Anheuser-Busch InBev Sees Sharpest Volume Decline In China. What Does This Mean For The Beer Giant?

by Trefis Team
+37.68%
Upside
56.46
Market
77.73
Trefis
BUD
Anheuser-Busch InBev
Rate   |   votes   |   Share

Anheuser-Busch InBev (NYSE: BUD) sells different beers, belonging to the (a) premium/high end brands, (b) core brands, and (c) value, discount, or sub-premium brands, in China. For example, the global brand Stella Artois targets the premium category, while the local brand Harbin targets the core category in China.

What Happened?

  • Volume sales in China saw their biggest quarterly fall in Q3 2019, when beer volume sold decreased by 5.9% compared to Q3 2018.
  • Volume has increased in 6 of the last 8 quarters, with the fall being marginal (1.1%) in Q1 2019, mainly due to the timing of the Chinese New Year.
  • However, the 5.9% decline in Q3 2019 is Anheuser-Busch InBev’s largest decline in China, the market which the company is most bullish about.

To understand the trend in volume over recent quarters along with what drove this decline in Q3, refer to the Trefis interactive dashboard – Anheuser-Busch InBev’s Volume: Why Has Beer Volume Decreased In China And What Does This Mean For Anheuser-Busch InBev?

Why?

  • One of the main factors that led to the decline in volume sold is a continuous slowing down of the Chinese economy, with the GDP growth having touched a 27-year low of 6% in Q3 2019.
  • Along with lower growth and consumer spending, new rules in China that prohibit sales of alcoholic drinks after 2 a.m. have dragged the industry down.
  • Additionally, shipment phasing, under which the company brought forward some of its volume sales to an earlier quarter due to marketing campaigns and listing of its Asia-Pacific business in Hong Kong, also led to a decline in volume during Q3 2019.

So What?

  • The sharp decline of 5.9% in volume during the quarter is likely to affect the full-year revenue growth in Asia-Pacific (APAC) in 2019.
  • Though APAC revenue is expected to increase in 2019, the rate of growth (3%) would be much lower compared to the previous 2 years (7.6% in 2017 and 8.5% in 2018).
  • Increasing premiumization and strong overall performance of the company’s e-commerce business is expected to drive APAC growth over the next two years.
  • Segment revenue could increase from $8.5 billion in 2018 to $9 billion in 2020, adding $0.5 billion in the next two years, which would be much lower than the $1.2 billion added in revenues in the previous two years (2016-2018).
  • For a company that is betting big on the Chinese region, a sharp drop in volume is likely to be a concern, but consumers switching to premium brands (higher revenue per unit) is expected to offset this decline in volume.

To understand how other operating divisions of the company are performing, refer to the Trefis analysis- Anheuser-Busch InBev Revenues: How Does Anheuser-Busch InBev Make Money?

 

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Data

Like our charts? Explore example interactive dashboards and create your own.

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!