Anheuser-Busch InBev Q4 profit drops by 10% due to sluggish US Market
Anheuser-Busch InBev NV suffered 10 percent drop in profit for fourth quarter of 2015. This is mainly sluggish market in the US. Revenues for fourth quarter fell to $3.23 billion from $3.33 billion in the previous corresponding quarter
Ab InBev and Molson Coors Brewing Co gained very little benefit from improving US economy. On the other side, taking advantage of cheaper gasoline prices and drop in jobless rate, other soft drink majors such as Coca-Cola Co, PepsiCo Inc and Procter & Gamble are riding high in the US market.
US market has been the major and most profitable market for AB InBev. However, consumers continue to prefer cocktails, craft beer and more flavorful beers like India pale ales. As a result, Belgium-based brewer Anheuser-Busch InBev NV recorded one percent drop in revenues for the fourth quarter to $3.23 billion from $3.33 billion in the previous corresponding quarter, as reported by The Wall Street Journal (WSJ).
The sales of popular beer brands such as Budweiser and Bud Light fell one percent to three percent during the quarter. Recently AB InBev made $108 billion acquisition bid for rival brewer SABMiller in 2015.The would create a largest brewing company in the world. The acquisition deal would enable AB InBev to access Africa, which one of the major beer markets in the world. AB InBev is hoping to close in the second half of 2016 despite regulatory hurdles.
The profit for the fourth quarter was below the market prediction. Fourth quarter profit rose by 6.6 percent to $4.31 billion as against average forecast of $4.73 billion in a Reuters poll. The weaker Brazilian currency Real, Mexican Peso and Euro impacted the margins. The beer is hoping to improve margins from the price hikes n 2016 and premium lagers as revenue per hectolitre increased by more than inflation, according to Fortune.
Felipe Dutra, Chief Financial Officer, said that company would soon get regulatory clearance for the deal. It'll include major markets such as the US, Europe and China. AB InBev is planning to divest some of assets in the US and Europe to make itself adhering to regulators. It's in the process of holding discussions over SABMiller's stake in China Resources Snow Breweries, which is world's largest brewer of beer by volume.
Total sales volumes fell by 0.6 percent in entire 2015. Its own beer sales volumes were flat, while non-beer volumes fell 4.7 percent in 2015. For the fourth quarter alone, own beer volumes inched up 0.2 percent, non-beer volumes fell 6.5 percent. Cost of sales rose 3.9 percent for 2015, according to Ab InBev.
AB InBev is planning to spend $600 million on sales and marketing this year. The spending mostly will be in the US as to overcome the recent drop in sales. AB InBev has recently rolled out a new Bud Light advertising campaign. It involved star cast of Amy Schumer and Seth Rogen in the ad film. AB InBev has decided to launch new packaging in April.
Chief Executive Carlo Brito said: "Bud Light is the brand, we need to get to a better place. If we can stabilize the brand that would be a big plus."
Chief Executive Carlo Brito is keen on stabilizing company's market share in the US. The market share of AB InBev fell from 49 percent in 2009 to 44 percent now, according to industry tracker Beer Marketer's Insights.