AB InBev Sales Drained as Virus Closes Bars, Eateries -- WSJ

By Saabira Chaudhuri 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 8, 2020).

A coronavirus-fueled shutdown of bars, nightclubs and other drinking venues around the world hammered sales for Anheuser-Busch InBev SA in the first quarter, a trend the Budweiser brewer warned would get much worse before it gets better.

AB InBev, the world's largest brewer, reported sharply lower volumes for the quarter as sales in China were badly hit by the coronavirus pandemic, starting in late January when parts of the country went into lockdown. Since then, the U.S., Brazil and many other major beer markets have gone into lockdown, too, as the virus spread. AB InBev said it expects the impact from this on its second-quarter results to be "materially worse" than its first.

It said it was seeing signs of recovery in Asia, which is emerging from the worst of the pandemic, and sales in the U.S. held up. Still, indications of a tough three months ahead were already showing in April numbers. The brewer's global volumes dropped by 32% in April, a far steeper decline than the 9.3% drop it reported for the first quarter, which ended March 31. It didn't issue financial guidance for the rest of the year.

The company, which makes one out of every four beers sold globally, said the decline in China is slowing. Volumes in April were down just 17% from the previous April. That compares with a first-quarter decline of 46.5% from the year-earlier quarter. It also reported higher sales in the quarter in the U.S., where consumers have been buying far more booze to drink at home, offsetting a slump from sales at bars and other out-of-home channels.

Buoyed by those two key markets, AB InBev shares rose 1.4% in European trading.

The U.S. has been a relative bright spot for global brewers, with 80% of industry sales on average made through grocery and liquor stores rather than the other out-of-home channels. Recent data from research firm Nielsen showed alcohol sales in stores outstripping growth in overall consumer-goods products.

By contrast, in countries like Colombia and Brazil, AB InBev relies on bars, clubs and restaurants for more than 50% of its volumes.

Overall for the quarter, the brewer swung to a loss of $2.25 billion compared with a profit of $3.57 billion a year earlier. Results were dragged lower by a large mark-to-market loss tied to the hedging of its share-based employee payment programsas the company's share price tumbled in the quarter. That was almost double the mark-to-market gain it saw a year earlier.

Revenue fell 5.8% on an organic basis to $11 billion, lower than the 5.4% drop analysts had expected.

In the U.S., AB InBev said net sales grew 1.9% but its brands' overall market share dropped by 50 basis points in the quarter. While hard seltzer sales have surged, AB InBev's stable of brands including Bud Light Seltzer, is smaller and launched later than rival brands.

The results come after rival Molson Coors Brewing Co. last week reported net sales dropped 8.7% for the quarter and warned that the uplift from grocery and liquor stores wouldn't be enough to offset the slump at bars and restaurants, dragging on sales through at least the end of the year.

Write to Saabira Chaudhuri at [e-mail]

(END) Dow Jones Newswires

May 08, 2020 02:47 ET (06:47 GMT)

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