By Emma Rumney and Jacob Gronholt-Pedersen
LONDON, Oct 29 (Reuters) - Top European brewers including Anheuser-Busch InBev warned this week that higher costs related to conflict in the Middle East were starting to weigh on profits or would do so in coming months as hedging contracts that had protected them end.
AB InBev, the top brewer by global volumes, and its rivals Heineken and Carlsberg joined other consumer goods companies, such as P&G, Philip Morris International and Coca-Cola, in flagging higher
cost pressures as the Iran war and its impact on the global economy drag on.
Brewers hurt when costs for inputs like electricity, fuels or aluminium rise because they need such commodities to make glass bottles or beer cans and transport them to retailers and venues.
The companies can lock in stable prices on some of these costs for long periods, but as those contracts expire they have to start paying higher prices.
AB InBev, best known for Stella Artois and Budweiser, said higher costs had offset stronger-than-expected revenue growth in some countries, citing in particular commodity, distribution and transportation costs in the US, Europe and South Africa.
Finance chief Fernando Tennenbaum told Reuters that costs that cannot be hedged, such as diesel in certain markets, hit AB InBev in the third quarter. Otherwise, it agrees 12-month hedges on a monthly basis.
Even as prices locked in before the war expire, Tennenbaum said he expected some cost pressures in 2027 but overall a normal year.
"Some of them are going up, some of them are going down," he said.
MARGINS UNDER PRESSURE
However, Barclays analyst Laurence Whyatt said AB InBev could see slower profit growth in 2027 as commodity pressures make it harder to outdo its strong performance in regions like Latin America this year.
In the third quarter, its EBITDA (earnings before interest, taxes, depreciation and amortisation) margin contracted 34 basis points to 36.1%, while its cost of sales hit $7.21 billion — the highest since 2023.
The world's No. 2 brewer by global volumes, Heineken, was also experiencing "significantly elevated" costs, especially in Asia, some African markets and increasingly Europe as well, finance chief Harold van den Broek said on Wednesday.
The trend would continue next year and Heineken had stepped up its savings programme in response, van den Broek said.
Heineken renews hedges on currency and commodity transactions for the year ahead around this time. Currently, between 80% and 90% of such costs for 2027 were hedged, he said.
As it renews expiring hedges, smaller rival Carlsberg also expects a more significant rise in the war-related costs in 2027, driven by energy and aluminium used to make the more than 10 billion cans it purchases annually, CEO Jacob Aarup-Andersen told Reuters on Thursday.
The impact is expected to be less severe than during a previous bout of commodity price inflation in 2022 and 2023, but Carlsberg will nevertheless look for savings and raise prices on its brands next year, he said.
"We will take value management initiatives, and one of those will be price," he said.
(Reporting by Emma Rumney; Editing by Tom Hogue, Saad Sayeed and Tomasz Janowski)
