Heineken shares fell by more than 4 percent on Monday, after Dolf Van den Brink announced he will step down as chief executive at the end May. This marks a change in leadership at an important time for the second largest brewer of the world.
Van den Brink will depart as Heineken struggles to cope with a weakening market, changing consumer tastes and increasing investor pressure.
Van den Brink, who will continue to serve as CEO until May 31, has been told that the company is in the process of selecting a new leader.
Van den Brink stated in a press release that Heineken has “reached the stage where the best way to further execute the long-term goals of the company is through a leadership transition”. He added that he will remain focused until he leaves on the delivery of the strategy.
Brewer is facing a slowing market and sluggish demand
The global beer industry has struggled to increase sales of their products. This is due to a variety of factors, from bad weather to uncertainty in politics.
Heineken is also falling behind its peers in terms of cost-efficiency and shareholder return, which adds to the concerns over Heineken’s competitiveness.
Heineken, under Van den Brink’s leadership, launched a number of cost-cutting measures, which included a 2021 plan to eliminate 8,000 jobs.
As consumers cut down on their alcohol consumption, the company has also focused on low and no-alcohol drinks.
The brewers’ shares are under pressure despite these efforts as the top-line has not grown.
Heineken’s third quarter results were released in October. Heineken reduced its volume forecast for the second consecutive year, and stated that adjusted earnings will be at the lower end.
Although the company had earlier predicted steady volume in July, and growth to begin the year, it now anticipates a decline for the full-year.
Heineken has highlighted the weak performance of Americas where trade uncertainty, inflationary pressures and subdued consumers sentiment have affected sales and profits.
Analysts support strategy, but predict a weaker end of the year
Some analysts have begun to wonder if the challenges facing the brewery can only be attributed to tough market conditions.
RBC Capital Markets stated that the Heineken underperformance in comparison to other brands over several years was not surprising.
Van den Brink, who was named in June 2020 to a position of high responsibility and expectations, has failed to meet those.
RBC analysts stated that “we believe Heineken has now done the right thing in its business with better expectations management and allocation of capital, but execution is still unconvincing.”
They said that “Heineken’s current strategy is still the best.”
JP Morgan has described Van den Brink’s sudden departure as surprising. This is because Heineken recently reaffirmed its financial goals and announced new plans for investment and saving.
Bank of America expects the brewery to have a poor year end. The global beer market was weak in the fourth-quarter, but not worse.
Exane BNP Paribas, on the other hand, downgraded its stock from “outperform” to “neutral”, due to what they deem as an overly optimistic expectation for growth of like-forlike sales in 2026.
Board supports strategy, but wants new leadership
It is preparing to launch the second phase of EverGreen.
Peter Wennink, Chairman of the Supervisory Board said that the emphasis would be to bring the strategy to reality through a disciplined execution. He added that the board had agreed it was time to begin the succession process in order to ensure strong leadership going forward.
Van den Brink, the company announced, will continue to serve as a consultant for eight months starting June 1.
As new information becomes available, this post Heineken share price falls as CEO steps down; Analysts mixed on strategic forecast may be updated.
