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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.

Ambev vs. Anheuser-Busch: A Primer on Retained Earnings

In my last article, I recommended Brazilian beermaker Ambev (ABV). In the comments section an argument was made that Ambev’s parent company Anheuser-Busch InBev (BUD) was in fact the better beer buy. The concern generally centered on Ambev’s growth prospects and hence its valuation. For the same reason why a company like Pepsi (PEP) commands a historic P/E around 20 with growth rates in the single digits, I propose that Ambev is worthy of a higher multiple not just for its growth potential but for management’s ability to efficiently and profitably reinvest earnings in the business.
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 Июл. 2011



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