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Anheuser-Busch InBev (EBR:ABI) |
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Revision as of 12:23, October 6, 2009
Anheuser-Busch InBev Anheuser-Busch InBev (EBR:ABI) is the largest brewer in the world, with over €16 billion in net sales in fiscal 2008, 22% of world market share, and 50% of US market share.[1] Created by Belgium-based InBev's acquisition of US-based Anheuser-Busch in November 2008, the company is based in Brussels and has operations in 30 countries across the world.[2] The combined company owns four of the top ten selling beers in the world, holds the number one or two market share in 20 markets around the world, and manages over 300 brands.[3]
In 2008 alone, AB InBev realized over $250 million in cost savings due to the merger.[4] By the end of the integration process in 2011, the company expects to realize synergies of $2.25 billion.[5] These synergies have allowed the company to grow revenues and EBITDA even in the face of the global recession.[1] In an effort to further increase margins, AB InBev has implemented a strategy focusing on its three higher margin global brands: Budweiser, Beck's, and Stella Artois.[6]
Contents |
Company Overview
Business Financials
AB InBev is the largest brewer and fifth largest consumer goods producer in the world.[1] The company occupies the number one or two spots in 20 markets around the world, including 49.9% market share in the US, 67.5% in Brazil, and 57.7% in Belgium.[7] AB InBev manages more than 300 brands and has brewing production facilities in six continents. Through the company's acquisition of Anheuser-Busch Companies (BUD), AB InBev owns a 50% stake in Grupo Modelo, Mexico's leading brewer and producer of Corona.[8]
On a pro forma basis, AB InBev earned €16.1 billion in 2008, a 3.4% increase from 2007. Ignoring the effects of currency translation, revenues increased by 5.2% during the year.[9] This increase was a result of net pricing increases, as volumes decreased negligibly. Ignoring one time charges, operating income rose 4.6% to €5.334 billion in 2008. This increase was due to cost management across all operating segments.
Operating Segments
AB InBev operates seven business segments.
- North America (16.7% of revenues, 21.5% of Net Income)[10]
In 2008, the North America segment posted €2.715 billion in revenue.[11] Top brands in the zone include Budweiser, Bud Light, and Stella Artois.[12] The company's equity income from Grupo Modelo is included in this segment. In fiscal 2008, Grupo Modelo posted sales of 75 billion Mexican Peso (MXN).[13]
- Latin America North (32.2% of revenues, 69% of Net Income)[10]
AB InBev's Latin America North segment posted €5.182 billion in revenues in 2008, and includes Brazil, Venezuela, and Peru.[14] Top brands in the zone include Brahma, Skol, Stella Artois, and Budweiser.[14] AB InBev also has a strong soft drink presence in Brazil, with 18% of the market.[15]
- North America South (7.8% of revenues, 14.2% of Net Income)[10]
AB InBev's Latin America North segment posted €1.254 billion in revenues in 2008, and includes Argentina, Paraguay, and Uruguay.[16] Top brands in the zone include Brahma, Andes, Pilsen, Stella Artois, and Budweiser.[12]
- Western Europe (20% of revenues, (4.9)% of Net Income)[10]
AB InBev's Latin America North segment posted €3.217 billion in revenues in 2008, and includes the UK, Germany, France, and Belgium.[17] Top brands in the zone include Bass, Leffe, Hoegaarden, Beck's, Stella Artois, and Budweiser.[12]
- Central and Eastern Europe (13.7% of revenues, 1.5% of Net Income)[10]
AB InBev's Latin America North segment posted €2.209 billion in revenues in 2008, and includes Russia, the Ukraine, and Serbia.[18] Top brands in the zone include Staropramen, Beck's, Stella Artois, and Budweiser.[12]
- Asia Pacific (6.3% of revenues, 2.3% of Net Income)[10]
AB InBev's Latin America North segment posted €1.019 billion in revenues in 2008, and includes China and South Korea.[19] Top brands in the zone include Harbin, Cass, Budweiser, and Beck's.[12] One of the key benefits of the combination of Anheuser-Busch and InBev was the combination of the two companies' geographic footprints in China. Whereas Anheuser-Busch was firmly entrenched in the north of the country, InBev had made great inroads in the south. The combined company now has national reach.[20]
- Global Export and Holding Companies (3.1% of revenues, (3.8)% of Net Income)[10]
The Global Export and Holding Companies segment posted €932 million in revenues in 2008. The segment includes the US Entertainment Business (Busch Gardens) and all export activities. The majority of exports are Beck’s, Stella Artois, Budweiser, Leffe, Hoegaarden, Staropramen, and Brahma.[12]
Trends and Forces
AB InBev Must Successfully Adapt to An Increasingly Consolidated Industry
The brewing industry tends to be categorized by a few large, dominant-players, along with many smaller, specialty and niche companies (e.g., micro-breweries). Consolidation of smaller outfits with larger ones has been a common strategy among large brewers like Molson Coors and SABMiller, all of whom have sought growth through acquisition. InBev's acquisition of Anheuser-Busch prompted the 2008 creation of joint-venture Miller Coors by SABMiller (SAB-LN) and Molson Coors Brewing Company (TAP) in the United States.[21] The two companies hoped to create a company which would be able to compete with AB InBev's nearly 50% share of the US market.[22] Although the United States is only one market in the company's global operations, it is indicative of global brewer consolidation, and AB InBev will have to contend with this new landscape.
Commodity Cost Fluctuations Affect Margins
The company utilizes a variety of agricultural and commodity products in brewing and bottling its beverages. For beer, the most important inputs are hops and barley. Barley typically constitutes 8% of the brewing costs of beer, and a significant price increase in barley, for instance, would increase the cost of the company's goods sold and put pressure on margins. Barley prices have increased 85% because of a dwindling supply.[23] Farmers are increasingly attracted to farming crops such as corn and soybeans instead of barley because of the burgeoning biofuel industry. During the commodities superspike of 2007 and 2008, the prices of these commodities rose drastically with general commodities bubble and dramatically pressured margins. They receded in late 2008, but remain elevated, and the possibility of another significant rise in commodities prices represents a constant threat to profits.
Euro (EUR) Affects International Performance
Another trend affecting AB InBev is the relative strength of the Euro (EUR). Although the company is based in Belgium, AB InBev derives 85% of its operating income from outside the eurozone, including 30.7% in Brazilian reals, 9.8% in U.S. Dollar (USD), and 6.5% in Russian Ruble (RUB).[24] Because of this, the company is very sensitive to the strength of the euro. As foreign currencies weaken relative to the euro, goods sold in foreign markets are worth less euros back in Belgium, lowering earnings. Thus, if the euro strengthens (as it did in the first half of 2008 and second half of 2009), it has a negative effect on AB InBev's earnings. In 2008 alone, currency fluctuations had a negative €235 million effect on revenue.AB InBev has broad exposure to foreign currencies and actively hedges a large portion of these to avoid wide swings in earnings from currency fluctuations. Although this hedging insulates from the potential downside of a strengthening euro, it also limits larger gains from drastic down-swings in the euro's value.
Competition
AB InBev is the largest brewer in the world. AB InBev is differentiated in that it is a true global brewer, as opposed to companies like Molson Coors Brewing Company (TAP) that primarily operate in only a few countries. This is reflected in product performance, as the company's Bud and Bud Light brands are two of the top three global best selling beers.[25] Additionally, with more than 100 different brands, AB InBev produces a local favorite in each of the countries in which it competes. AB InBev's competitors include:
- SABMiller (SAB-LN) is AB InBev's largest competitor, with a global footprint almost as large. Unlike AB InBev, SABMiller (SAB-LN) has a significant presence in Africa, where it has operations in 10 countries. However, Africa remains a young market and beer consumption per capita is very low, with an average of less than 10 liters/year. This pales in comparison to consumption in Europe, which averages above 60 liters/year.[26]
- Heineken N.V. (HINKY) operates primarily in western and central Europe. However, the company has little penetration into the Americas. In 2008, it sold 19 million hectoliters of beer in these regions, in comparison to AB InBev's 160 million hectoliters. Unlike AB InBev, however, Heineken N.V. (HINKY) has a significant presence in Africa and the Middle East, with 21 million hectoliters in sales in 2008.[27]
- Carlsberg (CARL'B-KO) operates mainly in Europe and Asia. Carlsberg (CARL'B-KO) does not have a large production footprint, instead brewing its products in Europe and exporting them to global markets.[28]
- Molson Coors Brewing Company (TAP) operates primarily in Canada, the US, and the UK. In the US, the company has entered a joint venture with SABMiller (SAB-LN) to improve operations and better compete with AB InBev. Sales to markets outside of the company's three primary regions are done via export.[29]
| Country | Market Share | Country | Market Share |
|---|---|---|---|
| USA | 49.9% | Luxemburg | 48.5% |
| Mexico (Modelo) | 55% | The Netherlands | 15.7% |
| Canada | 42.9% | UK | 21.8% |
| Cuba | 45.1% | Germany | 9.6% |
| Brazil | 67.5% | Italy | 7.8% |
| Venezuela | 4.1% | Bulgaria | 26.6% |
| Peru | 10% | Croatia | 39.7% |
| Ecuador | 8.9% | Czech Republic | 15.6% |
| Dominican Republic | 11.3% | Hungary | 25.1% |
| Guatemala | 15.7% | Serbia | 54.3% |
| Argentina | 74.4% | Montenegro | 92.3% |
| Paraguay | 93.1% | Romania | 19.2% |
| Bolivia | 97.1% | Russia | 18.4% |
| Chile | 13.3% | Ukraine | 37.5% |
| Uruguay | 97.1% | China | 15.4% |
| Belgium | 57.7% | South Korea | 41.1% |
| France | 9.7% |
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References
- ↑ 1.0 1.1 1.2 2008 Annual Report.
- ↑ 2008 Annual Report.
- ↑ About AB-InBev.
- ↑ AB InBev ups merger savings target, to cut capex.
- ↑ 2008 Annual Report.
- ↑ 2008 Annual Report.
- ↑ 7.0 7.1 2008 Annual Report.
- ↑ 2008 Annual Report.
- ↑ 2008 Annual Report.
- ↑ 10.0 10.1 10.2 10.3 10.4 10.5 10.6 2008 Annual Report.
- ↑ 2008 Annual Report.
- ↑ 12.0 12.1 12.2 12.3 12.4 12.5 2008 Annual Report.
- ↑ Grupo Modelo 2008 Annual Report.
- ↑ 14.0 14.1 2008 Annual Report.
- ↑ 2008 Annual Report.
- ↑ 2008 Annual Report.
- ↑ 2008 Annual Report.
- ↑ 2008 Annual Report.
- ↑ 2008 Annual Report.
- ↑ http://www.chinadaily.com.cn/bizchina/2008-07/31/content_6893908.htm.
- ↑ MillerCoors Proud History.
- ↑ TAP 2008 10-K pg. 25
- ↑ Craft Brewers Reformulate Beer to Cope With Hop Shortage.
- ↑ 2008 Annual Report.
- ↑ 2008 Annual Report.
- ↑ Where We Operate.
- ↑ Heineken International Key Figures.
- ↑ Markets.
- ↑ Wikinvest Molson Coors Brewing Company.
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