Comment - Will Anheuser-Busch InBev stick around in Russia?
What will A-B InBev CEO Carlos Brito do in Russia?
We've been debating here at just-drinks whether Anheuser-Busch InBev will hang on to its underperforming Russian business, Sun InBev.
Sun InBev, which also operates in Ukraine, posted some pretty grim first quarter figures this week. Volume sales fell by 14% for the three months to the end of March, while net sales tumbled by 20% to US$244m, even factoring in currency gains compared to the same period of 2009.
Normalised EBITDA, which excludes one-off items, crashed by 85.5% to just $8m, versus $62m a year earlier, reflecting a collapse in operating margins.
These figures must be seen in the context of a three-fold tax rise on beer in Russia on 1 January, which is expected to have damaged volume sales at all major brewers in the country during the first quarter.
However, competitors such as Anadolu Efes, SABMiller, Heineken and Carlsberg appear to have performed better on volume sales, albeit to varying degrees. This suggests Sun InBev has relinquished more market share. Figures from Business Analytica show that the group lost 2% of volume market share in Russia in 2009, dropping from 19% to 17%.
Our debate on A-B InBev's future plans for the business emanates from InBev's disposals plan following the $52bn takeover of Anheuser-Busch in late 2008.
Several analysts named Sun InBev as a contender for the chopping block, albeit with other businesses ahead of it in the pecking order.
In the event, A-B InBev achieved its disposals target without Sun InBev, but the speculation has never properly disappeared.
On the face of it, you might think A-B InBev daft for wanting to ditch the business. After all, Russia is expected to return to growth over the longer term and the brewer can only boost itself via cost savings in mature western markets for so long. It is present in Brazil through the AmBev unit, but that market is saturated for the company, while the group last year sold out most of its stake in Chinese brewer Tsingtao.
Russia may have its challenges, but it is still considered an emerging market.
At the same time, Russia may be proving too much of a drag on A-B InBev. The company is the world's largest brewer by volume, yet it lies a poor second behind Carlsberg in Russia, where its market share is going in the wrong direction and margins are being squeezed.
We heard rumours last year that a Turkish brewer, likely Anadolu Efes, was sniffing around Sun InBev.
Considering the uncertainty around Russia in 2010, potential buyers may wish to hold their fire. But, a Sun InBev sale over the medium term should not be ruled out.
We fully intend to keep an eye on how things develop here in the UK with Grupo Modelo's Corona Extra bottled beer brand....
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