Has beer become too expensive? AB-InBev reports weak fourth quarter 2022

Belgium | AB-InBev reported an unexpected fall in quarterly sales volumes after two price increases in the United States. But American beer drinkers are now getting over their “sticker shock”, CEO Michel Doukeris assured investors.

When AB-InBev, on 2 March, released fourth quarter 2022 results, they showed that its global sales volume had declined 0.6 percent. The biggest drop in volume sales occurred in the US (-8.3 percent), which AB-InBev attributed to two price increases in one quarter and poor weather in December. Still, revenue per hl in the US rose 12.2 percent in the quarter, thanks to higher selling prices and its continued premiumisation drive.

When it comes to market trends, Mr Doukeris has observed that Americans are more often buying beer in larger formats. And they are eating and drinking more at home, a setting that tends to favour beer over other tipples.

As consumers have taken to cocooning, AB-InBev has shifted the imagery in some of its commercials from traditional settings - such as a bar - to the home. In a – serious - effort to create new drinking occasions, AB-InBev aired a funny Bud Light ad during last month’s Super Bowl, in which the actor Miles Teller and his wife, Keleigh Sperry Teller, grab two cans of Bud for an impromptu dance party in their living room to pass the time while one of them waits on hold on the phone.

China on track to recovery

AB-InBev also said that fourth quarter volumes fell 6.9 percent in China, where beer sales were hit by lockdowns. The company's Asian subsidiary said it believes that China’s on-premise had almost fully re-opened by the end of February. The business is expected to recover in 2023 after a transitional first quarter.

In the fourth quarter, volume sales in Asia were down 2.3 percent overall, but the declines were mostly compensated by rises in Middle and South America.

Despite the challenges in the US and China, two of the company’s largest markets, AB-InBev reported an organic 10.2 percent increase in quarterly revenue to USD 14.7 billion. Net profit rose to USD 2.8 billion, up from USD 1.9 billion in the same period a year earlier.

Beer sales above pre-pandemic level

Mr Doukeris noted that the company’s sales volumes for the full year reached a record high of 595 million hl. He boasted that volumes are up almost 6 percent over 2019, with revenues having risen 24 percent since 2019 to reach USD 57.8 billion in 2022.

AB-InBev said that it managed to reduce its debt pile by USD 8.9 billion last year. At the end of December 2022, it had shrunk to just under USD 80 billion, or 3.5 times EBITDA, from 3.96 times EBITDA at the end of 2021. The brewer seeks to lower its debt to a more comfortable level of 2 times EBITDA.

Russia exit

The Wall Steet Journal reports that AB-InBev is still negotiating an exit from its joint venture in Russia with Turkish brewer Anadolu Efes, nearly a year after beginning discussions. Bud remains on sale in Russia, despite AB-InBev’s request to Efes to halt the brand’s sales there. AB-InBev declined to say when the divestment will be complete. Efes confirmed that it remains in talks with AB-InBev.

Outlook for 2023

Looking ahead, AB-InBev said it expects 2023 EBITDA to grow in line with its medium-term outlook of between 4 percent and 8 percent. Revenue is forecasted to grow ahead of EBITDA.