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Heineken N.V. Offers Above-Average Growth And Margin Self-Help, But A Lot Of That Is In The Share Price Now

Apr. 06, 2021 5:09 PM ETHeineken N.V. (HEINY)BUD, DEO7 Comments
Stephen Simpson profile picture
Stephen Simpson


  • Heineken is coming out of pandemic-driven volume pressures with a bold plan to cut significant costs, reinvest in marketing and digital initiatives, and maintain an above-peer growth rate.
  • Bullish analysts are expecting better margin leverage from the self-help program but that may be premature/optimistic given Heineken's more spread out volume/market share profile.
  • Revenue growth should remain a source of upside, with Heineken one of the leaders in premiumization and category innovation, including alcohol-free beers.
  • With the shares up 20% in about six months, I see today's price as more "fair" than "undervalued", and this is a name I'd look to add on pullbacks.

Operating conditions have remained challenging for brewers, particularly brewers like Heineken N.V. (OTCQX:HEINY) with above-average exposure to on-premises channels (basically, beer consumed outside the home), as pandemic lockdowns have seriously hurt business in Western Europe and some Latin American countries. The good news, such as it is, is that the first quarter will likely be the last really poor one ahead of recovery for the rest of 2021.

Navigating the pandemic isn’t Heineken’s only challenge. The company is really the last of the major brewers (depending upon your definition of “major”) to launch a large-scale restructuring program, and management is targeting significant expense reductions, but only expecting to get back to around pre-pandemic margins in 2023. While bulls see this as a conservative guide, that may not be the case given Heineken’s model.

These shares have done okay since my last write-up, mostly tracking with the S&P 500 and other brewers like Anheuser-Busch InBev (BUD), Carlsberg (OTCPK:CABGY), Diageo (DEO), while Constellation (STZ) has outperformed and Molson Coors (TAP) has significantly outperformed (much to my own surprise). At this point, I would say Heineken is an okay hold, with some positive leverage to premiumization, volume growth, and self-improvement, but with some fundamental challenges as well.

One More Ugly Quarter

When Heineken reports first quarter volume figures later this month, the results are likely to make for mostly unimpressive, if not ugly, reading.

With around 40% of sales coming from on-premises consumption and less than 30% of EU on-premises locations open through most of the quarter, it’s hard to see how the EU results won’t be ugly. I likewise don’t expect great things from Brazil or Mexico – Brazil due to reduced on-premises activity and Mexico due to a combination of the pandemic, more intense price competition from ABI, and FEMSA’s (

This article was written by

Stephen Simpson profile picture
Stephen Simpson is a freelance financial writer and investor. Spent close to 15 years on the Street (sell-side, buy-side, equities, bonds); now a semi-retired raccoon rancher. That last part isn't entirely true. Probably.

Analyst’s Disclosure: I am/we are long FMX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (7)

javings profile picture
Appreciate your update and take on HEINY, SS. This is one of the stocks that has been in my LT portfolio (actually it is HKHHY, and not HEINY) for some time, and will continue to be so in the future. One aspect that they are doing quite well is the non alcoholic category, which is what is popular with millennials.
Stephen Simpson profile picture
@javings Yep. that's why I mentioned the opp in non-alcoholic.
One could also just buy HKHHY which trades at a 15% discount to HEINY.
Stephen Simpson profile picture
@ten_percent But Seeking Alpha doesn't pay for articles on HKHHY, so...
@Stephen Simpson Haha fair enough. I thought I'd add that on there for other readers who might be interested.
I also really like the fact that the Heineken family still has a significant economic interest in the company in addition to running it. Some publicly traded family run businesses (BF.A, EL, ROL etc) make some terrific long term stocks and have made plenty of shareholders wealthy over a lifetime.
Stephen Simpson profile picture
@ten_percent Totally fair! And I'm glad you did mention it
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