DE4CC0DE-5FC3-4494-BCBF-4D50B00366B5
Drinks

Rising Costs Weigh On AB InBev Despite Higher Beer Sales

By Steve Wynne-Jones
Share this article
Rising Costs Weigh On AB InBev Despite Higher Beer Sales

Anheuser-Busch InBev, the world's largest brewer, scrapped its interim dividend and said quarterly profits dipped as the shift to drinking at home pushed up its costs.

The maker of Budweiser, Stella Artois and Corona lagers enjoyed a surprise rise in sales but earnings declined slightly after the pandemic forced consumers to shift from drinking out to buying more of their beer in stores.

This pushes up costs because AB InBev needs to produce and ship more packaging and single-use cans and bottles and fewer of the cheaper kegs and returnable glass bottles used in bars and restaurants.

The world's second largest brewer Heineken said on Wednesday it faced a similar cost issue.

Financial Guidance

AB InBev gave no specific financial guidance for 2020, but expects the second half of the year to be better than the first, albeit with considerable uncertainty due to the pandemic.

ADVERTISEMENT

Overall beer and soft drink volumes rose by 1.9% in the June-September quarter after a 17% slide in the second quarter to drive revenue up 4.0%, against consensus expectations of a 4% decline.

AB InBev shares were trading up 1.6% at 0925 GMT, with its largest markets recovering and showing no imminent signs of lockdowns.

Unlike rival Heineken, only a small percentage of the company's business is in Europe, where COVID-19 restrictions are tightening most.

Brazil Shines

AB InBev's clear outperformer was Brazil, the company's second biggest market, where beer sales shot up 25% from a year earlier with government subsidies propping up consumer demand for its premium and new beers.

ADVERTISEMENT

Volumes and profits also grew in its largest market, the United States, as its Michelob Ultra lager and hard seltzers offset a decline of mainstream brands to increase its share of national beer sales.

The Belgium-based company also reported growth in Mexico, Europe and China, but suffered declines in Colombia, where stay-at-home restrictions only eased in August, and South Africa, where alcohol sales were banned for a month.

Still, earnings before interest, tax, depreciation and amortisation only dipped by 0.8%, a far milder decline than the average forecast of a 9.3% drop in a company-compiled poll. EBITDA fell by a third in the second quarter.

The company said uncertainty and market volatility meant it would not pay an interim dividend this year after a payout of 0.80 euros per share in 2019.

ADVERTISEMENT

Earlier this year, it also halved its final dividend for 2019 to €0.50.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

Get the week's top grocery retail news

The most important stories from European grocery retail direct to your inbox every Thursday

Processing your request...

Thanks! please check your email to confirm your subscription.

By signing up you are agreeing to our terms & conditions and privacy policy. You can unsubscribe at any time.