Anheuser-Busch InBev sees return to growth in Brazil, Mexico

Wednesday 26 February 2014 12.23
The maker of Budweiser and Corona has warned about higher input and marketing costs
The maker of Budweiser and Corona has warned about higher input and marketing costs

Anheuser-Busch InBev, the world's largest brewer, has forecast that the Brazilian and Mexican beer markets would return to growth this year due to the soccer World Cup and stronger economies.

But the maker of Budweiser, Stella Artois and Corona cautioned about higher input and marketing costs.

The company said the World Cup would boost beer sales by 1 to 2 percentage points in Brazil, its second-largest market which shrank last year due to a wet summer and high inflation that sapped disposable income.

AB InBev also said that stronger economic growth would drive Mexico and its biggest market, the US in 2014.

The latter, though, would suffer in January and February as exceptional cold weather and snow meant fewer people went out to bars.

"Where weather has been good, for example the west coast, volumes have been fine," the company's chief financial officer Felipe Dutra told a conference call.

However, there were notes of caution. The firm said its cost of sales per volume would increase by a low single-digit percentage as the effect of unfavourable exchange rates outweighed lower global commodity prices.

AB InBev also said it would be raising its spending on sales and marketing by a low to mid-teen percentage, including World Cup-related promotions and investment in its newer brands.

AB InBev, which sold more than one in five beers drunk worldwide last year, said volumes slipped 1.7% in the final quarter of 2013, but revenue rose 4.6% to $11.71 billion, a little below the average $11.77 billion expected in a Reuters poll. 

The company reported a 13% like-for-like rise in fourth quarter earnings before interest, tax, depreciation and amortisation (EBITDA) to $5.20 billion, higher than the $4.94 billion average in a Reuters poll.

The figure included a $143m one-off gain related to the recovery of funds from a pension plan in Brazil, although even excluding that it was still above the market consensus.

The improvement came from price increases and a shift to premium lagers that meant higher revenue per litre, savings since taking full control of Mexican brewer Modelo and general cost control.

The world's top brewers are relying on Latin America, Asia and Africa for growth amid subdued consumer spending in austerity-hit Europe and limited US expansion. However, growth in several developing countries, disappointed last year.

For AB InBev, a wet summer, an early Carnival and high inflation depressed volumes in Brazil, where it has some two-thirds of the market, second only to the US in terms of profit. 

Volumes also slipped in Mexico due to a softer economy and harsh weather in September. The only region registering growth for the company in 2013 was Asia.

AB InBev's view of the year ahead after soft spots in 2013 echoes those of its brewing peers.

World number three Heineken forecast a return to revenue growth this year and Carlsberg, the world number four, saw profit growth in the year ahead with higher beer sales in emerging markets.