Anheuser-Busch InBev needs to kick-on in 2012

Anheuser-Busch InBev needs to kick-on in 2012

Dave Peacock's exit as US president at Anheuser-Busch InBev completes a full change of backroom staff at the brewer, but how might it affect the company's performance on the pitch?

Peacock is the last surviving senior executive from the days when August Busch III and IV presided over a family beer empire. Since acquiring Anheuser-Busch for a record US$52bn in late 2008, InBev's Brazilian-dominated management has brought its own people in.

After the takeover, Luiz Edmond became the new-look brewer's zone president for North America, moving from his job as CEO of InBev's Brazil-based AmBev. Now, he will add Peacock's job to his list of responsibilities. just-drinks understands that Peacock is leaving to spend more time with family and on other business projects, although he will remain as an adviser to A-B InBev.

Will much change following Peacock's departure? Simon Hales, analyst at Barclays Capital, thinks not. "This does mean the end of the old guard, but I don't see a step-change," he told just-drinks today (25 January). Given that Peacock has reported to Edmond for the past three years, A-B InBev should see continuity. Naturally, given the brewer's reputation for cutting costs, the amalgamation of two jobs in one market looks apt.

However, analysts at Morgan Stanley believe that Peacock's departure is more than a symbol of the brewer's evolution. Commenting on the "Ambevisation" of A-B, they said: "We believe important operational changes are under way that should lead to profit growth acceleration." In particular, the analysts predict a strong focus on AmBev-style exclusivity deals with distributors.

"Some might be concerned that Mr Peacock's departure creates risks of disruption, given his connections to wholesalers and the ex-A-B organisation," they added. "However, we believe Luiz Edmond taking over was planned."  

How Edmond must wish that he could have brought some of that Brazilian thirst for beer to the US. That's not going to materialise; the US is much further forward in the growth cycle.

Still, a little bit more Brazilian magic in A-B InBev's day-to-day US business could do little harm. Mainstream beer sales in the country are still floundering and, as of 2011, Coors Light is outselling Budweiser original. 

While the leadership may have evolved, A-B InBev's key challenges in the US market in 2012 look very similar to those of three years ago: Namely, how to stop market share losses on Budweiser; how to insulate net sales and profits against weak demand for beer generally; and, at the same time, how to reinvigorate interest in beer as a category.

Figures are likely to show that the US beer market shrank again in 2011, by around 1% to 2% in volume. Last week, third-quarter figures from SABMiller showed that MillerCoors, its US joint-venture with Molson Coors, saw volume declines on both Miller Lite and Coors Light over the three months to the end of December. Morningstar analyst Thomas Mullarkey said the group will likely "muddle through 2012", with more volume losses on key brands.

On a more positive note, Barclays' Simon Hales thinks that the US beer market might surprise a few observers in 2012. "We could well end up being too cautious on beer volumes in the US," he said. It's hard to predict, given that mainstream beer's plight is so strongly aligned with high unemployment among young males. But, Hales added: "If the current macroeconomic data is to be believed, people may feel a bit more confident [in 2012]."   

Morgan Stanley analysts see green shoots for A-B InBev specifically. "We believe there are already some signs of turnaround in US top-line and distribution profit pool optimisation," they said. "However, the bulk of it is to start happening in 2012, in our view."

A-B InBev already performs better than MillerCoors in terms of revenue per hectolitre of beer sold, having beaten its main rival in four of the last seven reported quarters, and drawn level in a further two, according to Sanford Bernstein research. Morgan Stanley analysts think that the brewer can, and should, go further.

At the same time, the brewer appears committed to innovation and a strong sports marketing spend. Bud Light Platinum, at 6% abv, is set to officially launch in the US next week. Earlier this month, meanwhile, Blaise D'Sylva became the group's new head of sports and entertainment marketing, adding fresh impetus to a role vacant since Mark Wright left for AT&T last summer.

In addition, A-B InBev has beefed up its zonal management team for North America by handing a seat at the table to its current VP of marketing in the US, Paul Chibe, and US VP of sales, David Almeida.

There are some good signs, then, for A-B InBev in the US in 2012. That said, after three years of reorganising, the pressure on the brewer to show more bang for its buck in the US is increasing.