Below are key drivers of Anheuser-Busch InBev that present opportunities for upside or downside to the current Trefis price estimate:
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 35.9% in 2021.
Going forward, Trefis expects margins to grow to 39% by the end of our forecast period. However, if margins rise to 44% on a favorable product mix and improved operational efficiencies, there could be a 25% upside to our current price estimate for Anheuser-Busch InBev.
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.
On 7 October 2016, BUD acquired control of SABMiller, and on 10 October 2016, it completed the business combination. The transaction was valued at a gross purchase consideration of USD 114 billion.
Budweiser is one of the top-selling beers in the United States. Globally, Budweiser volumes have grown every year since 2010. 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 and 2018 FIFA World Cup and has confirmed its sponsorship of the 2022 FIFA World Cup.
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.
The recession in Brazil previously helped consumer spending, especially on beer. In Brazil, volume performance remained under pressure due to a challenging consumer environment, with declining real disposable income and the increase of the unemployment rate to its highest level since 1995.
However, AB InBev has looked to maneuver through this period of low customer confidence and weak economic conditions by focusing on creating value and protecting profitability in the country. The company has emphasized sales of returnable glass bottles (RGBs), which have made their way back into off-trade channels. RGBs are cheaper and attract customers who are looking for smart choices in terms of purchasing, in a weak spending environment in Brazil, where disposable incomes are falling. Although RGBs negatively impact top-line growth, they are accretive to margins, thus helping AB InBev protect its profitability. Providing customers with affordable options seems like a solid strategy for AB InBev, which is battling slowing consumption in Brazil. The company is now in recovery mode in the country, spurred by a positive mix, RGBs, and easier foreign currency comparisons.
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.