Will AB InBevs CEO, Carlos Brito, be able to turnaround his companys performance in Brazil?

Will AB InBev's CEO, Carlos Brito, be able to turnaround his company's performance in Brazil?

Earlier this week, Anheuser-Busch InBev released its full-year figures for 2016 and, although the markets had been prepared for bad news, analysts were surprised to discover things were worse than they'd anticipated.

The Budweiser brewer, hit by Brazil's weak economy, suffered big misses on market estimates of top-line growth including a nine-percentage point miss on Q4 organic EBIT and a three-point miss on global volumes. The performance was so bad that CEO Carlos Brito and other executives did not collect their bonuses for the year.

"If there's one thing AB InBev executive management won't be taking home this year, it's a fistful of dollars," says Barclay's Simon Hales, who in a note today unearthed a rich vein of Spaghetti-Western references to sum up AB InBev's disappointing results.

The good, Hales writes, comes from the ongoing cost synergies from the brewer's SABMiller takeover. The bad was the Brazilian plunge. The inevitable ugly was a 10% cut to full-year 2017 earnings estimates.

"There is no getting away from it," Hales warns. "Q4 16 results were bad."

At Exane BNPP Staples, Eamonn Ferry sums it up by saying: "We had feared the worst for Q4. Unfortunately, our fears were realised." Again, Brazil was identified as the "culprit" dragging down sales, volumes and profits.

There were, however, a number of bright spots.

Bernstein's Trevor Stirling said that last year's FX headwinds (A US$300m drag in Q4 2016) will turn into tailwinds this year, giving a boost to performance. There is also the potential purchase by Heineken of Kirin's Brazil unit. According to Bernstein's thinking, this could bring much-needed rationality to pricing in the country as Heineken is more value-focussed than Brasil Kirin was, even in its former incarnation as the independent Schincariol.

AB InBev maintains that its strategy in Brazil has been correct so far, despite suffering a year that Brito labelled "one of the toughest... in our history". Asked yesterday if he would have done things differently had he known how it would turn out, Brito stuck to his guns, saying that his plan for the Brazil market - to benefit from strong demographics and commit to returnable glass bottles - will win through in the long-term.

Analysts appear willing, thus far, to give the CEO time to prove himself right. After all, AB InBev isn't the only one hurting in Brazil. It just suffers more because it controls two-thirds of the country's beer market.

More quarterly results like yesterday's, however, would put pressure on Brito, no matter how many bonuses he forewent.

Luckily, the SABMiller takeover, completed in October, has given him breathing space when it comes to improving performance. In notes today, analyst generally cite the synergies from the deal - which are already appearing - as reasons to be optimistic. It takes time to settle in a business the size of SAB, despite its pared-down profile following AB InBev sell-offs to appease anti-monopoly watchdogs around the world.

It is time Brito needs to use well. If significant progress is not seen by this time next year, investor patience may wear thin. What would happen then? To continue the Spaghetti-Western references, some of AB InBev's more trigger-happy shareholders may start hankering for a new sheriff in town.

Anheuser-Busch InBev Full-Year 2016 results - Click here for just-drinks' full round-up