Brewer’s earnings rise 6.6%; CEO ‘confident’ of acceleration
Thank you for reading this post, don't forget to subscribe!Company ramps up investment in marketing, U.S. supply chain
Anheuser-Busch InBev NV’s is ramping up spending on marketing initiatives ahead of the soccer World Cup this summer after promotions helped buoy demand in Colombia and Peru.
Budweiser’s campaign for the World Cup, the most-watched sporting event globally, began this week. The initiative comes as AB InBev, the world’s largest brewer, works to drive more revenue from athletic tournaments and social occasions after the past decade’s influx of smaller brands weaned drinkers off its mass-market brews. To address that challenge, the Leuven, Belgium-based company is investing $2 billion in promoting its brands and improving supply chains in the U.S.
The company sees a drag on earnings growth of between 0.5 and 1 percentage point from increased spending on the World Cup, which will be more weighted to the second quarter of the year, Chief Executive Officer Carlos Brito said Wednesday on a conference call with analysts.
The shares gave back some of their early gain after the company posted first-quarter earnings growth of 6.6 percent, surpassing analysts’ estimates. The company said it’s “confident” growth will quicken, especially in the second half. The stock was up 2.4 percent in Brussels at 3:55 p.m.
The beverage company’s results were “a relief, and growth looks set to accelerate,” Olivier Nicolai, an analyst with Morgan Stanley who rates the shares the equivalent of buy, said in a note to clients.
In Colombia, the Aguila brand increased sales more than 50 percent in the first quarter, helped by ads that fueled nostalgia for the last time the country played in the World Cup. Cristal performed well in Peru as the brand is supporting the national team.
This year’s World Cup is held in Russia, a market dominated by Carlsberg A/S. The Danish brewer said last week the Russian market shrank by about 5 percent in the first quarter, hurt by restrictions on bottling and the threat of international sanctions on the country’s economy.
AB InBev said it plans World Cup promotions for Budweiser in Argentina and in Nigeria, where it started selling the brand in March.
The event is “an opportunity for us to step of Budweiser execution in terms of brand performance in all the markets we operate in,” Chief Financial Officer Felipe Dutra said on a call with reporters.
One of the first ads in the new campaign involves hundreds of drones flying beer bottles from Budweiser’s home in St. Louis, down the shores of Rio de Janeiro, through the jungles of Latin America and over snowy mountain ridges. They drop off the beverages in Shanghai’s city center, in British pubs and finally at Moscow’s soccer stadium.
AB InBev’s shares have lost about a quarter of their value since the company acquired SABMiller Plc in 2016 in the industry’s largest-ever deal. The company said it had cost savings of $160 million related to the SABMiller purchase in the first quarter.
