UPDATE: BELGIUM: InBev posts leap in earnings
InBev has vowed to turn around its business in China after expressing dissatisfaction with its performance in the world's largest beer market during the first half of the year.
The Belgian brewing giant said today (7 September) that rising price competition in China had led to "more challenging" market conditions, especially during the second quarter.
"We're not entirely happy with our volume performance. In the second quarter, we suffered competitive pressures from national and local competitors," InBev CEO Carlos Brito said.
InBev CFO Felipe Dutra said some "aggressive" competitors had introduced pricing at "negative gross margins". Brito added that InBev's local management had put plans in action to regain share in "some important provinces".
Brito criticised the "opportunistic, value-destroying" strategies of InBev's competitors in China but refused to rule out that the brewer would introduce price cuts of its own in the coming months. He said: "We have to react to our competitors and keep our market share in a strong position."
InBev has focused on building a strong regional base in south-eastern China. In January, the brewer snapped up local beer maker Fujian Sedrin for US$730m and Brito insisted those operations were performing "ahead of expectations".
InBev declined to give sales figures from its business in China but said growth across Asia-Pacific had "slowed" to 3.2%.
Brito revealed that it had "not been a good year" for its business in South Korea, despite InBev reporting a 3.9% rise in volumes during its second quarter. Brito said InBev's second brand in South Korea, OB, had lost share over the last six months.
"The team in South Korea share our dissatisfaction and are committed to change," Brito added.
On a global basis, InBev said operating profit had leapt 23.2% to EUR817m (US$1.04bn) for the three-month period. Revenues rose 8.3% to EUR3.4bn.
InBev's global beer volumes rose 5.7% thanks largely to growth in Latin America and Central and Eastern Europe.
InBev again saw volumes rise in Brazil but also enjoyed strong growth across the southern cone countries, including Argentina, Bolivia and Uruguay, thanks to its majority stake in Argentina's largest brewer Quinsa. Net profit from the region jumped 21.3% to EUR439m.
Double-digit volume growth in Russia and the Ukraine drove an 11% jump in volumes across Central and Eastern Europe, while InBev also saw volumes in Romania soar 35%. Net profit from the region jumped almost 40% to EUR144m.
The brewer also enjoyed some respite in Western Europe. InBev, alongside most of its brewing rivals, has found the region challenging as beer consumption slowed but the Stella Artois brewer reported rising earnings and volumes during the quarter.
Volumes were up 2.4% thanks to sales growth in Belgium, Germany and the UK, InBev said. However, the brewer added that its plans to revitalise the performance of its UK business still had "some way to go". InBev's net profit in Western Europe rose 11% to EUR243m thanks to rising sales and the merger of its finance, procurement and export functions.
InBev's four global brands, Stella Artois, Beck's, Brahma and Leffe, all saw volumes rise. Growth in Germany, the US and Eastern Europe buoyed Beck's sales, while "solid" growth in North America boosted sales of Stella Artois.
This month’s just-drinks interview is a double-header, featuring two prominent executives from major international brewing groups operating in Europe. First, Olly Wehring discusses the challenges faci...
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