AB Inbev's Bud Light Lacks Fizz -- WSJ
05 May 2017 - 5:03PM
Dow Jones News
Brewer attempts to reverse drop in market share of the U.S.'s
favorite beer by sales
By Nick Kostov
The King of Beers hasn't found a fix yet for Bud Light.
Anheuser-Busch InBev NV reported surging profit thanks to last
year's integration of rival beer giant SABMiller, but its
best-selling Bud Light continues to hemorrhage market share in the
U.S., underscoring the challenge the company faces turning the
brand around.
The company is in the middle of a high-stakes revamp of Bud
Light, including a U.S. marketing campaign, "Famous Among Friends,"
which it launched earlier this year. The move is aimed at putting
some fizz back in the brand. It continues to outsell every other
beer by a wide margin in the U.S., but has suffered years of
falling market share at the hands of Mexican lagers and the craft
beer craze.
Elsewhere, the world's largest brewer reported Thursday a
rebound in its second biggest market, Brazil, cheering investors.
Shares in Belgium-based AB InBev were up almost 4% in early
afternoon trading in Europe.
Apart from the integration of SAB, the company's biggest focus
remains improving the fortunes of Bud Light. AB InBev said Thursday
that the brand's U.S. market share for the quarter ended March 31
fell almost two-thirds of a percentage point.
It remains America's favorite beer by sales, but the drop
continues years of declines. In 2010, Bud Light commanded a 19%
share, according to Beer Marketer's Insights, an industry trade
publication. That fell to 16% at the end of last year.
In the U.S., Bud Light "remains challenged in a few key
markets," Chief Executive Carlos Brito said in a conference call
with analysts Thursday. He said he believed the "Famous Among
Friends" campaign would help improve the brand's volume and share
trends in 2017. "We think this campaign has legs," he said. He also
noted that Budweiser's Super Bowl commercial, centering on the
immigration story of co-founder Adolphus Busch, was this year's
most-watched spot.
The Budweiser brand, meanwhile, lost over a third of a
percentage point of market share in the quarter. Beer Marketer's
Insights estimates Budweiser had 6.3% of the U.S. market at the end
of last year, making it the number three seller behind Coors
Light.
Overall sales volume in North America fell 4.4% in the quarter
from a year ago, sharply lower than analysts' consensus forecast of
a 2.2% fall. Margins in the U.S. increased, however, as the
company's portfolio of more-expensive beers, including Michelob
Ultra and Stella Artois, performed well. AB InBev has also rolled
out a handful of beers it markets as "craft," to compete with the
hundreds of smaller brewers that have popped up across the country
in recent years. It said this portfolio performed well in the U.S.
and Canada.
"There is no end in sight to the weakness" of Budweiser and Bud
Light, said Trevor Stirling, European beverage analyst at Sanford
C. Bernstein. "The success of Michelob Ultra and the craft
portfolio is not enough to compensate."
AB InBev said Thursday that net profit surged to $1.41 billion
in the quarter from $132 million a year earlier. The figure was
boosted by the integration of rival SAB, following AB InBev's $100
billion-plus acquisition. The deal's funding costs hit AB InBev's
year-earlier profit.
Revenue in the quarter rose 35% to $12.92 billion, but organic
growth -- stripping out acquisitions, including the effect of the
SAB purchase -- rose just 3.7%.
AB InBev said the integration of SAB was "progressing well,"
with savings of $252 million from the combination in the period.
That was higher than expected by analysts, with some suggesting the
company could wring out more than the overall $2.8 billion in cost
savings AB InBev has targeted in the deal.
But that isn't a long-term fix for flagging sales at its biggest
brands in the U.S. and Western Europe. AB InBev's acquisition of
SAB was a big bet that it could tap new growth in Africa and other
emerging markets such as Colombia and Peru.
In the short term, that has been a mixed bag. In Colombia,
revenue fell 5.1% because of a tax hike there. Peru sales rose 3%.
Sales in South Africa were up mid-single digits, AB InBev said,
thanks to price hikes pushed through at SAB just before AB InBev
took control.
A surprising bright spot was Brazil. Despite what the company
described as a challenging political and macroeconomic environment
there, beer volume rose in the quarter but revenue per hectoliter
dropped because large state tax increases last year haven't yet
been fully passed on to customers. The company said it remains
optimistic about Brazil in the long run and expects the rise in the
cost of sales to slow in the second half of the year.
U.K. sales rose by a double-digit percentage, meanwhile, lifted
by the launch of Bud Light. The company also posted a strong start
to the year in China. AB InBev said its full-year expectations
remained unchanged, including an acceleration of revenue
growth.
-- Jennifer Maloney contributed to this article.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
May 05, 2017 02:48 ET (06:48 GMT)
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