The Dutch brewer’s Q3 2013 results saw 2% organic volume growth in its Asia Pacific Breweries business with Heineken citing strong growth in Vietnam, Indonesia, China and Papua New Guinea.
Asia Pacific group revenues rose 66% to €540m following the full incorporation of APB; group revenues overall rose 1% to €5.693bn, but Q3 net profits fell to €438m from €568m year-on-year.
The fly in the regional ointment for Heineken was India – where the group is active via a 37% in the nation’s leading brewer United Breweries – given lower volume sales following a prolonged monsoon season and the impact of regulatory changes in the state of Tamil Nadu.
Sourcing out of mainstream volumes
Nevertheless, across the region as a whole the Heineken brands grew low single digit, but the real star of the show was Tiger – which accounts for around 25% of Asia Pacific volumes – with regional growth of 20%.
“We have taken a slightly different position towards the Tiger brand than what was happening under the previous management. We have put Tiger more in between mainstream and the Heineken brands,” Heineken CFO Rene Hooft Graafland said on an October 23 earnings call.
“Still premium, but more affordable premium, making sure that they can source out of mainstream volumes and see that in markets like Vietnam. And that is a very, very successful strategy.”
Growth in Vietnam was above 20%, Graafland revealed – adding that Heineken was also growing strongly in the Asia Pacfic, but a paltry 2% volume gain across the region was due to problems in India, namely Tamil Nadul over the quarter.
Premium strategy in China
“Secondly, in China, our mainstream volumes are down, and that is the effect of the changed strategy which we are following, I think now for two years, where we purely focus on the premium end of the market,” Graafland said.
Distribution issues in Tamil Nadu – the government there issued a regulation around six months ago dictating that state-buying from distributors should be in line with production capacity – have hit Heineken’s partner United Breweries.
Tamil Nadu’s State Marketing Corporation now orders according to production capacity within the state itself, rather than on the basis of local demand for specific beers.
“As there are a couple of new players with sizeable capacity but no volume, at once they get orders…and us being the biggest player in Tamil Nadu…we get penalized in a big way,” Graafland said.