By Emma Rumney
LONDON(Reuters) -From the beaches of Copacabana in Brazil to the neon bars of Shanghai, the world’s largest brewer AB InBev needs to convince consumers to order more Budweiser beers and Coronas.
The company’s shares slid 11.5% on Thursday, the biggest daily drop since 2020, after its second quarter volumes missed estimates, dragged down by sharp declines in Brazil – a key market – and China, the world’s second largest economy.
Rival Heineken’s shares also fell more than 8% on Monday after it warned volumes would be softer than expected for the remainder of the year and opted not to raise its annual profit guidance, citing volatility including from the U.S. trade tariffs.
Amid wider challenges facing the alcohol sector, worries over growth and volumes at both the top two brewers overshadowed other aspects of their performance, including strong profit generation, investors and analysts said.
“Volume was not where we would like it to be,” AB InBev CEO Michel Doukeris told investors on Thursday, pointing out however that other performance indicators like profit and revenue were growing consistently.
He said that bad weather had driven the drop in Brazil and it was preparing its business to grow in the second half.
In China, where AB InBev’s portfolio of pricey beers has suffered versus rivals, it was looking to grow sales for at-home consumption rather than bars and restaurants.
Drinking in venues, AB InBev’s focus in China until now, has suffered amid a slow economy and new government rules banning civil servants from dining out in large groups.
That was not enough, though, to head off investors losing patience on volume growth – a fundamental part of the investment case for brewers, where they have struggled to deliver on in recent years.
Brewers hoped to restore volumes in 2024, after price hikes drove prolonged declines in beer sales. But their plans were knocked off course by bad weather and inflation. Now they seem at risk of stagnating again in 2025, with U.S. President Donald Trump’s trade tariffs in focus.
VOLUME GAME
Siphelele Mdudu, investment analyst at Matrix Fund Managers, which invests in beer stocks, said it was not sufficient to deliver growth based on price increases alone.
“Eventually you are going to drive your consumers to alternative products,” he said, adding the beer was fundamentally a “volume game”.
Mdudu and Daniel Isaacs, equity analyst at AB InBev shareholder 36ONE, said a key factor in AB InBev’s decline in Brazil was pricing: AB InBev hiked prices earlier than rival Heineken, which benefited as a result.
Doukeris said the market was now adjusting to price changes.
Heineken also suffered in Europe as a result of prolonged and strained price negotiations with retailers. It also warned that tariff uncertainty was weighing on consumers across the Americas and could hit volume growth.
Trevor Stirling, analyst at Bernstein, pointed out that brewers were still seeing good performance in some markets where threats of U.S. levies loom large, like Mexico.
But if brewers want to prevent similar share price reactions going forward, they will need to find ways to reassure jittery investors they can deliver on volumes.
“If you have got anxieties about the robustness of the volume growth story, you tend to over-react,” Stirling said.
(Reporting by Emma Rumney; Editing by Adam Jourdan, Alexandra Hudson)
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