AB-InBev: “beer defies the economic slowdown”
For megabrewer AB-InBev, the economic slowdown around the world has not yet caused beer sales to plummet.
“I think demand is holding up,” AB-InBev CEO Michel Doukeris said on Yahoo Finance Live (video). “Beer as a category is very resilient.”
AB-InBev produces everything from the old, affordable Bud Light to higher-priced beers such as CutWater.
Doukeris says not only have beer sales not declined this year, but consumers don’t seem to be switching to cheaper alternatives.
“Not yet. Globally, we don’t see it,” Doukeris said when asked about consumers reducing sales. “Premiumization as a trend is still growing and doing well.
If we think about our global brands, the most premium brands grew very well this quarter, led by Corona, which grew revenue by 23.5%, while we grew revenue by 12%, a little bit above that in the quarter.
So the more premium beers continue to move forward. I think it’s an almost unstoppable trend in the category. There’s a lot of room to continue to premium.”
Photo by Paul Abrahams on Unsplash
Along those lines, AB-InBev saw sales of its often more expensive Corona beer rise 23.5% in the third quarter, a faster pace than the company’s overall revenue increase of 12.1%. And the company’s Beyond Beer segment, comprised mostly of various hard seltzers and beer alternatives, was up 10% year-over-year.
AB-InBev also managed to beat most analyst estimates for the third quarter thanks to demand for higher-priced offerings.
- Below is AB-InBev’s performance compared to Wall Street forecasts:
- Total sales: US$15.09 billion vs. US$15.15 billion
- Organic revenue growth: +12.1% vs. +10.8%.
- Adjusted EBITDA: US$5.31 billion vs. US$5.32 billion.
- Adjusted EPS: $0.81 vs. $0.77.
- AB-InBev shares are up 1% over the past month.
Evercore ISI analyst Robert Ottenstein, who has an “outperform” rating on AB-InBev stock with a $70 price target, wrote in a client note following the company’s results.
“In addition, the higher outlook suggests strong cost visibility and continued strong demand in most markets, with limited, if any, trading and a new round of pricing in the U.S. and Europe. The valuation is compelling.”
Ottenstein added that sales and margins “should improve as mobility improves and the revenge party continues through the World Cup/end of the year.”
Doukeris echoed optimism about the potential impact on sales of the World Cup that will kick off in Qatar at the end of November.
“FIFA figures say that some 2.5 to 3 billion people watch the games around the world,” Doukeris said. “There are celebrations in each and every country. We are going to perform in 70 countries with local brands and local passion points. But in addition, Budweiser is the official sponsor of the FIFA World Cup Qatar.”
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