THE BOTTOM LINE
AB InBev: We’re here, but maybe not for the beer
Shocking decline in appetite among South Africans for the stuff, even worse in the US, so all hopes are on China
Anheuser-Busch InBev (AB InBev) probably has another five or so years to prove that being a massively dominant global beer group makes good financial sense.
Despite making steady progress extracting the synergies from the 2016 acquisition of SABMiller, the enlarged group’s results have been on the disappointing side since. The operating efficiencies are there but consumers across the globe – with a few notable exceptions – seem to have lost their appetite for beer. If you can’t persuade enough people to drink more of your beer then it doesn’t really matter how much more efficient you are in getting it to them.
The AB InBev share price remains significantly below the R2,000 level at which it listed on the JSE back in 2016.
The US continues to haunt the group’s performance. That market, which is the most valuable in terms of profit pool, is unlikely ever to produce the sort of returns enjoyed in the heyday of Anheuser-Busch. AB InBev is continuing to lose market share in the US particularly with its Bud Lite and Budweiser brands.Consumers in China appeared to be more excited about Budweiser, particularly in the second quarter, and the World Cup helped push volume growth in that country. However further escalation in the trade war between China and the US could threaten this contribution given that beer is an easy enough target for Chinese consumers angered by President Donald Trump.
The grim performance in South Africa, with a shocking mid-teens volume decline in the second quarter, underpins the message from retailers about consumers being under severe pressure.
Group performance may settle onto a firm growth path in the next few years but if it fails to, can it be much longer before the 3G Capital guys behind AB InBev start to look to the benefits of deconsolidation?