Leuven, Belgium-based Anheuser-Busch InBev said on Thursday that a weakened economy in Brazil, its second largest market had depressed its full year earnings.
The world’s largest beer maker noted that consumer purchasing power in Brazil continues to fall amid high unemployment rate, a difficult situation consumer goods companies are facing in that country. Despite the macroeconomic challenges, the brewer said it grew revenue 2.4% to $45.52bn in 2016, with revenue per hectoliter rising 4.5%, largely driven by revenue management initiatives and brand mix as it continues to implement premiumization strategies. However, it said that total beer volumes declined by 2%, with own beer volumes down 1.4% and non-beer volumes down 6.2%.
The company said that net profit for the year was nearly halved, down 43% to $4.8bn. AB InBev notes that “higher net finance costs” associated with its purchase of SABMiller and “unfavourable currency translation” also weighed on its earnings.
Regionally, AB InBev reported flat sales in the United States, its largest market, with lower volumes offset by revenue per hectoliter growth, driven by both revenue management initiatives and favourable brand mix. However, it noted that the company’s gross profit margin grew due to these initiatives.
Mexico delivered a solid performance for the brewer, with strong volume growth, driven by increased investments behind its core brands as well as benefitting from a favourable economy. Revenue per hectoliter rose 2.2%, buoyed by revenue management initiatives as well as packaging mix.
The brewer noted that its beer volumes declined by 1.2% in China due to overall industry volume decline of 3.8% in 2016.
South Africa also saw volume declines of 5% in the fourth quarter as a result of weak macroeconomic factors and a sizable price increase implemented by the company to offset currency weakness and commodity price increases.
The company notes that Nigeria continues to experience double digit volume growth despite macroeconomic challenges. It cites reasons for its success in the country to “increased capacity” and further “market penetration”.
Other African countries such as Tanzania and Mozambique saw low-single digit volume growths in Q4 due to weak macroeconomic environment and pressure on consumer income, while an economic slowdown in Zambia resulted in double-digit volume decline in the fourth quarter.
In Western Europe, volumes grew in the low single-digit, driven by market share gains in the majority of the markets where it operates, while Eastern Europe saw volume declines in the high single-digit, due to industry weakness and market share loss caused by price increases on value segment brands in Russia.
Looking to the future, AB InBev said that delivering consistent, profitable top-line growth is its number one priority. It adds that its initiatives will focus around four key areas that will enable it to accelerate growth and invest in its future and deliver value to shareholders. Those areas include growing its global brands (Budweiser, Stella Artois and Corona) to strengthen connection with consumers, premiumizing and invigorating beer by offering specialty and premium brands to create excitment, elevating core lager by appealing to millennials through differentiated messaging and large scale activations, and developing the near beer segment or what it describes as enhancing the experience of consumers by providing innovative choices which includes low and no-alcohol beer.