Heineken
Image by Niek Verlaan from Pixabay

It has been a difficult year for drinks companies as a trend towards healthier lifestyles and non-alcoholic beverages has dented investor sentiment in the sector. For Heineken, the world's second-largest brewer, this has translated into a 31% fall in share price to £54.79 over the past year.

While the Dutch company expects to report profits up between 4% and 8% when it releases its full-year 2024 financial results on 12 February 2025, the brewer faces some significant headwinds.

Ozempic Effect

Like many drinks companies, Heineken has been a victim of the "Ozempic effect" – a concern that people taking weight-loss drugs will shun beer drinking as they embrace healthier lifestyles.

This is part of a broader trend in mature markets that has seen demand for alcoholic drinks fall among younger consumers.

These pressures have led analysts to forecast that Heineken could report a dip in net revenue to £25.3 billion for 2024 compared with £25.6 billion the year before.

While declining volumes are an issue that has affected all the major brewers, Heineken faces some specific challenges that could weigh on the company's balance sheet in the coming year.

Continuous Hurdles

Among these are a number of legal threats that were recently cited as one of the reasons that Deutsche Bank downgraded its rating for Heineken's stock from 'buy' to 'hold'.

These impending legal issues include claims brought in Brazil against the Heineken's Cervejarias Kaiser subsidiary, which was included on the Brazilian Government's 'dirty list' of companies engaging in alleged slave labour practices in 2023. Kaiser was subsequently removed from this list.

Heineken has set aside £118.3 million to deal with "civil and labour claims" in Brazil.

Another looming legal issue is the long-running demand for compensation stemming from anti-competitive practices employed by Heineken's Athenian Brewery subsidiary in Greece. Athenian was found guilty of anti-competitive practices in 2015 and fined over £25.3 million by the Greek authorities.

Heineken's competitors in Greece, Carlsberg and Macedonian Thrace Brewery (MTB), have brought legal claims for compensation following this ruling. Heineken has set aside €478 million to potentially pay damages for this case.

Anti-Competitive Prices

In October last year, one the complainants, MTB, won a major legal battle against Heineken when the Dutch courts agreed that Heineken should be held liable for the anti-competitive practices of its subsidiary. With this case now moving into the final stages, Heineken could be forced into a settlement during the current financial year.

Another competition issue is rumbling in Austria where the country's Federal Competition Authority has said last year it thinks Heineken should be fined for anti-competitive practices at its Brau Union subsidiary. If a fine is imposed, it could be equivalent to up to 10% of Heineken's global revenues.

While Heineken faces significant market and legal pressures, the company is expected to highlight some areas of good news when it reports results on 12 February.

In particular, the Heineken brand continues to grow strongly in a number of large emerging markets. The company said that Heineken branded beer volumes were up 8.7% globally in the third quarter of last year and experienced double digit growth in Africa, the Middle East and Asia Pacific.

Non-alcoholic beer and cider sales were also a bright spot in the third quarter with volumes up 11%.

Announcing the third-quarter results, Dolf van den Brink, the chief executive, said: 'Our business continues to deliver in line with our plan in aggregate, despite some markets navigating challenging consumer and industry trends.'

About the author: Robin is a contributor to FlexJobs.com, the Glass Hammer, and the Boston Real Estate Observer. Her work frequently appears on other top business sites including Business Insider, Harvard Business Review, Fortune.com, Forbes.com, Yahoo.com and Huffington Post.