Comment – US Gives Anheuser-Busch InBev Reason to Cheer
Bud Light Platinum is helping Anheuser-Busch InBev to beat the blues in the US beer market, but Western Europe continues to be a drag and Brazil is taking time to gather speed.
How pleased will A-B InBev's executive team have been to report first-quarter volume sales up by 1% in the notoriously troubled US beer market? Very pleased, I'd wager. Considering mainstream brewers' woes in the US, particularly since the onset of the economic downturn, this day has been a long time coming.
Bud Light Platinum, launched at the beginning of 2012, looks to be the main source of A-B InBev's green shoots, although a slightly improved US unemployment rate won't have done any harm. Bud Light Platinum is currently the most successful new product in the US alcoholic drinks sector since 2005, the brewer crowed. It will know, however, that the key is persuading consumers to come back for a second swig.
It's worth noting that A-B InBev still lost “marginal” volume market share in the US during the three months to the end of January. Rather than an upsurge at rival MillerCoors, this market share pressure is likely being applied by ongoing momentum for craft beer and A-B InBev's own conscious efforts to premiumise.
On a more positive note, the premiumisation strategy worked in tandem with beer price rises in the first quarter to enable the Budweiser brewer to increase revenue per hectolitre in the US by 4.3% versus the same quarter of 2011. It's too early to hail a US revival, with A-B InBev itself pointing to a softer second-quarter. But, things haven't looked this promising in the market for several years.
On a global level, A-B InBev's 6% rise in first-quarter net sales and 7% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) divided opinion. The brewer's share price dipped by almost 1.5% after it narrowly missed most analysts' EBITDA estimates.
Gerard Rijk, analyst at ING Bank, told just-drinks that EBITDA “is a bit disappointing for the first time in many quarters”. He added that A-B InBev's 2% increase in revenue per hectolitre in Brazil is weak. There also appears to be a tussle taking place between A-B InBev's Brazilian unit, AmBev, and the country's Government, with a suggestion that this may affect AmBev's investment plans. “Regarding our capex plans, we remain ready to invest up to BRL2.5bn (US$1.3bn) in 2012, depending on the levels of federal taxes,” AmBev said in its own results announcement today.
In the UK, meanwhile, Rijk said that a near-10% fall in beer volume sales looked “disturbingly down” considering that market-wide volumes across Western Europe fell by an estimated 2% over the same three months. The region as a whole was a disappointment for A-B InBev, with a 2% drop in EBITDA and a 2.5% fall in own-beer volume sales.
Analysts at Sanford Bernstein struck a more upbeat tone, referencing that A-B InBev always expected Brazil to start slowly in 2012. The firm expects revenue per hectolitre of beer sold to increase in-line with inflation in Brazil for the full-year. Inflation is currently running at 5%.
Overall, however, the first-quarter has thrown up as many challenges as successes for A-B InBev across its global business. Western Europe continues to drag on profits and Russia remains volatile. Troubles in Europe, though, could be quietened if the group can get things right in the US and Brazil.
These two markets provide the obvious backdrop to A-B InBev's performance in 2012, alongside, perhaps, moves to consolidate in China.
The second part of this month's management briefing shines a light on the logistics landscape in the Americas....
It has been an absorbing day at the ICAP 'Global Actions: Initiatives to Reduce Harmful Drinking' conference here in Washington DC....
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