AB InBev Misses Forecast Under Pressure From Costs, Fizzy Rivals -- WSJ
February 28 2020 - 3:02AM
Dow Jones News
By Saabira Chaudhuri
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 28, 2020).
Anheuser-Busch InBev SA reported lower quarterly profit that
missed analysts' estimates and sent its shares down sharply,
blaming higher costs and lost market share in the U.S. to hard
seltzer makers.
AB InBev -- the world's largest brewer, with brands such as
Budweiser, Bud Light and Michelob Ultra -- said its profit margins
were hit by the highest annual increase in commodity and currency
transaction costs in the past decade. It said consumers were
trading down and spending less.
Shares in the brewer fell in afternoon trading.
AB InBev's fourth-quarter net income dropped 75% to $114
million, from $456 million a year earlier. Revenue edged down 1.3%
to $13.33 billion.
"Our performance in 2019 was below our expectations, and we are
not satisfied with the results," said the company's management in a
statement.
Volumes on an organic basis, which strip out acquisitions and
divestitures, rose 1.6%. Input costs, though, rose 4.1%. Revenue
per hectoliter increased 0.9%, compared with growth of 3.1% in the
prior quarter. Earnings before interest, taxes, depreciation and
amortization dropped 5.5% to $5.34 billion, a much sharper decline
than the 1.9% analysts had expected.
In the U.S., its largest market, Budweiser and Bud Light
continued to lose market share. The company indicated its rivals
have done a better job of capitalizing on a shift to hard seltzers.
The fizzy alcoholic drinks are booming in the U.S.
Hard seltzer and other seltzer-like products have a market share
of 2.6% of all alcohol in the U.S., up from 0.85% a year earlier,
according to industry tracker IWSR. The U.S. market is dominated by
White Claw hard seltzer, owned by Mike's Hard Lemonade Co., and
Truly Spiked & Sparkling, manufactured by Boston Beer Co.
AB InBev has rolled out its own hard seltzers but so far
continues to lag behind the industry. Recently it began selling Bud
Light seltzer, which it advertised at the Super Bowl. In August, it
rolled out a low-cost Natural Light Seltzer, which has a higher
alcohol content than many rival brands. Early last year, it
relaunched an existing seltzer brand, naming it Bon & Viv.
In an interview with The Wall Street Journal, AB InBev Chief
Executive Carlos Brito said the company would look to leapfrog
rivals and dominate the hard seltzer category the way it came from
behind to dominate craft beer.
But he said AB InBev won't launch dozens of seltzer brands and
instead would look to gain 20% of the market with the three it
already has. Unlike craft beer, hard seltzer as a category is
driven by national brands, he said, which should make it easier for
AB InBev to leverage its distribution network and scale to gain
share.
Hard seltzers are growing in popularity with women and those who
like wine and spirits, said Mr. Brito. The category, which brewers
fold into their beer sales figures, has propelled beer industry
sales back to growth in the fourth quarter after a long decline, he
added.
"It's a way to broaden the category for sure, to start appealing
to consumers who don't have beer as their preferred beverage," he
said. "It solves many problems -- bloating, flavor, carbs, calories
-- lots of things."
Michelob Ultra, a bright spot for many years now, continued to
sell strongly. AB InBev said the brand has surpassed Coors Light,
owned by rival Molson Coors Brewing Co., to become the country's
No. 2 beer by retail sales behind Bud Light, citing data from
industry tracker IRI.
For the current year, AB InBev said it expects earnings before
interest, taxes, depreciation and amortization growth of 2% to 5%,
with most of that delivered in the second half. Consensus analyst
estimates for this were 5.7%. The coronavirus has resulted in lost
revenue of $285 million for the first two months of the year, it
estimated, adding that Ebitda will decline 10% in the first
quarter, partly due to the virus.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
February 28, 2020 02:47 ET (07:47 GMT)
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