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(Courtesy AB InBev)
Few things are more sobering than seeing $13 billion in market value wiped out in one day. But that’s what happened to the world’s largest brewer on Friday.
Coming off a relatively robust 2Q report, the weaker-than-expected third quarter earnings was a major disappointment for Anheuser-Busch investors. But that’s increasingly life in the big leagues in a world that is drinking less beer.
With overall beer sales slowing in the states, global brewers such as AB In Bev, home to Budweiser, Corona and Stella Artois, and Heineken have been looking to developing markets in Asia, Latin America and Africa, to make up for declines in Europe and the United States.
But it was underperformance in China, South Korea and Brazil that led to the Brussels-based brewing giant’s $13 billion hit last Friday.
The Asian business that Anheuser-Busch InBev, divided last month in a separate Asian stock offering is now weighing on its performance in China, as is the campany’s still considerable debt load.
(Courtesy AB InBev)
Earlier this year Anheuser-Busch InBev had raised the prices of its beers in South Korea and Brazil, a move that if the company’s third quarter results were any indication, didn’t play out all that well.
In Brazil, the company’s second-largest market behind the US, AB InBev “saw volume drop by 3%,” according to Reuters, “as some competitors sold their beer at a discount to consumers.”
In April AB InBev hiked its beer prices in South Korea, which like China is feeling the effects of a slowing economy, but rolled them back this month after rivals failed to follow suit.
Overall AB InBev’s third-quarter core profit was unchanged year-on-year at $5.29 billion. But the company had projected a 3% rise, so that didn’t help. It also didn’t help that its worldwide beer volume continued to decline either. And sales and marketing costs were also higher than in the third quarter of 2018
On his third-quarter earnings call with investors and analysts, CEO Carlos Brito didn’t even bother to spin the situation…
“Overall, the third quarter was challenging due to some material headwinds we faced and we’re not satisfied with these results.”
At one point during AB InBev’s rollercoaster ride last Friday, shares were down 11%, its second biggest daily drop in a decade which ended with the worst one-day loss so far in 2019.
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Banner image credit: AB InBev
