RUSSIA: Anheuser-Busch InBev could cash in as market declines - analyst
Anheuser-Busch InBev is losing market share in Russia
Anheuser-Busch InBev can cut free from the struggling Russian beer market and realise up to US$4bn by selling off its assets in the region, an analyst has suggested.
The brewer, which saw its Russian beer volumes decline by 17% in third-quarter results this week, are “losing critical mass” in the country, according to Nomura analyst Ian Shackleton. A-B InBev's Russian unit, SUN InBev, takes up more management time than it deserves while returning just 2% of the company's total profit, Shackleton said.
“The normal A-B InBev model is to have big market share in big markets, such as they do in Brazil, and the US,” he told just-drinks today (2 November). “In Russia, it's a big market, but it's arguable that its market share position is drifting.”
Shackleton said a sale of the unit will be more likely in 12 to 18 months to allow for some recovery in the Russian market and a higher profitability.
However, he said one obstacle would be reluctance to sell to a rival such as Heineken, who may be keen to acquire Sun InBev's 15% market share.
A-B InBev could expect to get about $4bn from any sale of SUN InBev and SUN InBev Ukraine if value is taken as twice its annual sales, Shackleton said.
Bernstein Research analyst, Trevor Stirling, disagreed with Nomura, saying a sale is “not on the cards”.
“They are getting out of the cheaper end of beer,” Stirling said, highlighting the recent closure of a brewery in Kursk. “But I think Russia is such an important platform for Budweiser, and the international success of Budweiser is very important to them.”
In Russia this year, Budweiser volumes grew about 40% in both third-quarter and year-to-date results. “(A-B InBev is) retrenching in Russia to a more profitable core,” Stirling said.
He added that the group is the leading company in Ukraine and has no reason to sell.
In a statement, A-B InBev said it remains committed to its Central & Eastern Europe business as it faces "the new reality of the Russian beer industry".
"Given the declining industry, challenging regulatory environment and tough competitive conditions, our strategy in Russia has been to focus on premiumising and improving the profitability of our brand portfolio," it said.
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