Heineken pushes up advertising spend to lure drinkers upmarket

Heineken pushed up its marketing and sales spend by a fifth last year to €2.7bn as the world’s second-largest brewer sought to lure inflation-hit consumers to switch to more upmarket beers.

The Dutch group, which also makes Tiger, Amstel and Birra Moretti, increased marketing and selling expenses by 22.4 per cent to a level ahead of pre-pandemic spending, a rise driven by advertising and promoting its products.

That brought the figure to 9.5 per cent of net revenues, or about €2.7bn, in the run-up to the company’s first Super Bowl advertisement in decades and as it launched a new, lighter lager, Heineken Silver.

Dolf van den Brink, chief executive, said the group would carry on spending more on marketing to tap into a trend of drinkers switching to more upmarket products — a shift he said was continuing despite cost of living pressures.

“Consistently, our premium brands are growing faster than the total portfolio,” he said. “There are many concerns about . . . pricing and the resilience of consumers, but we really see, all the way to the fourth quarter, our premium portfolio outperforming our total portfolio,” he said.

Van den Brink added that Heineken was focused on growth in its existing brands as the industry moved on from a period of consolidation. “The relative importance of [mergers and acquisitions] won’t be the same as it was in the past,” he said. “Increasing our marketing spend is important.”

Marketing spend remained the same as a proportion of revenues from 2021, but that came in a context of steeply rising revenues — like-for-like revenue growth was 19.1 per cent — as the group pushed through big cost increases to consumers.

James Edwardes Jones, an analyst at RBC Capital Markets, said the spend was “consistent with our view that the brewers collectively are raising their competitive game”, partly in response to gains made in key markets by the spirits industry.

The group’s growth strategy also includes a push in non-alcoholic beer, which van den Brink said had the potential to make up 5 to 10 per cent of the global beer market and of Heineken’s sales.

The Super Bowl ad featuring Paul Rudd as Marvel character Ant-Man — a return to the sporting event after three decades in which the world’s largest brewer Anheuser-Busch InBev was its sole alcohol advertiser — was the first to feature a non-alcoholic beer, Heineken 0.0.

Van den Brink added that Heineken aimed to sell its Russian business in the first half of 2023 after promising to exit the market following Moscow’s invasion of Ukraine.

He said the brewer was talking to potential buyers of its Russian arm, which employs 1,800 people, but signalled the transaction would take longer than previously indicated.

Heineken withdrew its flagship brand from Russia in the first half of 2022 but still sells other brands in the country. “We keep operating [the business] so that we are able to continue to pay our employees because otherwise you run the risk of being nationalised,” van den Brink said.

The group reported that its revenues before exceptional items rose 19.1 per cent to €34.6bn, generating €4.5bn of operating profit — above analysts’ expectations — as the volumes of beer the group sold rose 6.9 per cent.

Heineken expects higher revenues and profits in 2023, but forecasts declining beer sales in Europe as inflation squeezes consumers. Shares in the group were up 1.9 per cent to €92.98 by mid-morning.