Global Brands To Drive Revenue Growth For Anheuser-Busch In The Second Quarter

Anheuser-Busch InBev (NYSE:BUD) is slated to report its second quarter earnings on July 27, marking the third time the company will be addressing its shareholders since finalizing the merger with SABMiller. In the last quarter, BUD delivered a miss on its earnings, and this trend has been continuing in the past four quarters. The question, therefore, on everyone’s minds is whether the company can deliver a positive surprise this time around. The company is on track with its integration of SABMiller, and divesting some of its assets as part of the merger deal. Despite the divestitures, the combined company holds the top spot in the beer industry, accounting for 30% of the industry’s sales, and 46% of the profits. Below we’ll highlight certain trends taking place, which may have an impact on the company’s earnings.

1. Synergies From The Merger

• The company continues to deliver synergies from the combination with SABMiller.
• In the first quarter, BUD delivered synergies of $252 million, with a large portion of the synergies coming from best practice sharing.
• BUD expects the delivery of $2.8 billion worth of recurring synergies and cost savings, on a constant currency basis, over the next three to four years.
• This involves one-off cash costs of ~$900 million, to be incurred in the first three years of the deal closing, of which $318 million has been spent till date.

2. Importance Of Global Brands

• The combined revenues for the three global brands – Budweiser, Corona, and Stella Artois – grew by 12.1% in the first quarter, and this strong growth is expected to continue in this quarter as well.
• Budweiser revenues grew by 7.3%, with 16.4% growth in revenues outside of the US.  Stella Artois revenues grew by 21.1%, driven mainly by growth in the US and Argentina. Corona had a solid quarter as well, with revenues growing 18.2%, with 48.2% growth in revenues outside of Mexico, as a result of strong growth in Western Europe and China.
• The company continues to fuel the growth of these brands by leveraging their enormous commercial platforms, while also expanding to new markets such as Australia, Peru, Colombia, and South Africa.

3. Diversifying Its Portfolio

• BUD recently announced the acquisition of organic energy drink maker Hiball, which is expected to close in the third quarter of this year.
• While this is a small deal (Hiball has 20 employees and had sales of $40 million in the past 12 months), it is newsworthy as it implies a move towards non-beer categories. The company may also want to jump on the organic/natural drinks bandwagon.
• Anheuser has the distribution network to make Hiball increase its scale immensely.
• The company already sells carbonated soft drinks in the Latin American market, where it is a bottler for PepsiCo.
• BUD also struck a deal with Starbucks last year to make, bottle, and distribute the ready-to-drink Teavana tea line.
• The company is also trying to make in-roads in the craft beer industry, with partnerships with 10 craft breweries.

Have more questions on Anheuser-Busch InBev? See the links below.

• Here’s How AB InBev Trimmed Business To Make Room For SABMiller
• The Year That Was: Anheuser-Busch InBev
• Brazil Slowdown Weighs On AB InBev’s Financials, As Earnings Decline By More Than Expected

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