AB InBev, the world’s largest brewer, reported weaker-than-expected third-quarter profit and sales, due to higher cost of sales, marketing investments and price increases in two major markets, South Korea and Brazil.
The Belgium-based company described its results between July and September as “challenging” as it recorded revenue growth of 2.7% in its third quarter.
The owner of Becks and Budweiser said its weak results were driven by three anticipated factors: the shipping of beer in China had been significantly high in the second quarter hence its noticeable drop, higher costs of sales due to higher commodity costs and weaker currencies in markets, and risen marketing costs.
Price increases implemented in South Korea and Brazil also led to declines in sales volumes, which were worsened by reduced consumer demand. Total volumes decreased by 0.5% in the third quarter.
AB InBev’s results were boosted by its premium brands which continued to grow by double-digits. The company took a strong investment focus behind the growth of this category to address the trend. Combined revenues of AB InBev’s three global brands, Budweiser, Stella Artois and Corona grew 4.1% globally and 5.2% outside their respective home markets.
While the brewer saw solid growth from Mexico, South Africa and Colombia – delivering its best quarterly volume performance since the combination with SAB closed in October 2016 – due to its premium brand portfolio, this was offset by declines in China and the US. Declines were described as a result of shipment phasing in the second quarter, combined with ‘softness in the nightlife channel’.
The company also said it had focused on “offering consumers a portfolio of brands across the price spectrum” to target emerging markets with a smart affordable strategy. This was achieved through initiatives such as new packaging formats and new beers brewed with local crops, which drove success in major markets such as Brazil, Argentina, Colombia, Ecuador and South Africa.
The UK delivered volume-led revenue growth driven once again by double-digit growth of Corona and Budweiser. After a successful launch this year in France, Budweiser has been released in the Netherlands this quarter.
Earlier this year, AB InBev announced its decision to proceed with the initial public offering of 1.26 billion shares of a minority stake of its Asia Pacific subsidiary, Budweiser APAC, on the Hong Kong Stock Exchange. The company aims to expand itself in the APAC region, with the potential of mergers and acquisitions in the region. The net proceeds from this transaction are being used to repay debt.
The global beer company expects to deliver strong revenue growth in its end of year results, down to strong performances of its brand portfolio and commercial plans.
© FoodBev Media Ltd 2019