AB InBev Falters as U.S. Loses Taste for Bud Light -- Update

By Nick Kostov Features Dow Jones Newswires

Sales of Bud Light and Budweiser are continuing to lose fizz faster than Anheuser-Busch InBev NV can slash costs at the world's biggest brewer.

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The Belgium-based company said it lost 0.8% of market share in the U.S., it biggest market, in the quarter ending on Sept. 30 compared with the same period last year. The decline of the brewer's core business fueled investor concerns as shares fell nearly 3% in early trading.

"The underlying business remains incredibly weak," said Trevor Stirling, an analyst at Sanford C. Bernstein. "U.S. revenues were down 5.3%--we can't remember a quarter as bad."

Bud Light, still by far the country's top-selling brew, lost almost a full percentage point of market share in the three months to Sept. 30--a steeper-than-expected retreat. Budweiser also lost market share, more than a third of a percentage point in the U.S.

"We're working to stabilize the market share for these two brands, but we know it is journey," said Chief Financial Officer Felipe Dutra.

The setbacks, exacerbated by hurricanes in Florida and Texas, were only partially offset by the strong performance of the company's more expensive beers, including low-calorie Michelob Ultra and Stella Artois. Profit margins edged higher due to aggressive cost-cutting after the company's takeover of SABMiller a year ago. Cost savings from the merger are likely reach at least $3.2 billion compared with its earlier $2.8 billion estimate, the company said.

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AB InBev's woes are symptomatic of a shift in shopping habits affecting many consumer goods companies: Younger customers are more health-conscious and focused on customization. The brewer has responded with cost-cutting and the acquisition of faster-growing brands, particularly "craft" beers and imports. On Thursday, the company said Michelob Ultra, which it has marketed as a low-calorie drink for people with an active lifestyle, now accounts for almost 10% of U.S. volumes.

AB InBev has shaken up its marketing strategy for Budweiser and Bud Light in the U.S., but the moves has so far failed to stabilize the business.

In August, the brewer launched a fresh Bud Light marketing campaign that touted the simplicity of its brew while poking fun at more complex beers. Earlier this year, the company launched a another new marketing campaign, "Famous Among Friends," which was pitched as a down-to-earth tribute to friendship.

The Budweiser brand has adjusted its packaging with a special "America" logo. The rebranding--unveiled ahead of last year's presidential campaign--drew controversy at the time, but the company said it had a positive impact on the brand in the latest quarter. This week, the company announced the launch of a limited-edition beer to commemorate the repeal of Prohibition.

Mr. Dutra said early results from the campaigns "gives us confidence that we are moving in the right direction."

Overall, revenue across the company rose 3.6% in the period, a sign that the strategy of expanding brands such as Budweiser, Stella Artois and Corona overseas and positioning them as premium beers is helping offset the trouble in the U.S.

AB InBev reported a 14% rise in earnings before interest, taxes, depreciation and amortization to $5.73 billion--a fraction below the expectations of analysts. Net profit rose to $2.06 billion in the quarter, from $557 million a year earlier. In Brazil, the company's second-largest market, profit rose for the first time in nearly two years.

The brewer confirmed its guidance for revenue growth to accelerate this year and announced it would pay an interim dividend of EUR1.60 a share for the fiscal year 2017, in line with last year.

Write to Nick Kostov at Nick.Kostov@wsj.com

(END) Dow Jones Newswires

October 26, 2017 08:33 ET (12:33 GMT)