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3-2019

Russia: Positions of Brewing Companies

The review contains an analysis of interim performance of brewers in the first half of 2019. There are rather dynamic changes behind a modest industry growth. Baltika is again experiencing a stage of volumes and market share slid due to competition with AB InBev Efes. Because of the price competition and presence expansion in the modern trade company #2. has come close to the leading position. At the same time sales of Heineken Russia have continued growing which makes the premium part of the portfolio heavier. The market premiumization trend had been also confirmed by import brands. MBC and Zavod Trekhsosenskiy have been the most successful among federal market players. The market share of independent regional brewers and Ochakovo have continued falling as they are being squeezed out by the market leaders at their competitive fields.

Ukrainian beer market 2019: companies and brands

In 2019 beer production and market have been still fluctuating about zero point. However, the past season was successful for brewers judging by the sales profitability. The price mix has improved due to rapid general market premiumization, as well as its particular aspect, the growth of import beer sales. By the season end AB InBev Efes improved its positions considerably. It turned out that consumers had not forgot Efes brands that had to leave the market, but started to recover rapidly. Against the stagnating market that meant sales decline of other companies, in the first place Carlsberg Group that most of all beneficiated from Efes exiting the market. PPB turned out to be stable to branding activity of its competitor and Obolon kept the same volumes and at the moment it is the absolute leader of the economy segment. The share growth of independent producers took place thanks to leading craft breweries, that so far do not have a big market weight, but they are rapidly gaining it.

Brewing industry in Kazakhstan 2019

During the first half of 2019, the majority of Kazakh brewers made their contribution into positive dynamics. Yet it was companies of the lower division, not the two transnational leaders that raised their production and sales. The shares of draft beer and aluminum can which is rapidly squeezing glass bottle out of the market, have been growing. The price segmentation has remained stable despite the substantial rise of retail prices and fluctuations of brand market shares, while the borders between segments have become blurred. The main events in the industry have been: the announced revision of the beer excise policy, launch of BeerKhan brand in the strong beer segment, and most important – purchasing assets of Shymkentbeer by Arasan.

Is Ambev the Perfect Stock?

Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if Ambev (NYSE: ABV  ) fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

  • Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
  • Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
  • Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
  • Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
  • Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
  • Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let's take a closer look at Ambev.

FactorWhat We Want to SeeActualPass or Fail?
Growth5-Year Annual Revenue Growth > 15%9.6%Fail
 1-Year Revenue Growth > 12%8.8%Fail
MarginsGross Margin > 35%66.5%Pass
 Net Margin > 15%30%Pass
Balance SheetDebt to Equity < 50%27.6%Pass
 Current Ratio > 1.31.22Fail
OpportunitiesReturn on Equity > 15%32.5%Pass
ValuationNormalized P/E < 2020.92Fail
DividendsCurrent Yield > 2%3.9%Pass
 5-Year Dividend Growth > 10%46.3%Pass
    
 Total Score 6 out of 10

Source: Capital IQ, a division of Standard and Poor's. Total score = number of passes.

Ambev pours up an attractive score of 6. As part of an even larger network, the Brazilian beverage maker focuses on one of the fastest-growing regions in the world.

Ambev is a subsidiary of the larger Anheuser-Busch InBev (NYSE: BUD  ) , which itself has had a long and storied history of mergers and acquisitions. Ambev produces a wide range of beers and soft drinks throughout Central and South America, as well as distributing PepsiCo (NYSE: PEP  ) products in Brazil and elsewhere in Latin America.

Thanks to its presence in a growth market, Ambev hasn't seen the same top-line pressure that the recession caused for some of its brewing competitors, such as Molson Coors (NYSE: TAP  ) . Ambev's growth has not only defied Molson's contraction over the past five years to remain positive but also outpaces the growth of Mexican rival FEMSA (NYSE: FMX  ) . And although its Anheuser-Busch InBev parent is saddled with debt, Ambev has a relatively clean balance sheet.

As long as Brazilian growth continues to help the entire continent expand faster than the U.S. and other developed nations, Ambev should continue to grow. Its shares are somewhat pricey right now, but with a good dividend, Ambev might get even closer to perfection in the years ahead.

Keep searching
No stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate out the best investments from the rest.

18 Апр. 2011

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