% higher to €117.25 this morning.

The FTSE 100 fell back slightly this morning ahead of the Autumn Budget statement, with the index down 0.1% to 7,269.53pts.

Early risers include McBride, up 4.9% to 68.6p, Hilton Food Group, up 1.9% to 1,192p, and Compass Group, up 1.7% to 1,520.5p.

THG also bounced back slightly from yesterday’s mass sell-off (see below), with the stock up 2.9% to 249p.

Glanbia, Science in Sport, Bakkavor and AG Barr were all among this morning’s losers, falling 1.9% to €13.94, 2% to 71p, 1.4% to 124.6p and 0.3% to 508.6p respectively.

Yesterday in the City

The FTSE 100 hit heights not seen for almost two years despite the ongoing challenges of soaring costs, labour shortages and rising Covid numbers. London’s leading index of shares rose 0.8% to 7,277.62pts - a 20-month high.

Shares in Reckitt Benckiser surged 5.8% higher to 5,789p as the return of colds and flu helped contribute to a stronger-than-expected third quarter. The Nurofen and Dettol owner has suffered this year from shrinking margins as costs rose sharply, leading to a slump in its share price.

THG has collapsed to new lows despite a bullish third-quarter trading update as it tries to rebuild confidence in the City. Shares in the group plunged 21.1% to 242p, leaving it way off its 500p float price and previous highs of almost 800p.

Risers yesterday included Naked Wines, up 4.1% to 680p, Compass Group, up 3.8% to 1,494.5p, and Marston’s, up 3.5% to 76.7p.

Parsley Box Group, Science in Sport and Bakkavor were among the fallers, down 3.5% to 55p, 3.3% to 72.5p and 0.5% to 126.4p respectively.