VALUATION HIGHLIGHTS

1. Latin America West constitutes 29% of the Trefis price estimate for Anheuser-Busch InBev's stock.
2. North America constitutes 23% of the Trefis price estimate for Anheuser-Busch InBev's stock.
3. Latin America North constitutes 21% of the Trefis price estimate for Anheuser-Busch InBev's stock.

WHAT HAS CHANGED?

1. 2023 Performance

   AB InBev's revenues increased 3% to $59.4 billion in 2023, led by pricing gains, while volume was down 1.7%. Looking at segments, South Americas drove the sales growth, with segment revenue up 27% on an organic basis. AB InBev's earnings of $3.05 on a per-share and adjusted basis reflect a marginal rise over the $3.03 figure the company reported in 2022.



2. Bud Light Controversy

   AB InBev decided to feature Bud Light in a social media promotion by a transgender influencer, Dylan Mulvaney, in April 2023. This was followed by calls for a boycott of Bud Light by some of the influential voices. Lower Bud Light sales weighed on AB InBev's U.S. sales in Q2 of this year. Following the boycott, the company decided to put two of its executives on leave of absence.



3. Anheuser-Busch's APAC Listing

   AB InBev raised $5 billion by listing its Asia-Pacific operations in Hong Kong in September 2019, in what was the second-biggest IPO of 2019, behind Uber. The company's primary reason for this listing was the healthy growth seen and expected in China and other emerging markets in Asia.
   



4. Anheuser-Busch and SABMiller combination is about opening opportunities in emerging markets

   AB InBev completed its over $100-billion merger with SABMiller in October 2016, creating a beer behemoth with the combination of the world's highest-selling brewers. The merger was focused on potential growth opportunities in emerging markets, especially Africa. AB InBev had no meaningful presence in Africa, while SABMiller had a leading >30% market share in the continent prior to the combination. According to AB InBev, beer volumes in Africa are expected to grow by 44% from 2014 to 2025, nearly three times the forecast global rate. Africa, as a percentage of net global beer volumes, is estimated to reach over 8% by 2025, up from 4.4% in 2000.
   Acquiring a beer business that is already well established in Africa made sense because of the relative difficulty in setting up a business in the continent. The beer market in Africa is still relatively nascent, and as disposable incomes increase and the beer-drinking culture spreads, beer volume sales are expected to rise. With strong distribution channels and a strong brand image, SABMiller brought in an opportunity for AB InBev to increase the reach and availability of its globally renowned brands, such as Budweiser and Corona.
   



5. AB InBev divests SABMiller's businesses in crucial markets to appease regulators

   AB InBev has now raised ~$27 billion from divestments of SABMiller's interests in the U.S., China, and Europe, recovering more than one-fourth of the money it paid to acquire the world's second-largest brewer.
   In the U.S., SABMiller sold its 50% voting interest and 58% economic interest in MillerCoors to Molson Coors, its partner in the joint venture, for around $12 billion. The deal gives Molson Coors the global rights to the Miller brand, and also the right to continue selling brands it currently holds in its portfolio in the country (MillerCoors), including Peroni and Pilsner Urquell.
   In China, AB InBev sold SABMiller's 49% in its joint venture called CR Snow, with China Resources Enterprise, which has a leading >20% volume share in the country's beer market, for $1.6 billion.
   In Europe, AB InBev sold certain of SABMiller's premium European brands including the Peroni and Grolsch brands, and related businesses to the Asahi Group for ~$2.9 billion, and also agreed to sell a group of SABMiller's Central and Eastern European brands for around $7.8 billion to the Asahi Group.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Anheuser-Busch InBev that present opportunities for upside or downside to the current Trefis price estimate:

BUD EBITDA Margin

BUD EBITDA Margin has witnessed slight pressure in recent years as a result of increased costs and foreign currency translations, as well as the addition of Global Export and Holding companies in the Trefis estimates. The figure stood at 34.3% in 2022.

Going forward, Trefis expects margins to grow to 37% by the end of our forecast period. However, if margins rise to 42% on a favorable product mix and improved operational efficiencies, there could be a 25% upside to our current price estimate for Anheuser-Busch InBev.

BUSINESS SUMMARY

Anheuser-Busch InBev is the world's largest brewer by volume and one of the world's top five consumer products companies by revenue. It produces, markets, distributes and sells over 500 beer and other malt beverage brands. Some of its beer brands include global brands such as Budweiser, Stella Artois, and Corona (not in the U.S.), international brands such as Hoegaarden, Leffe, and Beck's, and popular local brands such as Bud Light, Brahma, and Antarctica. The company also produces and distributes soft drinks, particularly in Central and South America and Africa, and other near-beer products, such as Lime-A-Rita and other Rita family products in the United States and Mexico; MixxTail in China, Argentina, and other countries; and Skol Beats in Brazil

Inbev was formed in 2004, combining the Belgian company Interbrew and the Brazilian company Ambev, which, in turn, was comprised of the brewers Brahma and Antarctica. In 2008, InBev and Anheuser-Busch came together to form Anheuser-Busch InBev, with around $54.8 billion required to fund the deal. As a result, the company opted for a formal divestiture program, including the sale of stakes in the brewers Tsingtao and Oriental Brewery, in order to reduce the debt taken on for the combination of Anheuser-Busch and InBev.

In June 2013, the company completed the acquisition of leading Mexican brewer Grupo Modelo, in a deal valued at $20.1 billion. With this combination, Anheuser further grew its presence in Mexico, the world's fourth-largest profit-pool for beer manufacturers, and could benefit from the expected growth of Corona, Grupo Modelo's popular flagship beer, around the world. However, Anheuser-Busch InBev transferred the operations of the Mexican Piedras Negras brewery and sold the exclusive rights to market and sell Corona as well as some other beers made by Grupo Modelo in the U.S. to Constellation Brands, as part of an antitrust agreement with the country's Justice Department.

BUD acquired control of SABMiller and completed the business combination in October 2016. The transaction was valued at a gross purchase consideration of USD 114 billion.

SOURCES OF VALUE

Budweiser is one of the top-selling beers in the United States. Globally, Budweiser volumes have been on the rise. Budweiser sales outside the United States represented over 70% of global Budweiser volume in 2018, driven by strong growth in Asia, Brazil, and Europe. Budweiser was a sponsor of the 2014, 2018, and 2022 FIFA World Cup. High viewership of the FIFA World Cup has aided the company's volume growth.

Increasing disposable incomes to boost demand for premium beer Budweiser

The global beer brand Budweiser has a premium brand positioning worldwide. With an increase in disposable incomes, consumers might shift to more expensive beer brands, boosting the brewer's volumes as well as revenues per unit volume.

1. Increasing disposable incomes and falling unemployment rates should boost sales of premium beers going forward, thereby improving the average revenue generated by breweries. The unemployment rate in the US fell to below 4% in Dec 2018 before rising to nearly 7% in 2020 due to the pandemic. It improved to 4% in 2021 and under 4% in 2022.
2. The consumption of beer in Brazil is slowing down, hampered by the ongoing slowdown in the economy, high unemployment rates, and a fall in personal disposable income.

KEY TRENDS

Diversifying beer portfolio

Flavored beer is an area that can provide growth for the company going forward. BUD has witnessed considerable success in this category in emerging and developed markets. For example, in South Africa, Flying Fish grew volumes in 2018 by recruiting females and younger LDA (legal drinking age) consumers into the beer category and grabbing shares from cider. In Western Europe, Cubanisto, a rum-flavored premium beer, grew its top line over the recent years (except for 2020) by successfully competing against spirits in the nightlife occasion category. The company is also trying to make in-roads in the craft beer industry, with partnerships with almost a dozen craft breweries. The company's craft portfolio is growing ahead of the industry, driven by organic growth, as well as expanded distribution. Even in France, its Leffe brand has grown to become the number one beer brand by penetration.