Europe's biggest brewers may be forced to cut jobs and close breweries to cope with the escalating euro zone crisis and Danish brewer Carlsberg
The downturn in 2008 heralded a three-year cost-cutting exercise at Amsterdam-based Heineken
Analysts say another round of bloodletting is on the cards.
Both brewers are threatened by the euro zone crisis -- Heineken earns 35 percent of its profit from western Europe and Carlsberg as much as half, with the Dutch brewer more exposed to euro zone economies on the critical list.
Brewers' profits have already been battered by the crisis in Greece and Iberia and analysts worry Italy and France might be next, while, outside the euro zone, Britain's beer market may suffer from national austerity measures aimed at cutting debt.
Germany is western Europe's biggest beer market in a $29 billion industry with around one third of the volume, followed by Britain, Spain, France, Italy and then the smaller markets of the Netherlands, Belgium and Denmark.
Heineken is coming to the end of its cost-cutting programme, and analysts have said the next round, to be outlined in February, may have to go deeper, while Copenhagen-based Carlsberg has said it will look at overall costs.
Chief executive Jorgen Buhl Rasmussen told Reuters this week Carlsberg was preparing for the worst conceivable situation and looking back to its experience in 2008. It was important to act fast and ahead of the field, he said.
For that reason, we are right now looking at our entire cost base to see if all activities are necessary and if any could perhaps be postponed for a period of time, he said.
Analysts said brewery closure will be more difficult after a number of recent shutdowns -- Carlsberg is operating in a number of countries with just one brewery. But, if trading is hit by the euro zone crisis, brewers may have no option.
If the top line looks a bit gloomy and pricing in Europe is not fantastic, you need to adjust the cost base, Bernstein Research analyst Jean-Marc Chow said.
In 2008, Carlsberg decided to focus its Danish and Italian businesses on just one brewery each, with the closure of Valby and Ceccano. It also decided to close its Loule brewery in Portugal and Tetley brewery in Leeds.
Heineken's three-year 2009-11 Total Cost Management cut 435 million euros (373.2 million pounds) off costs in the first two years, with just over half the cuts in western Europe, and was still cutting costs this year.
Last year, Heineken closed two breweries in England, at Dunston in the northeast and Reading in the south, following its 2008 takeover of Britain's biggest brewer Scottish & Newcastle in a year when the beer market fell 4 percent.
A Heineken spokesman said his group is very focussed on productivity and cost savings and has cut costs by over one billion euros since 2006, and it will continue these cost cuts with the launch of its new TCM2 programme in 2012.
Heineken and Carlsberg, ranked No. 3 and No. 4 in the world, are more exposed to western Europe than the world's two biggest brewers -- Anheuser Busch InBev
Carlsberg, which also brews Baltika, Kronenbourg and Tuborg, is the No. 1 brewer in France and No. 4 in Italy but makes most of its regional profit further north in Scandinavia, Germany and Britain.
Heineken, which also brews Amstel, Birra Moretti and Cruzcampo, is the most exposed of the big brewers to the euro zone crisis being No. 1 in Greece, Italy and Portugal and No. 2 in France, Ireland and Spain.
Societe Generale analyst Andrew Holland said brewers were finding it very difficult to increase beer volumes and push prices higher in Greece and Ireland, and the tough trading conditions could easily spread.
The Italian market could be the next to suffer a consumer downturn. Austerity has yet to bite. From the experience of Greece, people stop spending a bit after the announcement of measures and then you get a second downturn when they actually find they have less money.
(Additional reporting by David Jones; Editing by Dan Lalor)