just On Call - Don't worry about Brazil - Anheuser-Busch InBev
- Brewer to launch Budweiser within three weeks
- New brewery to open in Q4
- Volumes to improve moving into 2012
Anheuser-Busch InBev confident of riding out Brazil weakness
Beer sales in Brazil are struggling in 2011, but Anheuser-Busch InBev has said that it sees no cause for alarm in the country.
A-B InBev will launch Budweiser in Brazil within the next three weeks as it begins to step-up efforts to develop the country's premium beer category. The move, though, comes amid a lull in consumer demand.
After acting as the powerhouse for A-B InBev in 2010, Brazil has suffered a fall from grace in 2011. The group's beer sales there came in weaker than expected for the first half of this year, with volumes down by 1% in the country. Volumes dropped by 2.6% in the second quarter, said the group, which has a 70% share of the market via its AmBev subsidiary.
Price increases enabled A-B InBev's first-half net sales in Brazil to rise by 7% to BRL8.49bn, but the volume performance caused some consternation among analysts.
"The Brazil performance is disappointing," said Stifel Nicolaus in a note today (11 August). However, A-B InBev's CEO, Carlos Brito, reminded analysts on the firm's H1 results conference call today that 2011 was always going to be about "revenue management" instead of volumes.
"Volumes declined on a very tough comp, because in the second quarter of last year volumes rose by nearly 14%," he said, also citing efforts by the Brazilian Government to "cool down" the national economy in the last few months.
Things are likely to stay tough on the volume front in Brazil, but A-B InBev's local unit, AmBev, expects to begin seeing improvements from the fourth quarter, when it will open a new brewery in the north-east of the country. Moving into 2012, the Brahma brewer believes beer sales will benefit from a projected 7.5% real-terms increase in the minimum wage.
Stifel Nicolaus, too, is inclined to take a longer-term view on Brazil's beer market. "We think the long-term case for strong growth in Brazil is still very much intact," it said today.
A-B InBev reaffirmed its confidence in Brazil's fledgling premium beer sector; something that will likely be of interest to Japan's Kirin Holdings as it seeks to acquire the country's second largest brewer, Schincariol.
Premium beer only accounts for 5% of beers sold in Brazil. "Compared to other markets, that's very small," said Brito. Volumes of Stella Artois tripled in Brazil, albeit of a small base, in the first-half, A-B InBev said. Meanwhile, Brito told analysts that he expects Budweiser to hit the ground running in the country, because consumers already know of the brand via international sponsorships, such as for the FIFA World Cup.
Brazil is set to provide 39% of A-B InBev's earnings before interest and tax in 2011, level with the US, according to analyst group Sanford Bernstein.
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