Some Brewers Hate Lockdowns More Than Others -- Heard on the Street
By Carol Ryan
Three of the world's largest brewers had good news about the
global beer market this week. Further progress depends on bars and
restaurants staying open, though, and things don't look positive in
Budweiser's owner Anheuser-Busch InBev, Heineken and Carlsberg
all beat analyst expectations for the amount of beer sold over the
summer, according to third-quarter results. AB InBev and Carlsberg
are also recovering profits faster than anticipated. Heineken made
less progress on margins, but the company's new boss plans to cut
The general picture is that demand for beer is resilient. Once
lockdown restrictions were lifted, consumers returned to bars and
restaurants, albeit cautiously. They drank at home with gusto,
especially in the U.S. Brazil was another bright spot -- AB InBev
shifted 25% more beer in the quarter than this time last year.
Government subsidies in the South American country put cash in
consumers' pockets and would continue to do so for the rest of the
Big brewers have done a good job adapting to the massive shift
toward beer drinking at home. In this battleground, the largest
players appear to be edging out smaller rivals.
Nielsen data shows that AB InBev and Heineken are both gaining
market share in the U.S., while Molson Coors and Boston Beer are
slipping. The picture is similar in Europe and probably reflects
more powerful supply chains that can meet supermarkets' thirst for
stock. Big companies also have more funds to invest in
The outlook for the fourth quarter is less rosy, especially for
companies that do a lot of business in Europe. Bars and restaurants
across France shut on Friday after President Emmanuel Macron
announced a month of lockdowns to arrest a second wave of Covid-19
cases. In Germany, they will close from Monday. In Italy, they must
now shut their doors by 6 p.m. and in Spain there is a national
curfew after 11 p.m.
Heineken, which sells 34% of its total beer volume in Western
Europe, according to Jefferies, will be hit hard. Carlsberg does
even more business in the region. AB InBev, the global leader, has
low exposure at 5% of beer sold.
Unfortunately, some of the business that will be lost is high
quality. Sales made in European bars and restaurants are more
profitable than purchases in grocery stores. Even if home drinkers
do pick up the slack, margins won't recover until social venues do.
AB InBev is fortunate that supermarkets sales are almost as
lucrative as bar deliveries in the U.S. -- its most important
market -- but this isn't the case in other places where the company
has a big presence, such as Brazil.
Home drinkers are salvaging sales this year for the world's
mega-brewers. The fate of hard-pressed bars and restaurants in
regions like Europe will decide what happens to their bottom
Write to Carol Ryan at firstname.lastname@example.org
(END) Dow Jones Newswires
October 31, 2020 10:14 ET (14:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.