August 28, 2008

Heineken’s S&N Brands Outperform Drinks Market ; BREWING

Dutch brewing giant Heineken yesterday said key brands inherited with the takeover of Scottish & Newcastle had outperformed a weakening UK beer market.

Heineken, which completed the pounds 7.8 billion acquisition of S&N with Danish rival Carlsberg earlier this year, said Kronenbourg 1664 and John Smith's - gained share despite a 2.5 per cent fall in the wider domestic market.

The firm has faced headwinds such as alcohol duty hikes, rising input costs and a weaker economy, but a strong performance in the UK and Switzerland offset declines in Italy, Spain and Holland, the brewer said.

Volumes of its Heineken premium brand rose 2.5 per cent to 390 million litres, driven by France and the UK, the firm added.

Alongside a strong performance from S&N beers, the company has also been pushing its main Heineken brand. It sold 1.29 billion litres of Heineken in the first half, while it is a sponsor of the UEFA Champions League and the new James Bond film, Quantum of Solace.

"The Heineken brand is well positioned to exploit the positive trend for international premium brands, and the growth of our top- ofmainstream brands will add to our margin and profit growth as well," the firm said.

The brewer added that cider brands Strongbow and Bulmers showed "sustained growth" in the UK after continued spending on advertising and sales.

Heineken has cut 85 jobs from S&N's former Edinburgh corporate headquarters since the deal, with a further 38 staff working in interim posts.

The group, which has around 4,500 UK staff, said the integration of the business was "proceeding well" and had added EUR608 million (pounds 485.9m) to revenues since May.

It now expects to make an extra pounds 25 million in cost savings from the acquisition of S&N, which called time on more than 250 years of history for the brewer.

Heineken said organic profits - discounting the effect of a stronger euro - increased by 5.3 per cent to EUR540 million (pounds 431.4m) and predicted "at least" mid-single digit profit growth for the rest of the year.

The firmsaid input costs had risen by around 15 per cent per 100 litres in the first half and are expected to remain at the level for the rest of the year - costs which it will continue to pass on to the consumer.

The company, whose other brands include Amstel, said overall beer volumes increased by 15 per cent to 5.86 billion litres, driven by higher-growth markets in Africa, central and eastern Europe, and Asia.

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