Heineken Holding N.V. (HEIO) Earnings Call Transcript

Hello, everybody, and welcome to the Heineken N.V. Q3 2026 Trading Update. My name is Elliot, and I'll be coordinating your call today. [Operator Instructions] I would now like to hand over to Tristan Van Strien, Director of Investor Relations. Please go ahead.

Thank you, Elliot. Good morning, good afternoon and good evening, everyone, from a bright and crisp Amsterdam today. Thank you for joining us for today's live webcast on our third quarter 2026 trading update. Your host will be our Chief Financial Officer and member of the Executive Board, Harold van den Broek. Following the presentation, we will be happy to take your questions. The presentation includes expectations based on management's current views and involve known and unknown risks and uncertainties, and it is possible that the actual results may differ materially. For more information, please refer to the disclaimer on the first page of this presentation, which should be on your screen. I will now turn over the call to Harold.

Thank you, Tristan, and a very good day to you all. And what a great picture to start with. I'm pleased that Rafael joined us as CEO on October 1 and is engaging fully with Heineken as you can see. As you would expect, he'll be listening, learning and reflecting over the next few months and we'll share more of this perspective when we report our full year results in February. So I'm happy to host you for this quarter 3 trading update. Let me start with the highlights of the quarter. We delivered volume and revenue growth across all 4 regions, driven by priority markets, segments and our global brands. Africa and Middle East delivered another quarter of resilient growth, while Asia Pacific continued its momentum. Europe continued with a return to volume growth, while the Americas returned to volume growth this quarter, both admittedly on softer comparatives. We also execute at pace on our EverGreen 2030 priorities with accelerating innovation, stronger commercial execution and simplification of our operating model. Against the broadly unchanged trading environment, we confirm our full year operating profit growth guidance on operating profit growth of between 2% and 6%. Turning to the key metrics. In the third quarter, total volume grew 4.8% and net revenue increased 4.6%. Net revenue per hectoliter was up 0.7%, and I will expand on this later. Our premium and global brands portfolio grew double digits. For the first 9 months, total volume increased 2.7% and net revenue grew 2.4%. The Net revenue per hectoliter was up 1.7%. And year-to-date, premium volume in global brands grew circa 8% and 7%, respectively. Overall, we consider this to be a solid quarter. Let us now look at the net revenue in a little bit more detail. Net revenue for the quarter increased organically by 4.6% to EUR 8.1 billion. The organic increase was EUR 360 million -- EUR 336 million, with EUR 286 million from consolidated volume and EUR 50 million through price/mix. Just for reference, and you know this is not how we report, but license volume growth would add about 20 to 30 basis points revenue for the quarter and 60, 70 basis points for the year-to-date. Turning to our pricing, where we consciously invest for the value-seeking consumer in selected markets and segments. This is partly why you see a lower contribution in the bar on this slide, as our net revenue per hectoliter grew 0.7%, as previously mentioned. An important [indiscernible] factor is the negative country mix, particularly driven by the strong growth in Asia Pacific, such as Vietnam and India, where revenue per hectoliter is below the group average. On a constant geographic basis, price/mix was 1.8%, and that's a more accurate reference of our price/mix delivery market by market. Consolidation changes, particularly the integration of Costa Rica at EUR 182 million and currency translation contributed EUR 241 million, mostly due to a stronger Mexican peso, Brazilian real, Nigerian Ira and South African brand. Moving to the composition and quality of our growth. Our mainstream portfolio grew in the quarter with our local power brands outperforming the segment led by Cruzcampo in the U.K., Bedele and Harar in Izivia in Kingfisher in India. Heineken had another strong quarter with double-digit growth in 22 markets. Heineken ultimate 3.5% build further momentum in Brazil broadening the brand's proposition with a lower alcohol, lower calorie and gluten-free beer. Heineken 0.0 grew strongly with double-digit growth in 26 markets, with encouraging contribution from recent flavor extensions. More broadly, we recorded double-digit growth in low and no alcohol with innovative launches across the portfolio and strong performance from [ virus ] in Egypt and Stelz in Brazil. Beyond beer, volume grew in the teens, driven by Bernini in South Africa and Cider in the U.K. If we can spend the word on Global Brands, which are Heineken, Amstel, Bedele, Tiger and Desperados. All 5 brands grew in the quarter, and in aggregate, were up circa 10%. Heineken grew around 10% with particularly strong momentum from Heineken Silver in Vietnam and Daina, while in Brazil, the brand returned to double-digit growth. Tiger grew more than 20%, supported by Tiger Crystal and strong execution across Asia. Amstel grew by high single digits, led by Brazil, China and South Africa and we extended our partnership with [ Kobe Libertadores ], leveraging the passion for football across Latin America to further build the brand. Beremoreti and Desperados also delivered volume growth. If I now move to the regions and starting with Africa and Middle East. The region delivered another strong quarter of resilient growth, led Ethiopia, in South Africa. Net revenue increased 6.8%. Total volume grew 4.3%. And price/mix on a constant geographic basis was up 3.6%. In Nigeria, macro circumstances continue to weigh on the leading to subdued market visions for our portfolio. Against the backdrop, we gained share and slowly we are seeing some gradual improvement in the economic environment. Within premium, Heineken and Desperados continue to perform well. South Africa continued to benefit from the strength of our multi-category portfolio. Our Bedele brands, Heineken, Amstel and Windhoek all grew in the quarter. Benin remains strong in RTDs, ready-to-drinks, and Clipdrift performed well in spirits. Ethiopia again, was a strong performer with strong double-digit revenue and volume growth, further building our leadership position. Bedele, [indiscernible] and Heineken are contributed to this performance. Our business remains vigilant considering the threat of tensions in north of the country. And if we now move to the Americas. As anticipated, this region to volume and renewed growth in the quarter, admittedly on software competitors. Net revenue increased by 3.1%, and total volume grew 2.1%, with price/mix at plus 2.2%. In Mexico, the beer category returned to growth. Our volume in net revenue moderately, and our market share trajectory is progressively improving. An important contributor to our performance was stronger outlet execution, notably in our own 6 network and with our traditional trade partners. Premium beer was strongly led by Miller High Life with Tecate Original, and India contributed to mainstream growth. In Brazil, the big category recovered positive growth in the quarter, and our volume increased by mid-single digit, with Hanken and Amstel both growing double digit. The recent Heineken Ultimate 3.5% innovation is resonating strongly with consumers, exceeding volume expectations. Also Heineken 0.0 grew in the high 20s. Overall, net revenue in Brazil grew in the teens. In Central America, the FIFCO integration remains on track, including delivery of expected synergies. In Costa Rica, our multi-category portfolio continued to perform well, supported by strong commercial execution across the entire portfolio. All in all, an improved quarter for the Americas with more work to do. If I now turn to Asia Pacific, which continued the solid momentum we saw in the first half year. Net revenue increased 15.1%, with total volume growing 17.3% and price mix on a constant geographic basis up 4.1%. Vietnam is strongly outperforming the beer category, growing mid-single digits. Our volume grew in the 20s with net revenue up in the 30s, supported by share gains and continued growth in the premium segment. Heineken Silver and Tiger Crystal were the key leaders of the growth. India continued to build on its leadership position in a high-growth beer market, partially benefiting from an easier comparable, following last year's head monsoon season. We are leveraging our scale and annual footprint to capture underlying consumer demand and drive category growth. Kingfisher Ultra and Heineken Silver led the premium growth. We are also encouraged by recent regulatoraly developments, that's a tongue twister, including more equitable excise treatment beer in certain states. The country's first-ever alcohol content-based tax system was implemented in Karnataka, boosting demand. And as a beer industry, we continue to engage with the state governments on reforms that support the responsible long-term development of the category. In China, we delivered another quarter of sustainable double-digit growth and share gains. Heineken Original and Heineken Silver, and also now Amstel show growth across geographies and channels. On the picture to the right, you see an example of the Heineken activation of the Shanghai Tennis masters on the board, a real great site. Turning to Europe. The region delivered another quarter of volume growth against somewhat softer comparatives, engaging with consumers through excellent summer activation and stepped-up innovation. Net revenue increased 1.3%. Total volume grew 0.6%, and price/mix was 0.1%. The latter held back both by negative channel mix in the quarter and intentionally restrained price/mix, as we continue to focus on affordability for value-seeking consumers. In the United Kingdom, volumes grew on the back of our portfolio strength with Cruzcampo Premium Cider and Murphy's stout as key drivers. Our pub also remains an important strength. Star Pubs continue to outperform the wider pub market, refrain the consumer appeal of quality pubs and the strength of our Star Pubs operating model. Across Western Europe, excellent summer activation supported market share gains in the off-trade. We also continue to expand our participation in beyond beer. For instance, with the acquisitions is subject to regulatory approval a majority shareholding in Stelz, a leading and fast-growing RTD brand in the Netherlands. Earlier this month, we also announced a significant simplification of our European business. Following this successful pilot, we are moving from 23 operating companies to 8 larger multi-market operating companies by year-end, combining local consumer and customer proximity with scale capability and productivity benefits. Finally, our outlook for 2026. The trading environment remains broadly unchanged and we continue to operate against the backdrop of macroeconomic and geopolitical uncertainty. Our similar third quarter performance, with volume growth across all regions and further proof points of acceleration of our strategy, gives us confidence in our full year delivery. We, therefore, reconfirm our guidance of 2% to 6% operating profit growth. Our outlook for all other metrics remain unchanged. So let me briefly summarize. We welcome Rafael as the new CEO, but he will be touring the world until the end of the year. We delivered a solid quarter with volume up 4.8% and net revenue up 4.6%. Growth was broad-based across all 4 regions and led by our priority segments and global brands. Premium volume grew double digits, while our global brands grew around 10%. Africa Middle East delivered resilient growth, and Asia Pacific continued its strong momentum. Americas returned to growth, and Europe delivered volume growth, both, however, on softer comparators. And as Rafael said, we have strong foundations and this quarter shows that. Yet there is more to do. With that, thank you for listening, and we'll be happy to take your questions.

[Operator Instructions] First question comes from Edward Mundy with Jefferies.

So 2 questions, please. The first is just on your guide for the year, which is obviously unchanged. I think you delivered the top end of the guide, if not above the guide, with H1, and you've now got a very decent Q3 under your belt. Can you perhaps talk to some of even parts, either on the cost or the investment side? And it's holding you back from upgrading or is this just an element of natural conservatism given the uncertainty out there and with a big Q4 is still out of view, is the first question. And then the second question is around some of the learnings from the MMO rollout within Europe. I think from H1 was very much about implementing and preparing for the rollout whereas I think the commentary from Q3 is that the pilot has been successful, and now you're scaling it. I mean, does this give you more confidence to continue to drive scale within Europe?

Thanks, Ed. Well, first, on the guidance point, indeed, it's more the latter to your comment. We currently are comfortable with the performance of our business. But as Rafa said and I just closed with as well, there is more to do. We're very happy with our performance in APAC. We believe the Africa region is resilient, but we're not yet where we want to be in the Americas, and we are encouraged with the progress on quarter 3, but we will continue to invest in that part of the region in order to ensure that we're setting ourselves up for a healthy 2027. It is also a reality of the world that we are still living in uncertain times, and we often said control the controllable. So in discussions with Rafa, we felt that this message that we wanted to convey is this is another solid performance. And indeed, in the first half was also solid, but we see little upside at this moment in time from narrowing the guidance because we are focusing on continuing our performance, investing in improving our performance, and that's what we will continue to do. So don't read more into that than what I just said, I would argue. Second to your point, on the learnings of the multimarket organization, and we briefly touched upon it also when we last spoke. The European team has been, I think, extremely well organized in making sure that we are first piloting before scaling. And earlier, we brought 4 multi-market organizations together. And this has really been done very well with the management and the organizations on the ground to not lose focus on consumers and customers because ultimately, what we want to achieve is proximity with consumers and customers, but still raging skill and skill, as we call it, across the multi-market ages. And this really has come through. So we started to learn from each other in terms of how we can drive better customer engagement, how we accelerate innovation how we learn across, for example, on procurement synergies or advertising or activation synergies. And this gives us confidence that actually building bigger units that collaborate narrowly together is actually the right path forward in our European structure. And that has made [ Glenn ] and his management team very much this has been carried from the bottom up, not from the top down only, decide to actually accelerate the implementation of it because we can see that together, we can have more impact at a more cost-efficient organization model. And that is really the reason why we are now accelerating. As per the first of January, those NOLs will be up and running.

[Operator Instructions] Our next question comes from Simon Hales with Citi.

So my first question was just around Vietnam, where we clearly saw a very strong performance again in Q3. I think back at the H1 stage, Harold, you were suggesting that that shouldn't really extrapolate the H1 trend into the second half, but it seems to have clearly continued to pace. Can you just provide a bit more color on what you're seeing there, what you're doing versus the wider market? And really, is there any reason to think that volume growth for you will be slow significantly in Q4, particularly given we might [indiscernible] of entry build ahead of the excise increases in January that are coming? And then secondly, I appreciate this is a salable primarily. But I mean, can you talk a little bit perhaps around some of the cost pressures you're perhaps seeing as a result of the elevated energy costs that we're seeing sort of globally, both from a logistical standpoint in H2? And are you able to say anything about the COGS picture and your hedging position on your main input for 2027 at this point?

Yes. Thank you, Simon. So indeed, based on the conversations with the APAC region and the Vietnam team, we did said, "Look, Heineken has been great," but it has also been a strong catch. It was some of the easier comparisons. We don't know what the market is going to do. You've heard me all say that. So frankly speaking, we were also positively surprised with the strength of the growth coming through this quarter. I still remain rather cautious because I'd rather be wrong on this side of the equation rather than be over bullish, overconfident because I still remember the scars that I carry in 2022 to 2023. And just to reassure, this is also important for you to know, we have put real metrics in place to look at distributor feasibility, freshness of the product in these markets, understanding the drivers of our growth. And then come to the question, we are starting to see very significant share momentum in Vietnam. But we also know that the analogies are very competitive markets. And we also see competitor entries coming in. So I don't want to be overconfident, but what I am going to convey is that we're very, very pleased with our Vietnam performance at this moment in time. It really is still the case that the market is growing very importantly, both on and off-trade in the mid- to high single digits. But on top of that, we are, therefore, gaining considerable share in our stronghold markets and are starting to expand a little bit outside of our stronghold markets and also see that taking effect. Now we're not taking that one for granted. So I would still argue, please don't extrapolate into quarter 4. There is excise coming. There is uncertainty, but we're confident that the Vietnam teams are doing, what it takes, in order to really compete very well in the Vietnamese market. So I don't know what the macroeconomic outlook brings. What I do know is that excise will happen in 2027. So yes, personally, I'm a little bit more cautious, and I don't think that we should continue to see 20% growth rates in Vietnam. Now on the cost pressures, we've spoken about this at half 1 as well. And you will have seen as much as I do, that the higher energy and transport cost will remain a factor not only for the balance of this year, but also going into 2027. We've, of course, increased our productivity agenda in order to compensate for that. So very important to know as well that we're not cutting any of the marketing or sales investments. And that is really what we use our elevated cost and productivity measures for. But we are seeing a significant elevated cost in parts of the world, and this is particularly true in Asia. It is also particularly true in some of the African markets, but also start [indiscernible] the impact of that happening now in Europe as well. Our hedging positions for 2027, I'll give a full commodity cost outlook in the full year results, but we have not changed our hedging policy. And that does mean that we are covering the majority of our hedges already for 2027 around this time of the year. So you should think about 80% to 90% of commodity, but also currency transactions have been covered.

We now turn to Sanjeet Aujla from UBS.

Harold, a couple from me, please. Firstly, I think you started the year quite cautious in your outlook on Mexico and Brazil. How has the category evolved relative to your expectations at the start of the year and also your market share performance there as well? That's my first question. And my second question is just going back to the comment there on the cost outlook for next year. Is it fair to say you're leaning more to absorb that through productivity measures as opposed to headline price increases?

Yes. Good questions, Sanjeet. Thank you. Maybe starting with my view on the Americas, just for the people on the call to just play back a little bit why we started with a more cautious outlook on the Americas at the start of this year. And that's basically driven by 2 reasons: Firstly, the macroeconomics, high interest rates, uncertain political situation, difficult read on the U.S.A. in particular, but also the spillover of that into Mexico made me much more cautious on the Americas than what I saw happening in other company's outlook. I personally have been a bit surprised on the resilience of the beer market in quarter 3 and was very happy to see that both Mexico and Brazil were returning to growth. But what I also believe, speaking to our Mexican and Brazilian teams, and you will have seen the currency in Brazil also reacting to the latest elections, is that it's still very fragile. Also, Rafael was there on a market visit a couple of weeks ago, and he basically said that there is still quite a bit of economic tension in the Brazil market. So I remain, yes, a little bit conservative, perhaps on the outlook of the Americas because I don't think that we've turned the corner to consistent positive category growth just yet. What I do believe is that both ourselves as well as the industry at large, are investing quite a lot to make sure that we stay relevant to the consumer. This is true in terms of pricing management because part of the reason why we are having to recover market share is that we created to some extent, our own price volatility, as we've spoken about, and we are repairing that. So I'm pleased with some level of market share progress, but not yet where we needed to be. But I also think innovation is playing a really key role. And for instance, you see Heineken Ultimate gluten-free really resonated. You also see [ Panaya ] really resonating. And [indiscernible] Ultra really growing very fast in a very health-conscious environment, for example. So I do believe that all of us, including the industry is doing the right things to make sure that affordability take place but also that innovation and activation is at the standards that you would expect to bring the people back to the category. So that's how I see it. Fragile but doing the right. In terms of the cost outlook, I believe that we have found the right balance between investing in affordability, but also making sure that we take measured pricing particularly through mix management and let's call it, not strain visible pricing, for example, through price/mix architecture and innovation-led pricing. And that is probably what you will expect from us going forward. Well, to find the right ones between pricing, I will probably put it at anywhere between 70% and 90% of CPI that we're going to target for but also to continue to work on productivity in order to make sure that we can build the brands because ultimately, it's not about lowering the price. It's really bringing value back in the brands and that we can do through innovation, quality activation, and that's what we will also invest in.

Our next question comes from Trevor Stirling with Bernstein.

2 questions, Harold, 1 on Brazil and 1 one Mexico -- 1 on Vietnam. In Brazil, you mentioned about the category growth. Is that both sell-in and sellout that you're seeing the category growing? And then can you talk maybe a little about the share trends in Brazil? And then in Vietnam, it means that level of volume growth, is there any risk of you hitting capacity constraints? I'm guessing probably not because of the prior weakness of the market. But I'd be intrigued to find that question. Again, you've got, I think, it's from memory [indiscernible] reproduce very strong price/mix in Vietnam. I mean, are you starting to get some operating leverage in Vietnam given that level of volume growth and that very strong price mix?

Yes. Very good. Let me first talk about Brazil. The Brazil market in quarter 3 was indeed both up in terms of sell-in but also in sell-out, so I can confirm that in quarter 3, we did see an uptick, both in terms of total industry, all the data we're looking at. So that's a positive signal. Now as I just said to Sanjeet as well is we also know that -- I'm not going to call out the weather as an excuse, but has not been terrific in Brazil at the moment. So I am still cautious on the volume outlook in the fourth quarter in both Brazil and Mexico, just to put a fine point to it Trevor, but hoping that I'm wrong, clearly. And then in terms of Vietnam, no, we're not going to run into capacity constraints just yet. We had plans to already upgrade the investment some time ago, so we're on standby to do that relatively efficiently and therefore, can handle the volume increase. Just to show that you hear it from me as well, it's not so easy as I make it out to me. So our Vietnam teams are doing a lot of juggling to make sure that they can fulfill the demand, but I don't see that as a constraining factor to continue the momentum in Vietnam. I think the point on price/mix is a very relevant one because what you currently see happening in Vietnam and is the driver of growth is both Heineken and Tiger Crystal is leading the premium segment again. Now this is in part also the fact that there is healthy and stable economics having in Vietnam, a stable government investment in bringing the Vietnam economy to higher levels of value accretion, and this is all boosting consumer confidence. This is good, not only for beer consumption, but also the type of beer consumption, is conducive to the premium segment, which is, of course, where we're leading. So we're very happy with the market dynamics and our own performance. To your point of price/mix, this is indeed creating some operating leverage, but also we're investing behind the growth. So I said before Trevor that we should not return to the levels of [ 40% ] operating margin in Vietnam, and that's also not what we're seeing in the future. We'd rather invest back in order to cater for more growth in Vietnam.

We now turn to Laurence Whyatt with Barclays.