Newly appointed Anheuser-Busch InBev CEO Michel Doukeris hosted his first earnings conference call today since taking the reins earlier this month from predecessor Carlos Brito.
“Throughout my 25 years at the company, I’ve had the privilege to lead our business across different regions of the world, working alongside the industry’s most talented and passionate colleagues every step of the way,” Doukeris said. “Stepping into this role, I look forward to working together with the team to collectively drive our business into this next chapter.”
Doukeris said he “will miss working with such a great leader, mentor, partner and friend” in Brito, and laid out his vision for A-B that, which involves three key priorities:
- “Meet the moment” as the company navigates ongoing implications of the COVID-19 pandemic;
- “Invest in and accelerate what’s working,” including A-B’s focus on premiumization, health and wellness, beyond beer offerings and its digital transformation;
- And maintaining confidence in the company’s commercial strategy.
As such, the world’s largest beer manufacturer will lean into four fundamental strengths: people leadership, access to both developed and emerging markets, “operational excellence,” and a “culture of ownership.”
“We will continue to meet the moment, and build on our current top-line momentum,” Doukeris said. “Our business and the beer category has been proving resilient and reliable in times of crisis.”
In the second quarter of 2021, A-B’s top-line growth increased 3.2% over its pre-pandemic level in Q2 2019, according to the company’s Q2 report. The company’s global volume increased 20.8%, driven by non-beer volume growth (+23.2%), which outpaced beer volume growth (+20.5%). In the first half of 2021, global volume increased 17%, driven by beer volume (+17.7%), which outpaced non-beer volume (+12.6%).
Global revenue increased 27.6% in the quarter; revenue per hectoliter increased 5.8%. Both figures indicated acceleration over Q1, as they outpace first-half revenue (+22.4%) and revenue per hectoliter (+4.7%).
“Positive brand mix, revenue management initiatives, operational leverage and ongoing cost discipline were partially offset by anticipated transactional FX and commodity headwinds,” A-B wrote in its earnings report. “Additionally, our SG&A increased due to higher variable compensation accruals, which are recorded by quarter at the zone level depending on operational performance, and growth in sales and marketing investments to support our top-line momentum.”
Chief financial officer Fernando Tennenbaum pointed to the company forgoing bonuses last year for senior leadership as the reason that variable compensation accruals increased. In addition to bonuses returning, they also increased with improved company performance, he added.
“It’s one number for you to have in mind that whenever we post strong growth, that also commands higher variable compensation accruals,” he said.
In the U.S., A-B’s shipments (sales to wholesalers) increased +2.2% and revenue per hectoliter increased +4.6%, “due to ongoing premiumization and revenue management initiatives,” the company reported. Meanwhile, depletions (sales to retailers) declined -1.4%, which A-B estimated lagged behind the overall industry.
Brands benefiting from A-B’s focus on premiumization included its ready-to-drink, spirits-based Cutwater Spirits canned cocktails (“growing by triple digits”); the company’s hard seltzer portfolio, led by the segment’s third-largest brand Bud Light Seltzer, which increased sales 28%, nearly triple the rate of the overall hard seltzer segment’s growth; and Michelob Ultra and the company’s Brewers Collective craft brands, which “grew by double-digits yet again in 2Q21.”
For the first half of 2021, U.S. shipments increased +2.5%, while depletions declined -1.1%. Total revenue increased 6.1%, as revenue per hectoliter increased 3.5%.
In North America, A-B’s EBITDA (earnings before interest, taxes, depreciation and amortization) declined by -281 basis points, which Doukeris attributed to increased costs in cans and aforementioned variable compensation accruals.
“The can market in the U.S. was very tight last year and first half of this year,” he said. “We are importing cans from several other markets.”
Doukeris also discussed the company’s strategy around its package and channel mix now that the on-premise trade has reopened.
“First, you start with consumer mobility, and then, the first channels that are impacted are the small off-trade and convenience stores,” he said. “The difference when you go to the large big packs, you start having more small and medium packs in a lot of variety. … The last one to pick up is then on-trade and the on-trade is generally starting with bigger brands and a lot of bottles, but quickly then transitioning to more brands and draft as well.”
Asked for his read on the state of the global beer business, Doukeris expressed confidence in the “very resilient,” “very reliable” industry and pointed out that beer is growing in “meaningful markets such as Brazil, China, Mexico, Colombia [and] South Africa.” In more mature markets such as the U.S., U.K. and Canada, “what is driving growth is both premiumization and innovation,” including hard seltzer and other beyond beer offerings, including Cutwater Spirits, he added.
“We do have here a big opportunity,” Doukeris said. “We have the right capabilities to win at scale, profitably and globally in these beyond beer opportunities, addressing more consumers, more occasions and building on the strength of our route to market and the platform that we built over the years in beer.
“So, we see a confident outlook there for the beer industry, which is growing globally, but as well as further opportunities for us to build and unlock value by going beyond beer and taking advantage of what we built over the last several years,” he continued.
Globally, A-B’s beyond beer portfolio grew revenue by 45%. By the end of 2021, A-B will bring Mike’s Hard Lemonade and Mike’s Hard Seltzer (which it sells outside the U.S.) to more than 20 countries. With nearly 50% market share in Mexico, Michelob Ultra Organic Seltzer is the segment leader in that country.
BEES, A-B’s B2B digital sales platform, now accounts for 60% of the company’s revenue in Mexico. In Colombia, BEES accounts for nearly 80% of revenue, Doukeris said. Mexico and Colombia are two of 12 markets where the platform is live. BEES now boasts 1.8 million monthly users, and captured $4.5 billion in gross merchandise value in Q2, more than 50% more than it did in Q1, Doukeris said.
“BEES has achieved significant adoption by customers in our seven focus markets, with 60% to over 92% of our revenue in these initial markets now coming from digital,” he added.