Dive Brief:
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Anheuser-Busch InBev missed earnings forecasts as the mega-brewer posted weaker sales and higher costs in Brazil, its second-largest market, which is struggling to recover from a recession, the Wall Street Journal said. Beer sales also declined in North America and Europe. The company said top executives will not receive bonuses following the weak results.
- AB InBev, which boasts 500 beers in its portfolio, including 18 beers with more than $1 billion in sales, reported total revenue rose 0.2% to $14.2 billion. Net profit was $400 million, down from $2.29 billion a year earlier, largely due to increased debt costs following the SABMiller deal and negative fluctuations in exchange rates.
- The beer giant increased savings expected from its $100 billion-plus merger with SABMiller to at least $2.8 billion, compared with $2.45 billion previously, the Wall Street Journal reported.
Dive Insight:
AB InBev’s disappointing quarter comes as the suds maker continues to fully integrate its 2016 purchase of SABMiller, a deal crucial to helping it gain access to the fast-growing African beer market and emerging countries such as Colombia and Peru. In the U.S. alone, AB InBev said sales to retailers declined 2% in its 2016 fiscal year, and 2.7% in the fourth quarter — both figures that trailed the overall beer industry. With struggles in its important Brazilian and U.S. markets showing no sign of abating, the company has been desperate to find ways to expand its market share and fend off acquisition-hungry competitors.
The beer market has been rapidly consolidating in recent years as big players in the industry fight for scale and growth around the world and try to combat the growing popularity of craft breweries. But those same craft brew makers that pose a threat to companies like AB InBev are also tantalizing acquisition targets. There are no signs that beer manufacturers, desperate for growth, will stop looking to make bids for fast-growing U.S. craft beer brands.
One roadblock could potentially come from the federal government, which has recently expressed concern over AB InBev’s purchase of craft brewers and whether those deals could place the company in a position to prevent other craft rivals from getting their product to market. Those acquisitions were ultimately approved. Still, with millennials gravitating toward craft beers, which have the bold and authentic flavors they crave, big brewers may have little choice but to develop their own brands or look to acquire them. It's a common theme playing out across the food and beverage industry, highlighted by Kraft Heinz's failed takeover last month of food and consumer products giant Unilever.