On being number one
Seems like the winner gets it all. Being the market leader in the U.S. and Brazil, AB-InBev got away with raising beer prices by 9.4 percent in Brazil and 3.7 percent in the U.S. in the first half of 2011. As a result, third-quarter profits rose by over 16 percent to USD 2.03 bn compared with last year's equivalent of USD 1.86 billion, the company reported on 9 November 2011.
It says its revenue grew by 3.6 percent in the third quarter even though volumes decreased by 0.2 percent.
EBITDA margin held up well. EBITDA gained 12.2 percent to USD 3.97 billion with margin up to 38.8 percent.
In the U.S., AB-InBev said that the share of Budweiser continued to decline although at a slower pace than previously. However, its focus brands Bud Light, Michelob Ultra and Stella continued to grow. Overall in the U.S., volumes dropped 3.5 percent with shipments to retailers falling by 0.9 percent in the quarter and shipments to wholesalers declining by 3.4 percent. Although the volume decline in the U.S. is severe, it came mostly from the sales-to-wholesales channel, while sales in the retail channel were resilient. The combination of deep wholesalers cuts and more or less solid retail sales means that we can expect inventory restocking in the wholesale channel in the fourth quarter, and thus volume improvements in the US, analysts said.
Beer volumes in Brazil were up 1.7 percent. But as AB-Inbev had said previously, 2011 will be a year focused more on revenue management
than volume and the brewer remains confident about the growth prospects for the industry in the medium and long run. It is looking forward to a stronger industry in 2012 with the benefit of an increase in the minimum wage, which should drive consumer spending.
Things were less rosy in other regions, though. Volumes in western Europe dropped 4.5 percent, while they were down 9.6 percent in central and eastern Europe in the quarter. Russian beer volumes declined 9.9 percent.
Fortunately, in China beer volumes grew by 4.7 percent.
In sum, as the company’s two core markets, Brazil and the US (accounting for about 75 per cent of EBITDA) performed much better than expected, profit expectations for the full year should keep investors happy.
At the results presentation, AB-InBev refused to give details on its new brand
Bud Light Platinum, which is expected to be launched into the market early next year. Bud Light Platinum will have a slightly sweeter taste and a higher alcohol content of 6 % abv, compared with the 4.2 % abv for Bud Light. It comes on the heels of Bud Light Lime, in 2008, and Bud Light Golden Wheat, in 2009.
The company said details on the marketing campaign to support Platinum's rollout will be provided later.
Market observers say that Bud Light Platinum is the brewer's response to the competition from spirits and craft beers, which often provide bolder tastes with higher alcohol contents than mass-brewed beers.
It also shows that Bud Light, as far as brands are concerned, is their number one brand in the United States.
The launch comes as growth opportunities for premium light beers remain limited due to the industry's size.
