Anheuser-Busch InBev, the world's largest beer maker, reported lower than expected first-quarter profit on Wednesday as its spending on marketing shot up ahead of the soccer World Cup in Brazil.
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The maker of Budweiser, Stella Artois and Corona sold more beer than a year ago in every region except Europe. Brazil and China were the stand-out performers, with volume increases of 11 and 9.4 percent respectively.
Sales and marketing spending, much of it related to the upcoming World Cup, jumped 17 percent.
The brewer retained a forecast that the Brazilian and Mexican markets would return to growth this year due to the soccer tournament and stronger economies, and this despite a recently announced increase of excise duty in Brazil.
However, it cautioned about higher input and marketing costs, the latter set to increase by a low to mid teens percentage, albeit weighted more towards the first half.
AB InBev shares, which have dropped from all-time highs since the Brazil tax increase was announced last week , opened down 1.5 percent.
At 0924 GMT, they were trading just 0.4 percent lower, while the STOXX European food and beverage index was little unchanged.
Analysts said marketing costs were higher than expected and savings made from taking full control of Mexico's Grupo Modelo last year were not as high as ambitious market forecasts. AB InBev is targeting $1 billion of synergy gains there.
"I had expected most of the (marketing) costs to be in the second quarter, but in certain countries they already started to do a lot of promotion ahead of the World Cup," said Bernstein Research's Trevor Stirling.
He said the marketing spend and Mexico gains were more issues of timing that might result in some reduction of short-term estimates, but should not affect the longer-term outlook.
Stirling has a "market perform" rating on AB InBev shares, which he said were trading at a 20 percent valuation premium to its drinks industry peers.
BRAZIL: FROM HOT SUMMER TO WORLD CUP
The company, which sold more than one in five beers drunk worldwide last year, reported an 11 percent like-for-like rise in first-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) to $3.88 billion.
The average analyst forecast in a Reuters poll was $3.98 billion. Revenue grew by a greater than expected 8.9 percent.
Overall volumes rose a surprisingly strong 4.4 percent, helped by increased shipments to U.S. wholesalers, part of contingency planning ahead of labour negotiations, which concluded last week.
The company said such shipments would decline in the second quarter as the wholesale sector cut inventories, which grew because sales to retailers had fallen.
AB InBev profited in Brazil, where it has a two-thirds share of the market, from a later Carnival break, extending the summer drinking season, warm weather and lower inflation.
The company expects the World Cup, starting in June, will add 1 to 2 percentage points to Brazilian beer sales this year.
In its largest market, the United States, an exceptionally cold winter meant fewer people went out to bars and restaurants. AB InBev's sales to retailers declined by 2.6 percent, slightly more than the industry average.
The world's top brewers are relying on Latin America, Asia and Africa for growth amid subdued consumer spending in recovering Europe and limited U.S. expansion.
World number four Carlsberg, the largest player in Russia, cut its 2014 forecasts for profit and Russian beer sales on Wednesday after a weak first quarter, hit by a lower rouble and declining sales in eastern Europe.