Heineken and Pernod come to terms with the consumer crisis

Heineken and Pernod Ricard are expected to test their accounts this week. An appointment that, in the event of disappointing results, would definitively certify that inflation is now taking its toll on consumers' wallets. The two manufacturers, like the other competitors in the sector, have been exposed to the mercy of a declining market for a few months now, albeit with differences relative to the different operating segments. Both will present their quarterly reports in the coming days. For Pernod Ricard in particular, Bloomberg Intelligence expects first-half revenues to be lower in all business regions, due to factors such as still-slow destocking and consumer turnaround. Disappointing results fromDiageo (below expectations despite the company's own warnings, with a 23% decline in the South American market and 5.4% drop in operating profit), coupled with broader industry weakness, are challenging investor confidence in the sector; despite this, Pernod Ricard could bounce back in the second half of the year if Chinese New Year trading proves robust, Citi analysts said. Overall, according to BI's analysis, the consumption picture in Asia will be key to full-year EPS guidance.

A foreseeable drop in volumes of Heineken's premium brands in the fourth quarter (the accounts will be released on Wednesday) would also, according to BI's analysis, be a sign that consumers are definitely feeling the effects of inflation and could hamper growth this year. The recovery in the Americas had helped preserve profitability last summer, when adverse weather in Europe had dampened premium sales, but the brewer also needs to see a recovery in key Asian markets such as Vietnam and Cambodia, which account for almost 30% of operating profit. Meanwhile Carlsberg, one of Heineken's main competitors, expects moderate growth this year and is increasing marketing spending to boost sales.

Davide Campari , meanwhile, will release its annual results on 27 February. The consensus forecasts sales growth of 8% year-on-year, while Ebit is estimated to grow by 60 basis points, due to an improving gross margin. Equita's estimates, in particular, discount a 9% year-on-year growth in turnover for the last quarter, a re-acceleration from the +4% year-on-year in the third quarter, which had been mainly affected by a drop in the Italian market due to unfavourable weather and trade destocking. Already in the last call," the analysts explained, "management had indicated an improving trend in October, which we believe has continued in the following months, with a recovery in Italy, also thanks to the particularly easy comparison and the resilience of final demand in the US. After the stock's weak performance (-17% over three months, which compares with a +1% for the Stoxx Food & Beverage) - albeit partly justified by the recent capital increase - and in light of the significant derating, Equita believes that "a substantial confirmation of expectations for the year may represent a supportive element, although it will be important to assess the visibility on guidance for 2024. Analysts' estimates for this year incorporate organic growth of around 8%, supported by good exit velocity in the final quarter of last year, but with a challenging comparison on Q1 2023 (peak sales, +73% on pre-Covid). Ebit is expected to grow by 15-16%, with margins improving by 130-150 bps, thanks to predictable cost savings in agave and glass, not yet quantified by the company.