Anheuser-Busch’s US Depletions Down 3 percent, Shipments Down 1.7 percent Halfway Through 2019

Anheuser-Busch InBev today reported global revenue growth of 6.2 percent in the second quarter of 2019, despite ongoing volume declines in the U.S.

The world’s largest beer manufacturer recorded revenues of more than $13.9 billion during the quarter, and a gross profit of $8.7 billion. The company credited “healthy volume growth, global premiumization and revenue management initiatives” for its increased revenue worldwide.

Halfway through 2019, A-B’s total revenue is up 6 percent, with revenue per hectoliter growth of 4.2 percent. A-B’s global brands — Budweiser, Stella Artois and Corona (outside of the U.S.) — increased revenue by 8.2 percent year-to-date.

“There’s a lot to be proud of this quarter, including our best quarterly performance in more than five years, leading to more balanced top-line growth,” A-B InBev CEO Carlos Brito said during a call with analysts and investors.

A-B’s worldwide volume increased 2.1 percent in Q2, and is up 1.7 percent through the first six months of 2019.

However, A-B’s volumes were again challenged in the U.S., where the company’s Q2 depletions (sales-to-retailers) and shipments (sales-to-wholesalers) declined 4 percent and 2.3 percent, respectively. Meanwhile, year-to-date depletions (-3 percent) and shipment (-1.7 percent) are both in decline.

Nevertheless, A-B’s revenue in the U.S. grew 1.8 percent in the quarter and 1.7 percent year-to-date. The company attributed its revenue growth to an April price increase, as well as its portfolio premiumization strategy.

Brito pointed to A-B’s “High End Company” of premium brands as its “growth engine,” increasing revenue by 19.5 percent in Q2. A-B said its regional craft portfolio also grew double digits during the quarter.

A-B’s portfolio of “above core” offerings, such as the Michelob Ultra family, regional craft brands, Bon & Viv Spiked Seltzer and other innovation products outperformed the industry, gaining 80 basis points (bps) of market share. Additionally, the company said Michelob Ultra’s market share gains in Q2 were its best in more than two years.

However, A-B is estimating its overall market share to decline 40 bps through the end of June, and to decline 55 bps in Q2. A-B’s mainstream offerings in the U.S. are estimated to contract by about 135 bps during the quarter due to consumers trading up to higher priced offerings.

Asked if A-B plans to make Michelob Ultra into a global brand, Brito said the brand is now available in the United Kingdom and “piloting” in China. He added that Michelob Ultra now accounts for 10 percent of the company’s overall business, and is the “fastest growing brand in Canada” and a top growing brand in Mexico.

“Our markets are asking for it because … it goes into the active lifestyle trend that we see out there with consumers in health and wellness,” he said. “It’s a brand that has always been in that space, the space is growing and the brand is there positioned in consumers’ minds.”

Additionally, Brito said Michelob Ultra line extension Pure Gold is “adding to the franchise, not subtracting.”

Brito also highlighted A-B’s Middle Americas region (Mexico, Colombia, Peru, Ecuador, Central America and the Caribbean), which he called the “largest contributor to the volume and revenue growth” during Q2.

Brito called the premium segment in Mexico “underdeveloped” and said it “represents a significant opportunity for further growth.” He noted that A-B’s premium portfolio in Mexico — driven by Stella Artois and Michelob Ultra — has grown by a compound annual growth rate (CAGR) of more than 90 percent in the last three years.

Helping drive growth in Mexico in Q2 was the rollout of A-B’s portfolio in 4,000 OXXO convenience stores, Brito said. The company plans a full rollout to all 17,000 locations by 2022.

A-B executives also addressed last week’s divestiture of its Australian business unit, Carlton & United Breweries, to Asahi Group Holdings for $11.3 billion, as part of an effort to pay down its debt load.

Felipe Dutra, A-B’s chief financial officer and chief technology officer, said the company will continue to “deleverage organically” in the future.

“We’ve been able to accelerate that and not be dependent on the sale of any assets to reach our goals,” Dutra said.