Heineken cheers EU-US trade deal as tariff problems grow

New Straits Times

5 days ago

LONDON: Dutch brewer Heineken welcomed a trade deal between the European Union and the United States and said on Monday it was weighing all options to deal with growing tariff challenges in the long term, including shifting manufacturing.
The world's No. 2 brewer exports beer, especially its namesake lager Heineken to the US from Europe and Mexico, and has also suffered from indirect impacts on consumer confidence in key markets like Brazil.
Nevertheless, it reported a 7.40 per cent increase in organic operating profit in the first half, versus analyst expectations of seven per cent, crediting growth in once-difficult regions like Africa and Asia as well as cost savings.
Heineken's shares, however, fell 1.40 per cent in early trade.
CEO Dolf van den Brink welcomed the certainty brought by the trade deal clinched on Sunday, which reduced a threatened 30 per cent US tariff on EU goods to 15 per cent, a rate that would still hit Heineken's US profits.
All options are being considered to mitigate tariffs long-term, including shifting manufacturing, he said, but added that such moves were capital intensive and would first need more consistency in policy.
"We look at all options from continuing with our current setup, a more hybrid version, or otherwise," he told journalists on a call. "If and when we deem them financially to be more attractive in the mid- to long-term, we would for sure explore them."
Lingering tariff fears, economic uncertainty
Heineken still faces US tariffs of up to 30 per cent on products it produces in Mexico unless the Mexican government can reach an agreement with Washington ahead of an August 1, 2025 deadline.
Executives told journalists that since the first quarter, Heineken has also seen economic uncertainty hit spending and confidence in the US, Brazil and Mexico.
In Mexico, remittances from the US have fallen significantly, impacting beer industry sales. And US Hispanic consumers were also spending less, van den Brink said.
Heineken continues to expect annual profit growth of between four per cent and eight per cent.
The company said its second-quarter revenues and volumes rose 3.30 per cent and fell 0.10 per cent respectively on an organic basis, also beating analyst expectations. It increased an annual cost saving goal from 300 million euros to 500 million euros (US$351 million to US$586 million).
The brewer has been locked in difficult, prolonged price negotiations in Europe, which hit sales in the region, including its key non-alcoholic portfolio.
"Heineken has once again delivered a solid quarter," said Laurence Whyatt, an analyst at Barclays, adding that Heineken's strong profits more than made up for flagging European volumes.