EU: Danish brewer Royal Unibrew warns surging costs will push people towards cheaper drinks

Shares in European brewers slid on October 19 after a warning that surging costs will push people to go for cheaper drinks, Bloomberg reported.

Danish brewer Royal Unibrew A/S said it’s experiencing unprecedented inflation and will pass on rising prices to customers as fast as possible into next year. It cut its full-year outlook, sending its shares tumbling 13% to the lowest since the pandemic struck, and dragging down bigger peers such as Carlsberg A/S and Heineken NV.

Consumer firms have managed to largely protect margins this year by raising prices to cope with soaring costs. But there’s a limit to how much customers may be able to handle that as rampant inflation and higher food and energy costs destroy discretionary purchasing power.

“Premium products will likely be consumed by less consumers and at less occasions,” Unibrew said, adding that “below mainstream” products would gain share.

That outlook rippled through major brewers, who will report third-quarter earnings next week. Carlsberg slid as much as 4.8%, Heineken dropped 3.5% and Anheuser-Busch InBev fell 2.4% in early trading.

Unibrew pointed to a worsening of the business environment in recent weeks, with high electricity bills in particular hurting bars, restaurants and consumers. Nordea Research, which downgraded its recommendation on the stock to hold from buy on Wednesday, expects the company to issue another profit warning.

“Costs are continuing to increase, and we see stiff competition hindering the company from passing on these higher costs to consumers,” the broker wrote in a note to clients.

19 October, 2022