Anheuser-Busch InBev Reports Q2 Earnings, Shakes Up Organizational Structure

Halfway through 2018, Anheuser-Busch InBev’s global revenues are up 4.7 percent despite continued shipment and depletion declines in the U.S.

A-B, the world’s largest beer manufacturer, posted global revenue growth of 4.7 percent, to more than $14 billion, as revenue per hectoliter increased 4 percent during the second quarter of 2018. The company also had gross profits of more than $8.8 billion.

Worldwide revenues for A-B’s global brands — Budweiser, Stella Artois, and Corona (outside of the U.S.) — increased 10.1 percent.

However, U.S. revenues declined 3.1 percent during Q2, with year-to-date revenues now down 2.8 percent. Despite those declines, the company’s revenue per hectoliter in the U.S. is up 2 percent on the year.

During today’s call with investors and analysts, A-B CEO Carlos Brito characterized the company’s Q2 results as “solid,” noting that trends improved in many “key markets.”

“We’re pleased to see our global brand portfolio accelerating its growth, especially Budweiser as the result of a highly successful FIFA World Cup activation,” he said.

At the mid-way point of 2018, A-B’s U.S. sales-to-wholesalers (STWs) were down 4.8 percent, while sales-to-retailers (STRs) dipped 3.2 percent. The company expects those numbers to converge in the second half of the year.

During the second quarter, U.S. sales-to-wholesalers declined 5.1 percent while sales-to-retailers decreased 3.1 percent, which the company attributed to “a weaker industry” and poor timing of the Easter and Fourth of July holidays.

“In terms of STRs, we had a very good quarter,” Brito said.

A-B estimated that it lost 35 basis points of domestic market share in Q2, which Brito said was the company’s “best quarterly market share performance in almost four years.” Through two quarters, the company has lost 45 bps of share.

Negative Bud Light and Budweiser volume trends continued as those flagship offerings lost 85 and 40 bps, respectively, during the quarter. However, Brito said Bud Light was able to stem its share loss within the premium light segment for the fourth consecutive quarter, while Budweiser’s share has remained flat for two consecutive quarters.

“The brands are in a better place, which tells me that the strategy is shoring up and it’s working,” he said.

Meanwhile, A-B’s “above premium brands” gained 100 bps of share in Q2, with Michelob Ultra remaining the the largest share gainer in the U.S. for the 13th consecutive quarter. Brito praised the success of new innovations such as line extensions Michelob Ultra Pure Gold, Bud Light Orange and the Budweiser Freedom Reserve series.

“The solution and what’s happened in the U.S and what’s working best is that we’re playing a portfolio game, not a Bud and Bud Light game,” he said.

Asked what makes him confident in the long-term viability of the line extensions, Brito said the company is no longer reliant on just one or two big innovations.

“I’m more confident because today I feel we have a portfolio and ways of work and a modus operandi that’s more intune with how fast the world moves today,” he said.

Brito also addressed the company’s recent split of its High End craft and import division into two business units. By doing so, the company has put a greater focus on its Stella Artois brand with “a group of people that will really live and breathe Stella.”

“Our craft business is doing very well — way ahead of the segment, growing double-digits in a segment that this quarter was flat,” he added. “Because of that focus on the craft, Stella was sometimes being left with not the attention that it deserves.”

A-B also announced several organizational changes, including moving its “global growth and innovation team,” ZX Ventures, and its marketing department “under a common global lead.”

As part of the move, ZX Ventures chief disruptive growth officer Pedro Earp will now hold the dual role of ZX Ventures officer and chief marketing officer.

Former CMO Miguel Patricio will transition into global marketing role and report to A-B InBev CEO Carlos Brito while Bernardo Novick, vice president of client services in Latin America North, will lead ZX Ventures.

“We have to anticipate the future,” Brito told analysts and investors. “We believe a common global lead will help achieve our objectives of anticipating market and consumer trends and adopting ZX Ventures’ innovation approach more broadly.”

A-B also announced the creation of two new executive leadership roles that will both report to the CEO. The company appointed Lucas Herscovici to serve as chief non-alcoholic beverages officer, overseeing the company’s emerging non-alcoholic division, which now accounts for 10 percent of the company’s volume sales.

Pablo Panizza was also named chief “owned-retail officer,” in order to oversee its global brewpubs and Modelorama storefronts in Mexico.

Additionally, Brito said the company is changing its geographic structure by reducing its number of zones from nine to six with a focus on “top-line growth and value creation.” North America, Europe and Africa will not be affected by the changes. A-B created the additional zones following its merger with SABMiller to help with integration.

“This restructuring is about growth, simplicity and top-line,” Brito said.

The organizational changes are slated to go into effect in January 2019.

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