just On Call - Anheuser-Busch InBev sticks to guns in US
Anheuser-Busch InBev undeterred by sluggish US beer market
Anheuser-Busch InBev's CEO has said that the company will not waver from its strategy to increase beer prices in the US, despite ongoing weak consumer confidence in the country.
The Budweiser brewer plans to continue its efforts to close the price gap between its sub-premium and mainstream premium beers, group CEO Carlos Brito said yesterday (4 May). "We're very committed to it," he told analysts on a conference call following A-B InBev's first quarter results.
A 3.5% drop in beer sales by volume in North America, as well as near flat volumes in Brazil, blighted an otherwise solid set of quarterly results for A-B InBev in the three months to the end of March. However, the company used top line growth to claim that its pricing strategy in the US and in other key markets, including Brazil, is working. The group's global net sales for the quarter rose by 5.6%.
In the US, both A-B InBev and its main rival, MillerCoors, are seeking to close the gaps between different price brands in order to squeeze more revenue out of a weak market.
A-B InBev said today that this strategy led it to leak 0.6% of volume market share in the country in the first three months of 2011. "We've proven before that we're willing to go through short-term pains if it's for the good of the margins and the long-term future," Brito told analysts.
The group wants to reduce the price gap between sub-premium beers and premium beers to 15%, which it said reflects the gap in other major beer markets and in consumer goods markets more generally. Brito conceded that this could take several years to achieve.
The brewer is taking some positives from the US, such as double-digit volume growth for Stella Artois lager and stronger demand for high-end beers generally.
Some analysts have suggested that the US beer market is starting to head in the right direction after two tough years. However, the market remains in decline and Brito was cautious in his comments. "We see some signs of more consumer activity, but those are yet to be confirmed," he said. "We try to do what we can control," he said, adding that this means investing in brands and marketing and adapting prices.
The group is also investing more resources in the fast-growing craft beer sector. This week, Brito said, the brewer has completed its acquisition of Goose Island for US$38.8m.
In the first quarter, A-B InBev's EBITDA rose by by 6.5% to $3.4bn, while net profits doubled to $964m.
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