Correction to Hurricanes Flatten US Beer Sales for AB InBev Story

By Nick Kostov Features Dow Jones Newswires

Price hikes and cost cuts helped Anheuser-Busch InBev report a rise in third-quarter core earnings on Thursday, despite selling less beer in the period as hurricanes in Florida and Texas hit its largest market.

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The company, which paid nearly $100 billion to take over its nearest rival SABMiller last year, reported a 14% rise to $5.73 billion rise earnings before interest, taxes, depreciation and amortization, its key earnings measure, a fraction below the expectation of analysts.

Shares fell 2.3% in early trading.

AB InBev said savings from the megamerger will likely reach at least $3.2 billion compared with its earlier $2.8 billion estimate. This includes $1.05 billion in cost savings that SABMiller said it would target before the merger was completed.

In the U.S., cost savings pushed up the profit margin but volumes fell as the growth of higher-end beers didn't make up for falling sales of Budweiser and Bud Light. Bud Light, its best-selling brand in the U.S., 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.

Those setbacks, however, were partially offset by the strong performance of the company's more expensive beers, including low-calorie Michelob Ultra and Stella Artois.

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Despite regular marketing changes, AB InBev has yet to determine how to stabilize Budweiser and Bud Light in the U.S. The two brands have become less important as AB InBev has broadened its U.S. portfolio to cater to changing consumer tastes that are moving away from mainstream American lagers and toward smaller "craft" brands and imports.

Bud Light remains America's favorite beer by sales by far, but the third-quarter drop continues years of declines. Earlier this year, the company launched a fresh Bud Light marketing campaign, "Famous Among Friends." Pitched as a down-to-earth homage to the large and small moments of friendship, it followed a more over-the-top campaign--"The Bud Light Party"--that featured comedians Seth Rogen and Amy Schumer but did little to improve sales. In August, new ads for the country's largest beer touted the "four essential ingredients"--water, rice, barley and hops--while making fun of more complex brews.

The company said its advertising tied to the new campaign had been "well-received by consumers" in the third quarter and had positively impacted brand health.

"Bud Light share losses continue to be concentrated in a few states and we have taken action to address the key gaps," said Chief Financial Officer Felipe Dutra. "Early results give us confidence that we are moving in the right direction."

The Budweiser brand also had its own marketing push. Last year, and again this year, it rebranded cans and packaging of Budweiser with a special "America" logo. The move--which first came ahead of last year's presidential campaign--drew controversy, but the company said it had a positive impact in the latest quarter. This week, the company announced the launch of a new beer brand--Budweiser 1933 Repeal Reserve Amber Lager. The limited time release is meant to "celebrate the repeal of Prohibition."

"We continue to work to stabilize the market share for these two brands but we know it's a journey," Mr. Dutra said.

The rest of the company's business offset the weaker performance of AB InBev's two largest brands in the U.S. Overall, revenues rose 3.6% in the period, a sign that the strategy of expanding brands like Budweiser, Stella Artois and Corona overseas and positioning the brands as premium beers is paying off. In Brazil, the company's second-largest market, profits rose for the first time in nearly two years.

Net profit rose to $2.06 billion in the quarter, from $557 million a year earlier when it was hit by financing costs related to the SABMiller deal.

The brewer confirmed its guidance that it expects revenue growth to accelerate this year and announced it would pay an interim dividend of EUR1.60 ($1.89) a share for the fiscal year 2017, in line with last year.

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

Corrections & Amplifications

This article was corrected at 0836 GMT because the original omitted the percentage rise for Ebitda in the second paragraph.

AB InBev reported a 14% rise to $5.73 billion in earnings before interest, taxes, depreciation and amortization."Hurricanes Flatten U.S. Beer Sales for AB InBev," at 0831 GMT, omitted the percentage rise for Ebitda in the second paragraph.

(END) Dow Jones Newswires

October 26, 2017 04:45 ET (08:45 GMT)