ABI reported its Q3 2014 results today with quarterly revenues up 2.3% to $12.239bn; normalized EBIT fell 0.7%, with net profit attributable to shareholders of $2.499bn.
Beer volumes fell 2.7% in Q3, with Europe accounting for 40%+ of the decline (driven by Russia and Ukraine); but in all four of its top markets – US, Mexico, Brazil and China – ABI claimed it made good progress.
In the US the company reported a 30bps (basis points) or 0.3% market share decline versus 65bps in Q2, and claimed good performance for Bud Light, Michelob Ultra and ABI’s high-end brands.
However, US volumes fell 3.7% in organic terms to 29,566 hectoliters, with revenue down 2.6% to $3.703bn and normalized EBITDA down 7.1% to $1.49bn.
Bud Light sales to retailers fall…but at a slower rate
Bud Light sales to retailers fell circa. 2% (leading to a market share loss of 20bps in the quarter and year to date), but the company estimates that it gained share within premium lights due to its ‘Up For Whatever’ campaign launched at the start of 2014, a new 25oz can and 16oz aluminum bottle (pictured below).
The total estimated market share for the Budweiser family fell circa. 40bps in the quarter, but ABI expects the brand will benefit from the introduction of the 16oz aluminum bottle here. Driven by the 25oz can, the brewer’s value brands gained share in both that segment and the total beer market.
In an investor call this morning, Santandar analyst Anthony Buccalo pressed Brito on ABI’s value portfolio: “This quarter it looked like the value sector had a very positive impact on your overall market share in the industry.
“The last five years or so you’ve de-emphasized the value brands, but it looks like they may be one of the most constructive parts of your market share formula,” he added.
‘Will you let your value brands breathe a bit more?’ Anthony Buccalo, Santander
“Are you going to allow the value brands to breathe a bit more…and will you be investing a bit more in those, or will it be ‘Steady as she goes!’, as we’ve seen over the last few years?” Buccalo said.
Brito replied that value remained an important part of ABI’s business (it has the Top 3 brands in that segment) but said it wouldn’t invest as much as in other segments; nonetheless, he admitted that ABI needed value-driven volumes to meet its fixed costs and remain competitive from an industrial standpoint.
“It’s 25% of our volumes – this helps the bills, especially as we don’t pay much in terms of marketing,” Brito said. “Despite having a lower consumer price that we don’t like – we’ve narrowed that gap in the past five years, so the margins are better than you’d expect, because we don’t invest much in sales.”
Brito told analysts and investors that ABI’s top US priorities include: “Bud Light growth, Budweiser stabilization, high-end growth and the on-trade focus…Montejo and other brands that’ll come with the Mexican import segment.
‘The biggest beer brand in the US was never supported in the summer…’
“This year, this quarter, we’re really very happy with Bud Light. It’s amazing to see a brand that has close to 20% share of total market in the US able to grow within its segment…This has proven to us that every time you invest in your base brands consumers come,” Brito said.
‘Up for Whatever’ was an amazing campaign…and in the summer. The biggest brand in the US was never supported in the summer. This year we decided to do this, and guess what? The results are there – we gained one whole percentage point as share of segment in premium lights.
“That’s focus No.1. Bud Light has to work, and when Bud Light is healthy, everything is in a much better place…And I think Bud Light, Budweiser, high-end, on-trade and now the Mexican segment – those are our top five priorities.”