After appearing on a whim in the first half, the Prime Minister’s announcement of a second Halloween lockdown will rarely support the brewery’s balance sheet during the 2020 closure phase. Speaking about Covid Challenges and the outlook for the beer industry, says Mark Lynch, partner at Oghma Partners:
“The results of Carlsberg, Heineken and Abimbeviv throughout the third quarter reflect the hiatus of the Covid-19 march after the first and second quarter hits at the beginning of the year. As a result, this quarter has generally seen an evolution of positive volumes from brewers despite some margin impact as businesses switched from eating out to on-the-go drinks to reduce their margin retail business. The outlook remains mixed with general concerns about the revival of Abinbev, which is reflected in the outlook and passes dividends.”
Reflecting the uncertainty facing breweries, even the summer surge in drinking activities at non-retail stores failed to save Carlsberg (CPH:CARL-B) revenues, falling 2.1% in the third quarter and exceeding 8% in the previous year. “The pandemic is a concern for us and affects people, customers and businesses in many markets,” said T Hart of CEES, CEO of Carlsberg.
The outlook remains unstable at best, but Lynch remains at least somewhat positive. “(It) seems like the cost reductions are being taken action, coming down the pipe and they have a better understanding of the overall sales performance.
Despite this optimism, the brewery now has to compete for a return to lockdown conditions. This will undoubtedly hinder their revenues as they venture further into the fourth quarter of this year.
France, Germany, Spain and the UK are currently in lockdown. If Biden wins the presidential election on Tuesday, the chances of the US entering a second lockdown will be significantly increased, but it is still not guaranteed.
For now, breweries are concerned about the latest round of UK lockdown measures, which are more punitive in the alcoholic beverage sector than they first time. The government has decided to ban alcohol take-out from pubs. This has resulted in the cancellation of alcohol sales in bars, pubs and restaurants in England and Wales, and the situation in Scotland is also bleak for high-rise eateries that have been banned from selling alcohol. Similarly, fewer grants provided by the UK government means that consumers will have less money at their disposal to spend on non-essential products such as liquor.
Cambra National Chairman Nick Antona spoke to the Sun and said the second lockdown would come as a “devastating blow.”
“Pubs across the country are already investing thousands to reopen the Covid safety environment despite a significant drop in revenue.”
“We also need a clear route map from evidence-based lockdowns, otherwise we’ll see that many pubs and breweries will close their doors forever.”
