Heineken Faces Pressure for Deeper Cost Cuts, Efficiency

Heineken, the world's second-largest beer maker, has pledged to increase revenue and cut costs, but investors and analysts are pressing for more aggressive steps, including potential plant closures, to boost business efficiency. Dolf van den Brink, CEO, who has led the €39 billion (MX$829 billion) brewer since 2020, is primarily challenged to deliver greater efficiency while reviving flagging volume growth, according to market observers.

Heineken has committed to achieving up to €500 million in gross cost savings annually through 2030. The brewer is also aiming for mid-single-digit annual revenue growth by focusing on 17 high-potential markets and five global brands, with operating profit and earnings per share growth projected to exceed that. The company’s performance has frustrated some investors, however, due to volatility and for lagging behind larger rival Anheuser-Busch InBev in efficiency, citing higher fixed costs and a larger brewery footprint in certain regions.

Pinto described these targets as too general, requesting specific goals related to margin, return on invested capital, and net savings. Javier Gonzalez Lastra, an analyst at Berenberg, noted that Heineken needs to prove its savings promises translate into increased profitability, given that over €3 billion in savings since 2021 appeared to have had little impact on the bottom line.

Heineken’s finance chief, Harold van den Broek, said about 25% of its historical savings flowed to the bottom line, a figure he expects to increase under the current program.

For low-growth markets like Europe, both Pinto and Gonzalez Lastra stated that investors expect concrete cost-cutting measures, such as brewery closures. Van den Brink, however, has ruled out a radical overhaul of the company's brewery footprint.

Heineken is expected to have an easier path to selling more beer in developing markets, particularly in Latin America, but uncertainty over the timeline for this growth is holding back some investors. Van den Brink projected that once short-term challenges related to difficult economic conditions and political turbulence ease, the beer industry should see around 1% volume growth per year, and Heineken should outperform that figure.