AB InBev has announced its 2019 results, with its fourth quarter the worst the brewer has experienced in a decade.
Revenue grew by 4.3% in FY19 and by 2.5% in 4Q19, with revenue per hl growth of 3.1% in FY19 and 0.9% in 4Q19.
Because of the poor results, Brito won’t receive a bonus for the second half of the year.
“Our performance in 2019 was below our expectations, and we are not satisfied with these results,” CEO Carlos Brito (pictured main) said during an analyst call.
AB InBev has been hit hard by the novel coronavirus, which depressed demand in China both at home and in bars and restaurants.
There’s been “almost no activity in the nightlife channel and very limited activity in restaurants,” Brito said.
Plus, demand fell during the most recent Lunar New Year holiday compared to previous years.
Some industry observers also say the misguided connection between Corona and the coronavirus is an issue for the brand, both in China and globally.
AB InBev said it is on track to return to business as usual in its China breweries. The company has reopened more than half of its 33 breweries in the country and is preparing to open the rest, with the exception of its facilities in Wuhan, the center of the outbreak.
“In China you have more than 30 provinces and each province is adopting a slightly different way of going back to normal life,” Brito said.
“Some provinces were harder hit, so they’re taking a bit more time. Some others are going back to business a bit faster. And we’re anticipating our customers to resume their operations in the course of Q2 second quarter of this year.”
AB InBev expects to lose $285 million in revenue in the first two months of this year because of the virus. Overall, it expects a roughly 10% earnings decrease in the first quarter.
Progress & setbacks in Asia Pacific
Brito said the company “achieved a major milestone in 2019” with the successful completion of the listing of a minority stake of its Asia Pacific business (Budweiser APAC) on the Hong Kong Stock Exchange for $US5.75 billion.
He noted the result recognised “the value we have created in the APAC region throughout the past decade”.
CFO Felipe Dutra added: “We took significant steps to retire debt, including the expected divestitures of our Australian operations.”
Prior to the coronavirus impact, super premium brands were growing by strong double-digits in China, led by Corona, Blue Girl and Hoegaarden.
“We estimate that Corona is the number one brand in the super premium segment,” Brito said.
“We also continue to lead the beer category in the e-commerce channel, which grew by strong double-digits this year. During the Double-11 e-commerce campaign in November, the largest e-commerce sales event in China, Budweiser was the number one brand and Corona, Hoegaarden and Harbin were also among the top five beer brands by retail sales value on both the Tmall and JD platforms.”
2020 outlook in the face of coronavirus
AB InBev said the impact of the COVID-19 virus outbreak on its business “continues to evolve”.
“In FY20, we expect EBITDA growth of 2-5%, with the majority of our growth to be delivered in the second half of the year,” it stated. “In 1Q20, we expect EBITDA to decline by around 10% given the impact of COVID-19 on our results as well as a challenging comparable, especially in Brazil.
“The outlook for both FY20 and 1Q20 reflects our current assessment of the scale and magnitude of COVID-19, which is subject to change as we continue to monitor the development of the outbreak.”
Brito added: “So the financial impact on our business in China is difficult to estimate given it’s dependent on the containment of the virus and especially the speed by which our customers and consumers resume their normal operations and lives which can be different by channel and province.”
He also noted that there was “good news” for the drinks industry in China.
“The silver lining in this whole thing is that Chinese consumers were surveyed by Kantar, a market research company regarding the impact of COVID on their consumption patterns and what they intend to do once they are released from their confinement and quarantine,” he said.
“And out of the 10 top things they want to do, the top six are totally within our business realm. They want to go back to restaurants. They want to go back to meet friends, to dine out, to entertain, to go outdoors, indoor entertainment to do everything that they would normally do. So that’s squarely within our dream of bringing people together.”
AB InBev’s China “crisis room”
AB InBev was one of the first to reopen its office in Shanghai, with government officials attending the event.
The brewer has also shipped about one million hygienic masks to China, which it’s distributing to employees and local communities.
“Our team in China has a crisis room that’s now working on a daily basis,” Brito said.
“We have weekly calls with the global guys as well. And we’re monitoring province by province, channel by channel because we want to come back very fast because we think when it comes back it will be very fast. If you look at SARS that’s the way it came back.
“And as a company given the portfolio we have the channels that we’re strong and the channels that we’re getting stronger like e-commerce because people are changing habits and we have a very good share higher than the average market share of the market in those channels, we want to be an even stronger company in China after this crisis is over.”
“So, right now, of course, the first priority is the safety of our people community consumers. But once the government guidelines allow us to go back to business, we’re prepared and we have — as the recovery takes place. So, we’re very prepared and we feel good about it in terms of the recovery.”
