Anheuser-Busch InBev Worldwide Revenues Grow Despite Declines in US

Anheuser-Busch InBev today reported global revenue growth of 5.9 percent in the first quarter of 2019, despite continued declines of its two biggest brands in the U.S.

A-B, the world’s largest beer manufacturer, recorded global revenue growth of nearly $12.6 billion during the quarter, and a gross profit of more than $7.7 billion, as its worldwide volume increased 1.3 percent. The company’s revenue per hectoliter also grew 4.6 percent during the period.

The improved top and bottom line growth, A-B said, was due to its premiumization strategy, driven by an 8.5 percent increase in worldwide revenues for its global brands — Budweiser, Stella Artois and Corona (outside of the U.S.) — and a nearly 20 percent increase for products within its “High End Company.”

In the U.S., however, A-B’s Q1 depletions (sales-to-retailers) and shipments (sales-to-wholesalers) declined 1.9 percent and 0.9 percent, respectively. Still, the company’s depletions and shipment trends were improved compared to Q1 2018. At this time last year, the company’s depletions declined 2.3 percent, while shipments declined 4.4 percent.

Nevertheless, U.S. revenue increased 1.6 percent, as revenue per hectoliter increased 2.6 percent during Q1 2019.

During Tuesday’s call with investors and analysts, A-B InBev CEO Carlos Brito expressed confidence in the company’s strategy in the U.S. Although Budweiser and Bud Light remain the company’s “two most important brands,” Brito pointed to the growth of Michelob Ultra, which now accounts for 10 percent of A-B’s business.

“Bud and Bud Light will remain key brands for us in our portfolio, but maybe they’ll be smaller in size going forward and other brands will be bigger,” he said, adding that Michelob Ultra offers “a much better margin” than Bud Light.

Michelob Ultra’s rise can be seen in market research firm IRI’s latest off-premise sales report. The 95-calorie, low-carb offering has surpassed Budweiser as A-B’s No. 2 brand in off-premise retailers and leapfrogged past Miller Lite as the third largest U.S. beer brand. Dollar sales of Michelob Ultra increased 15.5 percent, to more than $568 million, through the first four months of the year.

Meanwhile, dollar sales of Bud Light and Budweiser declined 4.8 percent and 4.4 percent, respectively, during the first four months of 2019. Bud Light remained the top selling beer in off-premise retail accounts, with more than $1.4 billion in sales, through April 21.

Despite a lack of improvement in Bud Light’s market share trends, Brito said the brand’s Super Bowl ads and subsequent “transparency” campaign are “a long-term play, not just for the brand but the entire beer category.” He added that the approach would be applied to other brands in the future.

Although sales trends for Budweiser and Bud Light haven’t improved, the company’s overall loss of 10 basis points (bps) of market share was the company’s best quarterly share trend since the fourth quarter of 2012, Brito said. He pointed to gradual market share trend improvement over the last two years, after losing 70 bps in 2017, 45 bps in the first half of 2018 and 35 bps in the second half of 2018.

Brito credited the overall market share trend improvement in the U.S. to “above core” brands — such as Michelob Ultra, acquired craft brands, Bon & Viv Spiked Seltzer and other innovations — which gained a collective 90 bps of market share during the period. He added that A-B had nine of IRI’s top 15 market share gainers in the quarter, led by Michelob Ultra.

During the call, Brito said A-B’s innovation pipeline is now more nimble, with the ability to get successful new offerings on shelves within 100 days. He added that the company is betting on Patagonia, a lager brand from Argentina, in 2019. The U.S. launch of the brand has already resulted in a lawsuit from the clothing retailer of the same name, however.

Another strategy Brito said is working is the company’s “regional” marketing campaigns, such as the Bud Light “Philly Philly” Super Bowl LII bet, the Bud Light “Victory Fridges” for the Cleveland Browns, and Michelob Ultra’s presence at the New York Marathon. Brito said the company would continue to invest in “local, community relevant campaigns, which go beyond traditional media,” while building digital media conversations and experiences around them.

Finally, Brito also confirmed that A-B is “actively exploring” a potential IPO on the Hong Kong Stock Exchange for a minority stake in the company’s Asia Pacific business. However, he said the company’s decision would rest upon its valuation and market conditions, among other factors.