Virus has industry crying in its beer
Anheuser-Busch InBev NV warned that its biggest three beer brands — Budweiser, Stella Artois and Corona — are bearing the brunt of a collapse in sales caused by COVID-19.
Revenue from those brands dropped 11 percent in the first quarter, about twice the rate of decline for the company’s overall portfolio of more than 500 labels. Shipments plunged the most in China, where the effect of COVID-19 lockdowns hit hardest because they started earlier than in the U.S. and Europe.
As demand evaporates amid a global shutdown of bars and restaurants, AB InBev and rivals Heineken NV and Carlsberg A/S are racing to find ways to cut costs to reduce the effect on profit. So far AB InBev’s more expensive products are suffering less. Longerterm, as the pain from a pandemic-induced recession spreads from blue-collar to white-collar workers, that could also harm the collection of niche premium labels that AB InBev has built up in past years.
“We do better when consumers feel good about the future,” Chief Executive Officer Carlos Brito said by phone. Sales of premium brands are slowly recovering in China after nightlife establishments there reopened, Brito said. Demand for more expensive beers “could have a couple of bumps, but it will remain in our view.”
AB InBev is in more of a pinch than Heineken and Carlsberg, given that it’s also struggling to reduce its a pile of debt that stood at $96 billion at the end of 2019. The brewer said Thursday that shipments plunged 32 percent in April. Budweiser, Stella and Corona are in its mid-priced segment in the U.S. The company’s stock has lost almost half its value this year.
Carlsberg said last week that it was already preparing for a new normal in which more profitable craft labels face more competition from cheaper alternatives. An eye-opening moment for Chief Executive Officer Cees ’t Hart was when he took a taxi to Amsterdam airport on April 26 on his way to Copenhagen: He was the driver’s first customer in a month, and the 60-euro fee his only income.
“We need to cater to this with a slightly different portfolio — it could be that for a while, we will have have a focus on economic brands,” the CEO said. “The aftermath will much longer and maybe quite a bit more painful, with people not having the money to spend.”
Cut-price beer is performing well in some markets, such as South Africa. AB InBev was already seeing its inexpensive Lion Lager grow at a double-digit rate in the first quarter there before its production and distribution was halted to comply with a government mandate.