The Year That Was: Anheuser-Busch InBev
Anheuser-Busch InBev (NYSE:BUD) has missed the consensus estimates for revenue in all of the first three quarters of the fiscal year 2016, as a slowdown in crucial markets, especially Brazil, weighed on the financials. Moreover, with almost 70% of the sales from outside the U.S., the rising U.S. dollar against foreign currencies dragged down the top line growth for the world’s largest brewer.
The numbers are telling for AB InBev. Organic volume growth is down 1.4% year-over-year through the first three quarters, with continual overall decline in beer volume in crucial markets such as the U.S., Brazil, and China.
- United States: The beer market in the U.S. is mature and AB InBev dominates it with ~45% market share. However, the brewer’s market share continues to drop in the country due to a declining demand for domestic beer — a category AB InBev dominates with products such as Bud Light and Budweiser. The brewer’s share dropped to 45% from 47.6% in less than a year in the U.S. beer market. More bad news followed for the brewer in Q3 as the craft beer segment, which has been growing at a fast rate, and is viewed as a potential growth segment, slowed down. AB InBev was looking to expand presence in the high-growth craft segment, which formed only 2% of its volume in the U.S. The brewer has bought 8 craft breweries between 2011-2016.
- Brazil: Recession in Brazil hasn’t helped consumer spending, especially on beer. The country forms over 25% of the net volumes for AB InBev, and is the second largest market for the brewer behind the U.S. Through September, AB InBev’s Brazil beer volumes declined 6.4%, bringing down the overall company’s volume growth to -0.7%, impacted by higher prices and a challenging consumer environment.
- China: The beer market in China declined 4% year-over-year through the first three quarters, and this slowing demand caught up to AB InBev as well, with the brewer’s volumes down 0.5% during this period. Although the brewer has done well to grow its market share in a slow market, the slowing demand hasn’t helped its overall volumes, especially as China is expected to be one of the growth drivers for the company going forward.
Despite the dropping volume numbers, the main point of focus in 2016 regarding AB InBev was the acquisition of SABMiller. Throughout the year, various SABMiller divestitures were made in many markets to appease regulatory authorities, and finally the combination was completed in October last year. 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. 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. And 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 then agreed to sell a group of SABMiller’s Central and Eastern European brands for around $7.8 billion to the Asahi Group.
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With organic beer growth hard to come by, especially in developed markets where the beer segment is mature, the combination with SABMiller will help augment AB InBev’s volumes, especially given that the former has now given AB InBev access to Africa, an emerging market for beer.
Have more questions on Anheuser-Busch InBev? See the links below.
- Here’s How AB InBev Trimmed Business To Make Room For SABMiller
- Another Sale To The Asahi Group As A Consequence Of The AB InBev-SABMiller Merger
- Brazil Slowdown Weighs On AB InBev’s Financials, As Earnings Decline By More Than Expected
- How Will AB InBev Derive Growth In Brazil During Tough Times?
- AB InBev’s Q2 Results Marred By Brazil Slowdown And Currency Woes
- AB InBev: SABMiller Combination Could Make U.S. Business Weaker
- How Can AB InBev’s Asia-Pacific Beer Segment Grow In The Next Five Years?
- How Can AB InBev’s Mexico Beer Segment Grow In The Next Five Years?
- How Can AB InBev’s South America Beer Segment Grow In The Next Five Years?
- How Can AB InBev’s North America Beer Segment Grow In The Next Five Years?
- Where Will AB InBev’s Revenue And EBITDA Growth Come From Over The Next Three Years?
- What Is Anheuser-Busch InBev’s Revenue And EBITDA Breakdown?
- How Important Is South America For AB InBev?
- How Has AB InBev’s Revenue And EBITDA Composition Changed Over 2012-2016E?
- By What Percentage Have AB InBev’s Revenues And EBITDA Grown Over The Last Five Years?
- Is Asia Pacific Becoming A Significant Segment For AB InBev?
- Why Asia Pacific Revenue Is Estimated To Grow By 3x The Net Sales For AB InBev Through 2020
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