Dive Brief:
- Citing a 4.1% decline by volume in its Latin America market, AB InBev scaled back its revenue growth forecast, according to The Wall Street Journal. Total revenue fell 2% to $11.1 billion, but even 2.8% organic growth fell below analysts' estimates.
- The 2.5% dip in the U.S. also contributed to lowering expectations, due primarily to continued decreased domestic demand for Budweiser and Bud Light.
- Instead of growth, the brewer is now predicting revenue more in step with inflation.
Dive Insight:
The costs associated with the more than $100 billion merger with SABMiller is no surprise, but the dip in key markets was not. The beer giant has said it will take years before SABMiller is fully integrated, but investors could be shocked by the costs involved in the interim. The fourth quarter will be telling as to how this merger will pan out in early earnings reports.
Greater access to the African market was a critical aspect of the SABMiller takeover, as it is one of the fastest-growing regional markets for beer. The merger enables AB InBev to depend on sales growth more from this region than from the U.S., where volumes of flagship brands continue to decline. But some analysts posit that this deal could cause U.S. beer volume sales to decline even more quickly.
Staving off one of its biggest disruptors, the company has also made inroads into the craft beer market. That included a flurry of acquisitions at 2015's close, but AB InBev has also pursued the craft beer and homebrewing markets through strategic acquisitions of key companies in the space. This latest acquisition of a major homebrew ingredients company likely startled craft brewers who were already concerned about how this mega-merger could impact distribution for craft brewers.