Analysis - Anheuser-Busch InBev takes plaudits despite own goal
There was general agreement among analysts that Anheuser-Busch InBev's Q1 results yesterday were better than expected.
That's not to say the global brewer doesn't face a few challenges as it gets 2015 out of the blocks. But first the good news.
Yesterday's numbers marked "an excellent performance given the very tough comparatives" in the US and Brazil, according to Bernstein analysts. Reported net sales may have dipped but organically they were still 2% ahead of Bernstein's expectations as Brazil did much of the heavy lifting. The country had been expected to underperform this quarter because it was cycling the lead-up to last year's World Cup, which lifted demand. Instead, the market increased its beer volumes, helping A-B InBev's Latin America North unit grow sales by 12%.
There was also, according to analysts at CLSA, a "significant" improvement in A-B InBev's China margins, which are typically low in the high-volume market, as the company continues to manoeuvre its brands up the value chain. A-B InBev's China volumes grew 5% in Q1, and organic share rose 100bps to 16.7%, CLSA says.
But, now the bad news. Despite the Q1 plaudits for Brazil, analysts at CLSA still expect beer volumes in the country to decrease over the next two quarters as the World Cup comps take their toll along with Brazil's slumping beer production (production was down 13% in April, CLSA says).
Meanwhile, Bernstein believes A-B InBev's results were "slightly flattered" by Brazil's high inflation.
"The payback for high Brazilian inflation is weak foreign exchange and hence real 'underlying' organic growth is somewhat less than the headline figures suggest," the analysts say.
However, there is another factor at play - one more of A-B InBev's own making. Last week, the company was forced into fire-fight mode, all because of a one-sentence message printed on some of its Bud Light bottles. Part of A-B InBev's 'Whatever Happens; marketing campaign, the message read: "The perfect beer for removing the word 'no' from your vocabulary for the night."
Twitter was aflame with accusations that Bud Light was advocating date rape, two words no company wants within a country mile of their brands.
A-B InBev was quick to respond, rushing out a statement saying that the company had "missed the mark". "We regret it," A-B InBev said. "We would never condone disrespectful or irresponsible behaviour."
But, CLSA fears the damage may already have been done. "We are concerned that negative headlines following a marketing gaffe could further hurt Bud Light as it enters the key summer season."
Has the company that is currently priding itself on a successful post-World Cup just scored this year's most farcical own goal?
Companies: Anheuser-Busch InBev
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