AB InBev sees ‘silver lining’ with Budweiser in bleak Russian market

By Ben BOUCKLEY contact

- Last updated on GMT

US icon Budweiser now has a 2% market share in Russia, according to AB InBev (Picture Credit: Joyosity/Flickr)
US icon Budweiser now has a 2% market share in Russia, according to AB InBev (Picture Credit: Joyosity/Flickr)

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AB InBev CEO Carlos Brito admits the firm is suffering in Central and Eastern Europe because of an historic focus on high volume, value brands, but notes strong growth for Budweiser in Russia.

Reporting Anheuser Busch InBev’s (AB InBev's) Q3 2013 results on Thursday, company management said they were not satisfied with top line performance in 2013.

Although Q3 revenue grew 3% to year-on-year to $11.622bn and profit rose around 21% to $2.796bn, the firm bemoaned macroeconomic headwinds in a number of markets – including the US, Brazil, Mexico – which offset growth strong Asia Pacific growth and a slight uptick in Western Europe.

AB InBev’s Russia beer volumes fell 13.4% in Q3, while Ukraine volumes fell 26.2% due to destocking in September “following a very weak industry performance”.

Stuck in a negative trend?

Anthony Bucalo, Grupo Santander, said it was around two and a half years “since we’ve had anything really resembling a constructive quarter in that division”​ – namely the SUN InBev subsidiary that brackets Ukraine and Russia within the Central and Eastern Europe division.

“Can we assume that there’ll be any kind of recovery…or are we stuck with a negative trend that’s going to go on the foreseeable future?”​ Bucalo asked, on the analyst call following the results announcement.

Noting the impact of 2009-10 excise tax increases in Russia, Brito said they destroyed 40% of the industry’s profit pool, where before this measure and the financial crisis the market was growing double digit.

AB InBev recognized the need for more focus, by investing resources to support premium and super premium brands “because that’s the only way to make sense of that market”, ​he said.

“But that’s a long road because we still have lots of our volume based on value brands that will not be part of our future.”

‘We want to have our feet wet' in Russia

Nonetheless, Budweiser has reached a 2% market share in Russia following its launch in 2010, Brito said, adding that Siberian Crown, Stella and Klinskoye were also key brands.

“But this has been a tough market because, first there were the taxes, then there was the media, then was the distribution restrictions – one of top of the other,”​ he said.

Yet Russia remained one of the top five markets in the world by volume, Brito said, which meant that AB InBev “want to have our feet wet in that market”.

“It’s a market where premiumization is also taking place, and we have brands to take advantage of that. But it will take some years for us to see what we used to see before 2008 there,” ​he added.

The premium brand focus marked a greater focus on key regions in Russia rather than covering all time zones, Brito explained.

“If you want to be more focused on the premium side of your business and core-plus, your route to market has to reflect that,”​ he said.

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