Beer market of Russia 2016: PET goes to draftThe beer market of Russia was warmed up by the hot summer, but the preparation for large volume PET prohibition has already impacted it negatively. The year was successful for Efes, MBC and regional producers; Carlsberg’s positions were virtually stable but AB InBev and Heineken lost a part of market share having focused on the sales profitability. The dynamics of big brands was determined by how much the companies were willing to keep the prices down or by their promotional activity. In this context the economy segment of the beer market and sales of inexpensive draft beer were increasing. The premium segment started shrinking due to license brands migrating to the mainstream segment.
Beer market of Vietnam: “Young tiger”Vietnam is one of the few big beer markets that continue to grow steadily. The beer popularity results from its low price, street consumption culture, and social motives. The outlooks of beer market as well as the Vietnamese economy inspire optimism, though the country is heavily dependent on export of goods. The state regulation can be called liberal, but the key risk for brewers is harbored in intensive rising of excise. Within TOP-4 there are two leaders, Sabeco and Heineken that grow at the fastest rates. The first company effectively employs its capacities, the second one focuses on marketing technologies. Almost 80% of the market belongs to century-old brands, yet the middle class and the youth are shifting their interest toward international premium that is growing taking share from the mainstream.
Analysis of beer market in China (on Russian)
Beer market of Ukraine: big three losing weightIn 2016, fast increase of excises and resulting price spike stood in the way of the beer market stabilization. Most of competition (as well as mass sorts) moved to the economy segment of the market. The biggest losses were incurred by the leading three, especially Obolon, which again experienced pressure after reallocation of Efes market share. However, one should already speak of TOP-4. Group Oasis CIS (PPB) became a strong player and competitor to transnational companies. Besides the net sales of many regional medium breweries look rather good and 16-fold cost reduction wholesale trade license for craft brewers opens up a possibility of rapid growth in 2017.
Ambev vs. Anheuser-Busch: A Primer on Retained Earnings
If I make a dollar on every widget I sell, ideally I take that dollar and reinvest it in new capacity, enter new markets or stoke demand for my products in existing markets. What I don’t want is to spend that dollar on replacing plants and equipment, paying off piles of debt or defending myself against lawsuits because my widget causes measles. There’s a case often made that debt repayment can drive profitability when your cost of capital is greater than your return on equity, but this isn’t the kind of dynamic I’m interested in as a long-term investor in a business. It’s instructive here to crunch some numbers to determine which of our companies is the better capital allocator.
Between 2002 and 2010, Ambev earned a grand total of 9.96 Brazilian Reals per share (approx. $6.40USD at current rates). During that same time the company paid out 7.10 Reals ($4.56USD) in dividends. This leaves 2.86 in retained earnings, which were plowed back into the business. Earnings per share were .66 in 2002 and 2.44 in 2010 with the incremental profit equaling 1.78 (2.44 - .66). Utilizing only 2.86 in retained earnings, the company realized a 62% return (1.78 / 2.86). This is a company firing on all cylinders and driving shareholder value at every turn. Now for Papa BUD.
Over the same period, Anheuser-Busch InBev earned $21.99 per share. The company paid out one .39 dividend in 2010 leaving 21.60 in cumulative retained earnings to reinvest. Earnings per share were $1.12 in 2002 and $2.50 in 2010 with the incremental profit equaling 1.38 (2.50 – 1.12). Utilizing 21.60 in retained earnings, the company was only able to realize a 6.4% return (1.38 / 21.60).
Whatever the company is doing with its earnings (a discussion for another time), they are not delivering the incremental profit and this is what the smart investor demands.
28 Jul. 2011