Budweiser, Bud Light Volumes Fall Sharply in U.S. but AB InBev Squeezes Costs -- Update

By Nick Kostov

Big brewers are losing their grip on America's beer belly.

Anheuser-Busch InBev SA, which makes Budweiser, Bud Light and Stella Artois, said Wednesday overall sales volume in North America fell 4.1% over the first three months of the year from a year earlier, due largely to declines in Bud Light and Budweiser. Molson Coors Brewing Co. said last week that it also struggled, losing 3.8% in brand volume in the U.S., while beer volume at Heineken NV's U.S. unit declined by a high single-digit percentage in the first quarter.

The U.S. has been turning away from big beer for years, but brewers say demand was even more anemic than expected in the first quarter.

Sales to wholesalers in the U.S. at AB InBev were down 4.4%, with revenue decreasing 2.5% in the first quarter. The brewer estimated that sales to retailers declined 2.3% across the industry in the first quarter.

The silver lining for AB InBev in North America is that its revenue per hectoliter grew 1.9% over the period as management kept a tight lid on costs and consumers paid more for their brews. Shares rose 3% in morning trading in Europe.

"While we acknowledge we still have work to do in the U.S., we are moving in the right direction," Chief Financial Officer Felipe Dutra told reporters.

Michelob Ultra -- marketed as the beer for people with an active lifestyle -- continued to perform well, AB InBev said, as did Stella Artois, which continued to gain share in the so-called "above premium category." The company said its portfolio of beers it markets as craft beer also performed well.

But the brewer's Budweiser and Bud Light brands continued to lose market share in the U.S. Overall, the company estimated it lost half a percentage point of market share in the quarter.

Speaking on a call with reporters, Mr. Dutra said AB InBev had lost market share because a large part of its business is in declining categories, rather than growing segments of the market like craft beer. Executives at the company have been trying to boost profits and margins by persuading consumers to buy more expensive beers. The company recently rolled out Michelob Ultra Pure Gold, made with organic grains, as well as Bud Light Orange and a "refreshed" Bud Light Lime, which are both brewed with real citrus peels.

Globally, AB InBev said earnings before interest, taxes, depreciation and amortization -- a key measure watched by analysts -- rose 6.6% to $4.99 billion in the first quarter, topping analyst expectations of a 4.7% rise.

In the U.S., a rise in the price of hedging aluminum and increased freight costs led to margin contraction and a 5% decline in Ebitda, although Mr. Dutra said that "underlying beer trends remain unchanged."

The Leuven, Belgium-based brewer said beer volumes grew strongly in Mexico, Colombia and Argentina, but declined in Brazil, its second-largest market, as well as the U.S. The brewer had flagged that the first quarter was likely to be weak, in part because of an early end to Carnival season in the Latin American country and increased sales and marketing spending tied to the coming soccer World Cup in Russia.

Revenue increased to $13.07 billion from $12.92 billion. Net profit decreased to $1.02 billion from $1.40 billion.

Mr. Dutra said that the first quarter "was better than we initially expected" and that growth should accelerate through the rest of the year, particularly in the second half.

The company said it found another $160 million of cost savings tied to its almost $100 billion acquisition of SABMiller, bringing the total to $2.29 billion since it completed the deal in October 2016.

Write to Nick Kostov at Nick.Kostov@wsj.com

(END) Dow Jones Newswires

May 09, 2018 06:26 ET (10:26 GMT)

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