Wednesday, 9 September 2015

Second posting from the Barclays Back-to-school conference: Heineken, Altria

So after my thoughts on Danone and Philip Morris International on day one (link here) what catches my eye on day two?

Well Heineken was first up.  I must admit it is a company I have struggled with a little share price wise in the Euro70s, a level it has just popped back up into...

...but I note back at the Q2s in July that developing/emerging market growth was basically very good: 

You can see this geographic structural shift over the last decade or so with Asia particularly seeing growth: 

Brand is hugely important for Heineken as the brand is by far the biggest global premium beverage name...

 ...and apparently the most liked on Facebook too:

Their recent US market growth has actually predominately been from their Mexican brands. Kind of interesting given that the historic perception of Heineken was as more of a key sole brand...perhaps those Facebook campaigns are helping cross-sell...

Yesterday Fast FT noted the company had acquired a significant stake in a craft brewery name:

On Tuesday, Netherlands-based Heineken said it had bought a 50 per cent stake in the Lagunitas Brewing Company, the fifth largest craft brewer in the US.
The partnership gives Heineken the opportunity to expand its footprint in the craft brewing category — small, independent brewers which account for annual production of6m barrels of beer or less.
Craft beer accounts for 11 per cent of the overall beer market by volume, up from 7.8 per cent the previous year and just 5 per cent in 2010, according to the Brewers Association, the industry's trade body.
One chart they cited showed some of the rationale why:

Overall solid from Heineken and the presentation contained some interesting specific new pieces of information on brand and social media activity.  Not the cheapest name you will see though so I am still just watching. 

As for Altria I have posted on the US tobacco name many times, most recently here where I noted post the Q2 results that I would again pick up the shares in the US$48-50 range a level they are currently trading a few percent above of: 

Not too many new points in their presentation. I did like this as an indicator of longer-term worth (and what a 50+ year compound return!):

Like or loathe tobacco investing you have to be impressed by that. Otherwise guidance was reiterated... was the sheer power of the Marlboro brand: 

One of the more interesting slides concerned the (still relatively fledgling) e-vapor market which Altria now estimate as getting on for a US$2.5bn category in revenue terms.  With full year profitability of the cigarette division annualising close to an US$8bn level it is still relatively small.  Nevertheless - and as we showed at the link to yesterday's Philip Morris International comments - tobacco companies see potential here.

I remain an Altria holder especially as I believe it should be helped by any current 'navel-gazing' at Reynolds/Lorillard as they bed down their merger.  For tobacco sector buyers today however I would look at Philip Morris International as discussed yesterday.  


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