- Anheuser-Busch InBev NV and Diageo Plc released mixed earnings reports, as both alcoholic beverage companies struggled in certain markets.
- North America proved to be a difficult market for both companies, with AB InBev reporting 2.2% decrease in sales to retailers and Diageo seeing a 3% decline in volume.
- It appears consumers are starting to adopt more expensive tastes in spirits, but Diageo CEO Ivan Menezes told CNBC that this trend would be the boost the company needs to increase sales in the U.S. The same could be said for AB InBev, which has seen low single-digit decreases in sales for its non-premium flagship brands, Budweiser and Bud Light in the U.S. while it pursues U.S. craft breweries.
"Faced with declining popularity of its flagship Bud and Bud Light brands, AB InBev is looking elsewhere for growth with different beer styles, new packaging like recloseable aluminum bottles and acquisitions of fast-growing American craft brews such as Elysian and 10 Barrel," Bloomberg reported.
AB InBev's interest in acquiring craft breweries is especially significant to its strategy, which shouldn't come as a surprise with craft beer volume up 16% in the first half of the year, according to the Brewers Association. Brewbound recently reported that AB InBev had even recently tried to set up a sit down with Dogfish Head Brewery, a darling in the craft beer industry, which has seen 17 consecutive years of double-digit growth.
As the largest brewer in the U.S., AB InBev has contributed to the U.S. economy in a big way. "The U.S. beer industry contributed $253 billion to the American economy and supported 1.75 million jobs in 2014, according to the latest 'Beer Serves America' report, jointly commissioned by the Beer Institute and the National Beer Wholesalers Association," Brewbound reported. AB InBev and other large and regional brewers make up 70% of employment in the beer industry, according to the report.
In response to Americans' evolving preferences for more expensive spirits brands, Diageo also announced that it would acquire the remaining 50% stake in premium tequila brand Don Julio, which saw a 5% volume increase in North America. Other premium Diageo brands saw similar growth: Buellit, a high-end bourbon, enjoyed a massive 32% jump in volume, while premium Ciroc volumes increased 4% as well, according to CNBC.
"But we've got a portfolio that covers the whole breadth of price points and you will see us activate our brands, be it Smirnoff or Ciroc…but Americans in general are drinking better and that bodes very well for us because we are very well positioned in the premium end of the business," Menezes told CNBC.