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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.

Who Fancies a BUD?

Investing in one of the world's largest brewers - Anheuser-Busch InBev

Rupert is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

Beer. Although some would not like to admit it, it is a staple of modern day life. This kind of product has a certain defensive quality about it; unless there is a huge overnight change in perceptions, beer sales and their growth will rise in line with global population growth. The case for investment in the industry is simple--it is a fairly stable industry, and last year beer sales rose last year for the 27th year in a row.

So then should we consider investing in one of the world's largest brewers - Anheuser-Busch InBev (NYSE: BUD)?

World Beer Rankings

RankBrandMain market2010-2011 growthOwner
1SnowChina-2.36%SABMiller (NASDAQOTH:SBMRY)
2BUD LightUSA-4.4%AB InBEV
3BudwiserWorldwide4.5%AB InBev
4Corona ExtraWorldwide9%AB InBev
5SkolAfrica-2.3%Carlsberg Breweries
6HeinekenWorldwide4.8%Heineken International
7Coors LightUK/US25%Molson Coors (NYSE: TAP)
8Miller LightUS-1.1%SABMiller
9BrahmaSouth America-3.4%AB InBev
10Asahi Super DryJapan2.5%Asahi
Total top 10 Growth32.24%

Source: http://www.thedrinksbusiness.com

As we can see, ABInBev produce some of the best-selling beers in the world. Anheuser-Busch also produce:

  • 3 ‘Global brands’ – Stella Artois, Becks, Budwiser
  • 2 ‘Multi-country brands’ – Leffe, Hoegaarden
  • 200 + Local Champions

What about the company's finanicals?

Data Source: Motley Fool CAPS

ABInBev generates a very respectable gross margin of 65.5% and a pre-tax profit margin of 25.5%. This gives the company plenty of free cash flow, which it can use to return cash to shareholders or re-invest into the business.

However, this margin could come under pressure from increasing commodity prices.

Data Source: Motley Fool CAPS

ABInBev's growth strategy has been aggressive. It has been driven through acquisitions and aggressive pricing by the firm. This has led to a large increase in sales, but slow growth in EPS. (Although these figures are somewhat distorted by abnormally low growth in, Q4 2010 and Q1 2011).  ABInBev is effectively buying market share from its competitors.

If we look at 3 year growth on a company level we get a much better growth picture:

ABInBevSABMiller Heineken NVMolson Coors
Revenue - 3 Yr Growth Rate7.00% 21%16.5% 7.45%
EPS - 3 Yr Growth Rate18.43% 33%25%-4.22%
Dividend - 3 Yr Growth Rate 235.90% 34%25%11.82%
Dividend Cover 2011 3.5 2.43.23

Data Source: Motley Fool CAPS

This data presents an interesting picture of BUD versus its competitors. Although BUD has the slowest revenue growth amongst its US-listed competitors, it has a EPS growth rate that is slightly better (second in the group). BUD has the highest dividend growth in the group, with the highest dividend cover, leaving plenty of room for extra dividend growth and plenty of free cash flow.

So in conclusion, ABInBev looks to be a decent investment. It products are some of the most popular in the world. However, its revenue figures are lacking behind its competitors as it seeks to drive sales volumes through lower prices. I believe BUD will continue to improve investor returns, with its vast portfolio of products.

With all these factors in mind i think ABInvBev is a good investment for the long and short term. Although if you are looking for more growth, bothSABMiller (NASDAQOTH: SBMRY) and Heineken NV (NASDAQOTH:HINKY) could be better stocks.

20 Ноя. 2012

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