How Much Does Anheuser-Busch InBev Depend On Asia-Pacific For Its Growth?
Asia-Pacific (APAC) has maintained its position as the fastest growing revenue segment for Anheuser-Busch InBev (NYSE: BUD). Over the last two years, while Anheuser-Busch’s total revenue (shows BUD’s key revenue components) increased by $0.67 billion between 2016 and 2018, the APAC division saw its revenues increase by $1.22 billion during the same period. Can Asia-Pacific continue to command the kind of significance it recently has seen? To understand this, please refer to the Trefis interactive dashboard – What Is The Importance of Asia Pacific In Anheuser-Busch InBev’s Growth? In addition, here is more Consumer Staples data.
Division Overview
What is on Offer?
- The APAC division includes Anheuser-Busch InBev’s business in China, India, Japan, South Korea, Vietnam, and other South and Southeast Asian countries.
- Some of its brand offerings include: Budweiser, Hoegaarden, Stella Artois, Harbin, Sedrin, Cass, etc.
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Who Pays?
- All beer and cider customers worldwide are potential end buyers. On the basis of quality and price, Anheuser’s beer offerings can be differentiated into: (i) Premium or high-end brands; (ii) Core Brands; and (iii) Value, discount, or sub-premium brands.
- For example, the global brand Stella Artois targets the premium category, while the local brand Harbin targets the core category in China.
Competition?
- BUD faces competition from- Snow Beer: Snow; Tsingtao Brewery: Tsingtao, Laoshan; Lion: James Boag’s Premium, Boag’s Draught, Emu Bitter; Carlsberg: Carlsberg, Wusu, Dali Beer; and Microbreweries.
Segment Revenue Trend
- APAC revenue increased from $7.25 billion in 2016 to $8.47 billion in 2018, adding $1.22 billion in two years.
- The segment is expected to add another $0.61 billion by 2020, driven by healthy organic growth led by increasing premiumization and strong overall performance of the company’s e-commerce business, especially in China.
To understand the performance of other operating segments, refer to the following Trefis analysis- Anheuser-Busch InBev Revenues: How Does Anheuser-Busch InBev Make Money?
Volume Share
- APAC’s volume share in BUD’s total volume sales has increased from 16.5% in 2016 to 18.4% in 2018.
- This was primarily driven by higher demand in emerging markets like India and China, along with lower beer sales in North America, as people are moving away from carbonated beverages.
- Segment share is expected to grow further to over 19% by 2020, led by strong e-commerce sales in China and slower growth in developed markets.
Revenue Share
- APAC has been the fastest growing segment for the company, with its share in total revenues increasing from 13.4% in 2016 to 15.5% in 2018.
- Despite slowdown in overall sales growth, APAC is likely to see healthy growth in its revenue base, driven mainly by strong growth in India and China. taking the segment’s revenue share close to 16% by 2020.
- Though North America is the largest segment for the company, the higher rate of growth in APAC is helping the segment eat into North America’s revenue share.
Profitability
- APAC division’s gross margins have always been lower than the company’s in the past, mainly due to higher proportion of sales of premium brands in developed markets such as North America and Europe.
- However, with the company now focusing on increasing premiumization across all markets, along with strong e-commerce infrastructure and sales in China, the segment’s gross margins are expected to see better growth compared to BUD.
- The gap between APAC’s and BUD’s margins is expected to narrow in the next 2 years.
Conclusion
The company’s management expects the APAC division to be the primary growth and value driver for the company, due to which it recently listed its APAC operation on the Hong Kong stock exchange, which fetched the company about $5 billion. The segment is likely to be the company’s fastest growing division, with its improving profitability helping it to catch up with the company’s high margins.
As per Anheuser-Busch’s Valuation by Trefis, we have a price estimate of $103 per share for BUD’s stock.
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