Anheuser- Busch InBev, the world’s largest brewer, announced disappointing financial results for the first quarter of the year in a report issued April 30, 2013.
Anheuser- Busch InBev’s total volume, excluding takeovers and disposals, dropped by 4.1 percent worldwide in the three month period ending March 31, 2013. This compares unfavorably to the 1.8 percent growth in volume for the same period during 2012 and it shows the company is losing momentum in the early months of the year.
Anheuser- Busch InBev points to several factors leading to the decline in sales volume, including bad weather, high fuel prices, and tax increases. Price increases in some markets, such as North America, helped to offset some of the loss of beer volume sold, but the overall picture is still cause for concern.
Looking at individual world regions, Latin America and North America were especially disappointing. The Spanish and Portuguese- speaking nations from Mexico and southward watched as their love of Budweiser cooled off considerably, with overall A-B InBev volume declining by 5.8 percent vs. a 4.8 percent increase during the same period last year. In North America, the picture was equally grim, with volume falling 5.1 percent compared to a 1.2 percent gain during the previous year’s first quarter.
The overall financial and sales performance doesn’t look very promising, but Anheuser- Busch InBev is counting on its purchase of Mexico’s Grupo Modelo to help turn things around. Grupo Modelo’s portfolio includes products such as Corona, the top selling imported beer in the United States, plus other brands with growing loyalty and sales. Anheuser- Busch InBev experienced a few snags along the way, but it expects the Group Modelo deal to be complete in June, 2013.
Other financial news is a little better, but still inconsistent and misleading. Anheuser- Busch InBev reported an increase in overall net profit to $2.05 billion for the quarter compared to $1.67 billion for the same period last year. However, the improvement was partially due to hedging gains relating to the Grupo Modelo deal. Worse, overall revenues worldwide fell to $9.17 billion from $9.33 last year and while a weaker dollar is partially to blame, it is still a trend the company hopes to reverse.
Anheuser- Busch InBev is hoping for an improved second quarter once the Grupo Modelo deal is completed and the weather turns warmer across North America and other key markets. But mild weather or not, competition from craft breweries and other factors will continue to eat away at A-B InBev’s sales and market share. Until the business comes to terms with its stale lineup and generally bland products it can expect a continued, gradual withering away of its once dominant market position.
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