Anheuser-Busch InBev’s revenue increased 4.3%, to $52 billion, in 2019, but executives within the world’s largest beer company said Thursday that the growth fell short of expectations.
During a call announcing full-year earnings, A-B CEO Carlos Brito said the company is “never fully satisfied with our results.” Globally, the company’s total volume increased 1.1%, to more than 478 million barrels, in 2019.
“We’ll use the learnings from this year to better position ourselves to deliver long-term growth,” Brito said. “Although there are some short term challenges ahead, we’re confident in our strategy and plans to grow our business by delivering balanced sustainable, top and bottom line growth in 2020 and beyond.”
In the U.S., A-B’s depletions (sales to retailers) declined 2.4% for the full year and were “flattish” in the fourth quarter. By the company’s estimation, the beer industry as a whole outperformed it on these metrics, with a 1.4% decline in depletions for the year and a 0.4% increase in Q4.
Five Commercial Strategies
The company’s U.S. business centers around five commercial strategies, which were first set in 2017:
- Expand its core-plus business by doubling its industry segment mix: A-B’s share grew from 6% in 2017, to 8% in 2019, due to the growth of active lifestyle offering Michelob Ultra.
- Double its share of the super premium segment: The company’s share in super premium is flat due to double-digit growth from craft offerings and the stabilization of Stella Artois’ volume.
- Grow its premium volume 1,000%: Premium volume has increased 200% since 2017, with triple-digit growth of Michelob Ultra Pure Gold.
- Stabilize volume loss of its mainstream offerings: Mainstream brands have improved from a loss of 60 basis points (bps) in 2017 to a loss of 15 bps in 2019.
- Increase revenues of beyond beer offerings: The company still under indexes on beyond beer brands.
The goal of the five-pronged strategy is to focus on consumers and rebalance its portfolio through innovation and premiumization, according to the release. The work done against these priorities resulted in revenue growth of 0.5% in 2019 and growth of 2.8% revenue per hectoliter.
The Growth of Hard Seltzers
With the launch of Bud Light Seltzer last month, A-B has set its sights on taking the No. 2 spot in the hard seltzer category, which is currently occupied by Boston Beer Company’s Truly Hard Seltzer. Mark Anthony Brands’ White Claw has maintained more than half of the share of the hard seltzer category. A-B’s hard seltzer portfolio also includes Bon & Viv Spiked Seltzer, which it rebranded after acquiring Spiked Seltzer in 2016, and Natural Light Hard Seltzer.
“We’re getting very quickly to close to 20 share of segment,” Brito said. “And we intend to get to No. 2 position with this portfolio approach.”
Brito compared the hard seltzer category to the early days of the craft beer segment, and he pointed out that A-B’s portfolio was lacking offerings of both in each category’s early days.
“Quickly in a few years, we built a portfolio of craft brands that today grows at many, many times over what the craft industry grows — a strong double-digit versus a low single digits for the craft industry,” he said. “The good news about seltzer, compared to craft, is that seltzer is a game of national brands, which of course caters much more to the way we go to market.
“So, I think it’s all good news, very profitable. It’s incremental, brings new people to the category. It addresses a lot of trends that are out there in terms of health and wellness. It’s more co-ed and with flavors, there are many things that can be accomplished.”
A-B plans to increase its investment behind its beyond beer offerings by 20% through “resource relocation,” Brito said, adding that beyond beer “is where growth is.”
The Impact of the Coronavirus
Asked how the outbreak of the coronavirus has affected the company, Brito estimated a revenue loss of $285 million in China, where the robust nightlife scene has come to a halt. A-B has reopened about half of its breweries in China and has licenses to reopen almost all of the rest. The exception is A-B’s brewery in China’s Wuhan province, where the outbreak began.
“The health and safety of our community, our colleagues and our business partners will always be our top priority to support government measures and recommendations to contain the spread of the virus,” Brito said. “For the business impact, it continues to evolve; so far, we see a significant decline in demand in on-premise channels with almost no activity in the nightlife channel, and very limited activity in restaurants. We also observed a meaningful decline in home channels.”
Brito cited a survey of Chinese residents that found that among the activities they were most looking forward to resuming were meeting friends, dining out and enjoying indoor entertainment.
“That’s squarely within our dream of bringing people together,” he said.
A-B’s team in China is meeting regularly and communicating with the global team as the situation develops. As of Thursday, the Associated Press estimated that more than 82,000 people have been infected worldwide and more than 2,800 have died.
“We’re monitoring province by province, channel by channel, because we’re going to come back very fast,” Brito said. He recalled the end of the SARS outbreak in 2003, when life resumed quickly.
“We want to be an even stronger company in China after this crisis,” he said. “So right now, of course, first priority is to say to our people, community and consumers ‘Once the government guidelines allow us to go back to business, we’re prepared,’” he said.
Change at CFO
Brito closed the conference call by acknowledging chief financial and technology Felipe Dutra, who will depart the company after its annual shareholders meeting on April 29th.
“Felipe has embodied the spirit of true ownership,” Brito said.
Fernando Tennebaum, the vice president of finance for A-B’s South American division, will supplant Dutra.
A-B stock (BUD) had declined about 8% of press time.