AB InBev SA, the world’s largest brewer, reported its first volume decline since the early days of the pandemic and gave an earnings forecast for 2023 that disappointed investors.
(Bloomberg) — AB InBev SA, the world’s largest brewer, reported its first volume decline since the early days of the pandemic and gave an earnings forecast for 2023 that disappointed investors.
Beer-drinking in the US suffered from blizzards in December, while the final stage of China’s Covid Zero policy weighed on demand in Asia. That led to a surprise drop in fourth-quarter volume, while analysts had been expecting an increase. AB InBev shares dropped as much as 4.5% Thursday morning.
“We hope this is no more than a speed bump on AB InBev’s road to rehabilitation, but Q4 was not great,” wrote RBC analyst James Edwardes Jones.
Brewers are under pressure as the cost-of-living crisis leads consumers to pare spending, and that’s denting their ability to raise prices. Danish rival Carlsberg A/S said last month that 2023 will be difficult as consumers retrench.
While beer is “resilient,” in an economic downturn, “it is not 100% immune,” to shifts in consumer behavior, Chief Executive Officer Michel Doukeris, said in an interview.
AB InBev said 2023 sales will grow thanks to a “healthy” combination of volume and price. The brewer is forecasting a rebound in China as restaurants and bars were almost fully reopened there by the end of last month.
“We will have a ton of opportunity to sell more volume there,” Doukeris said.
For the full year, the maker of Budweiser and Stella Artois expects Ebitda should rise 4% to 8% on an adjusted basis this year. Analysts are expecting a gain of 7.6%.
What Bloomberg Intelligence Says
RECENT EVENT REACTION: AB InBev’s 276 bps gross margin decline despite almost 9% pricing shows further operating margin pressure is likely unless it can boost volume again in 2023. However the small 4Q decline, even with the World Cup, suggests a difficult year ahead. Consumers may buy cheaper beers due to affordability, explaining why its guidance remains cautious at 4-8% Ebitda growth.
—Duncan Fox, senior consumer industry analyst
AB InBev’s Positive Volume Key to Restoring Margin Growth: React
Revenue growth has been fueled by its premium beers and price increases, as well as expansion into low-alcohol brews and other drinks like seltzers.
Doukeris said cost inflation will remain high this year but slower than the 15% increase in 2022. He also said negotiations to divest AB InBev’s minority stake in a Russian joint venture are in an advanced phase.
–With assistance from Joel Leon.
(Updates with CEO comments beginning in sixth paragraph)
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