Comment - Anheuser-Busch InBev: The Teflon brewer
Would you bet against Anheuser-Busch InBev CEO Carlos Brito?
It is borderline preposterous that InBev should have completed the biggest takeover in brewing industry history in the middle of the worst recession for a generation and then reduced debt faster than expected at the same time as maintaining increases in sales and profits.
Yet, that is the reality of the situation. A-B InBev's half-year figures yesterday (12 August) provided another hats-off moment to the efficiency of the Budweiser and Stella Artois brewer.
You'd think a brewer that accounts for one in five beers sold globally would be somewhat concerned about a global recession. But, net sales for the six months to the end of June rose by 3%, with volumes up 1.5% - at a time when several rivals have reported stagnation - and EBITDA also increased by 5%, even with an increase in advertising and marketing spend.
Not even a global wheat crisis can dampen the brewer's confidence at the top of the global beer market.
We're not saying that yesterday's results were perfect; in some regions, they were far from it. Beer volume sales fell by 5% in North America, which is faster than the market according to some estimates. Sales also continued to struggle in Europe. Brazil, together with China, largely held up volumes and A-B InBev itself admitted that it needs to make more market share gains in key markets.
It should also be remembered that A-B InBev announced earlier this year that it would cut around 10% of its workforce in Western Europe as a result of long-term decline in demand for beer.
Some analysts have said that the brewer cannot go on cutting costs forever. Last year, the brewer gained plaudits by surpassing its target of US$7bn in asset disposals following InBev's $52bn buyout of A-B. This year, while the firm has continued to cut debt faster than anticipated, there has been greater scrutiny on the top-line.
The US remains a big problem in volume terms, but A-B InBev insisted in a conference call yesterday that it would succeed in maintaining value sales growth by raising beer prices in the US. Consumers, it argued, would accept it and, in any case, volume sales will cycle lower comparison numbers in the second half of 2010.
Analyst group Sanford C Bernstein provided a neat summary of the group's performance so far this year: "Unlike some other global consumer product companies," it said, "A-B InBev is showing how the brewing industry in general, and A-B InBev in particular, is able to generate solid and improving global volume trends without resorting to price cuts, and at the same time increase A&P spend and expand margins."
The company has predicted an acceleration of EBITDA growth and stronger volume sales in the second half of 2010. It is fair to say that A-B InBev has won itself a fair few detractors, but who would bet against the firm?
That's why we're naming A-B InBev the Teflon brewer. No crisis seems to stick.
There are sound reasons behind Anheuser-Busch InBev's foray into the cider market with Stella Cidre, but the brand needs to be clear about what it's trying to do if it's going to survive as a latecome...
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