AB InBev defends Budweiser Black Crown against analyst succession doubts


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AB InBev defends Budweiser Black Crown from analyst succession doubts
Anheuser-Busch InBev CEO Carlos Brito insists to analysts that US line extension Budweiser Black Crown ‘is delivering on its promises’, and says he is encouraged by flat core Budweiser brand sales.

On Wednesday the world’s No.1 brewer reported Q2 beer volumes down 1.2% in organic terms, but revenue rose 3.9% to $10.587bn and EBIT increased 7.1% year-on-year to $3.179bn.

Brito told analysts that AB InBev was pleased that its “major innovations”​– Budweiser Black Crown (sold at a 10-15% standard brand price premium) Bud Light Platinum (10-15%) and Bud Light Lime (60-70%)

“Our major innovations are only sourcing between approximately 20-30% of their volume from other AB InBev brands,” ​Brito said, revealing the relevant respective brand percentages: 29%, 22% and 18%.

Black Crown shows ‘lack of traction’?

Sanford C. Bernstein analyst Trevor Sterling asked: “Looking at the Nielsen numbers, it’s clear the [Bud Light] Lime-A-Ritas have been a fantastic success. Bud Light Platinum is very stable sequentially, but Bud Black Crown hasn’t had quite the same level of traction thus far. Is that a fair read of the data?”

Brito replied that for a “huge brand”​ like Budweiser:“You want a line extension to help the mother brand more than anything else, and bring interesting cues in terms of contemporary positioning.”

He added: “That’s what Black Crown is achieving. Not only appealing to different occasions, but continues to help Budweiser brand health go up.”

Black Crown draught and can sales would appear in the Fall, Brito added. “So, I think it’s delivering on its promises, but of course, Platinum is a line extension from a much bigger brand – Bud Light.”

On Budweiser itself – which grew +6.3% y-o-y globally in the quarter but flatlined in the US – Brito said AB InBev was encouraged by improving brand health scores, with the beer benefiting from new activations while sponsorship deals such as Nascar had also been “recalibrated”​ to tap younger consumers.

“Our commitment since 2010 has been to stabilize this brand, and we see good progress in that,”he said.

Corona opportunities excite

Discussing the implications of AB InBev’s $20bn takeover of Grupo Modelo, Brito said his firm could boost the brand internationally as it had Budweiser, which it acquired via the Anheuser-Busch takeover in 2008.

AB InBev was currently sifting through the 180+ export contracts that Modelo had, and would either renew or exit these on a per case basis, Brito added.

“When you look at the total volume of Corona outside of the US and Mexico, it’s around 4m hectolitres with great margins. When you look at Budweiser outside of the US it’s 19m hectolitres,”​ he said.

“So just look at those two numbers and you can see why we’re so excited. Corona has been developed very successfully around the world and very well positioned and priced, but always on the back of importers who have short-term contracts,”​ Brito added.

“So now, like Budweiser, we have it in our system, the commitment and investment behind the brand is a different one,”​ Brito said.“Budweiser as a global brand was going down until 2008. In 2009 it already got to positive volumes…the brand is growing. The same will happen with Corona.”

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