Analysis - Anheuser-Busch InBev vies for Wall Street beverage crown

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A peculiar thing happened on Wall Street after Anheuser-Busch InBev released its full-year numbers yesterday (26 February).


For a few short hours, the global brewer's total market capitalisation rose fractionally above that of soft drinks giant - and trading floor beverage favourite - the Coca-Cola Co. By the end of the day, Coca-Cola had regained the difference, but it prompted the Wall Street Journal to announce that shareholders might have a new “king of drinks”.

That coronation is unlikely to happen - Coca-Cola is going through an uncharacteristic sticky patch as it tackles health concerns over CSDs - but its proposal serves to remind us of the financial clout A-B InBev has, and beer's brighter prospects going forward, compared to traditional soft drinks such as Coke.

A-B InBev's full year numbers weren't great. Global volumes slipped and there were market share losses in the US and Brazil.

However, despite these pressures, the brewer still pushed through a 10% net profits increase and a 3% rise in sales. Compare that to Coca-Cola's full-year 5% net profits drop and 2% sales dip, which came despite a global volumes increase.

Nomura analyst Ed Mundy believes the numbers show A-B InBev can “muscle out” robust results in the context of a weak top line. “This largely reflects strong cost savings and conservative financial guidance,” he says.

And, while the brewer's outlook is “not rock and roll” there is a strong sense of “steady as she goes” for the rest of the year, he adds.

CLSA's Caroline Levy believes that the problem market of Brazil can “expect a return to solid volume growth” in 2014, helped by marketing around the FIFA World Cup, of which A-B InBev is the sole alcohol sponsor through its Budweiser brand.

Underlining that turnaround were yesterday's Brazil numbers - beer volumes fell by 4.3% in FY13, and by 3.4% in the final quarter of the year, with A-B InBev's market share in the country falling by 60 basis points over the full year.

Mundy, meanwhile, thinks that Brazil's outlook is “good news” for the brewer.

With investors painting a rosy picture for A-B InBev over the coming months, it was no surprise that CEO Carlos Brito ended his post-numbers conference call yesterday in an upbeat mood. “We're very excited about 2014, to see a lot of our major markets in a better place in terms of industry,” he said. “That's so exciting.”

Budweiser likes to market itself as the king of beers. Its parent company might one day find itself wearing a different crown.

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