Heineken beer bottles are seen at a bar in Monterrey
INTERNATIONAL - Heineken, the world’s second-largest brewer, wants to challenge leader Anheuser-Busch InBev in one of its key markets - and that’s going to cost the Dutch brewer some lost profit.

The operating profit margin will expand about 25 basis points in 2018, below the target it had for previous years, the brewer said yesterday, warning of a headwind as it integrates a business in Brazil that it bought from rival Kirin for 2.2billion real (R7.9billion).

The Dutch company became the second-largest brewer last year in South America's largest economy after Kirin stumbled amid competition with AB InBev. Heineken’s namesake brand had double-digit volume growth in Brazil in 2017, which was an improvement after a slump caused by a currency devaluation and political upheaval.

The integration was progressing “very well” and the dilutive impact on profit was less than the company first expected, chief financial officer Laurence Debroux told reporters.

Heineken will provide a long-term forecast for profit growth next year, she said, as the company moves past an earlier guidance set in 2014 for 40 basis points of annual margin expansion.

Heineken still expects underlying margin improvement in the “ballpark” of the past two to three years, Debroux said later while on a call with analysts.

“We grow through targeted acquisitions in countries where we're not, or where we think we’ll add some power,” she said on Bloomberg TV.

The company has acquired California-based Lagunitas Brewing, a stake in London's Brixton Brewery, as well as South African brewer Stellenbrau.

Major beermakers have been snapping up craft brewers as growth of their mainstream brands slows. Constellation Brands paid $1billion (R11.96bn) for Ballast Point Brewing in 2015 and entered the cannabis market with a minority stake in Canada’s Canopy Growth last year.

Asked in the Bloomberg TV interview whether Heineken was thinking about investing in the marijuana business, Debroux said: “I’m going to be clear: no. It’s a situation that we’re looking at, and that we’ve had a number of questions about, with marijuana becoming legalised in a number of states in the US.” 

- BLOOMBERG