581.7 million hectoliters of beer. It is a staggering amount, but how much is perhaps difficult for the layman to imagine. Perhaps it helps to know that a hectolitre is the same as a hundred litres, and that one of the most common kegs in the hospitality industry contains fifty litres, from which you can get about 250 glasses of beer – tapped very economically.
And 581.7 million hectoliters of beer is also what AB InBev generated a turnover of 48.7 billion euros last year. This makes the merged company of breweries in Belgium, the United States, Brazil and Mexico, with its headquarters in Leuven, by far the largest beer brewer in the world. Number two Heineken has an annual turnover of almost 22 billion euros.
AB InBev had a bottom line of 4.67 billion dollars (4.25 billion euros) in 2021. It marked the first recovery after the sharp contraction in 2020. In that corona year, the beer market suffered a serious blow and AB InBev’s turnover fell by almost 16 percent. Profits fell by two thirds.
AB InBev, known in the Netherlands for brands such as Stella Artois, Leffe, Hertog Jan, Budweiser and Corona, has 169,000 employees and is active in nearly fifty countries. One country can soon be pulled from this: AB InBev wants to sever ties with Russia, following Heineken and the Danish Carlsberg. The brewer expects to write off 1.1 billion dollars (about 1 billion euros) on its Russian activities. It is negotiating the divestment with its Turkish partner in Russia, Anadolu Efes.
No heavy blow
That is not a real blow to AB InBev, says analyst Wim Hoste of KBC Securities. “Relative to the company’s enterprise value of approximately $200 billion, the effect is quite limited. If you look at the profit contribution of the Russian joint venture, you see that the interest is completely limited. That would mean $7 million in 2021 on a group profit of $4.67 billion.”
What the brewer should be more concerned about is how the pandemic is developing. Although CEO Michel Doukeris foresaw a “post-corona euphoria” last year, the corona virus still leaves traces.
ING analyst Reginald Watson: “That euphoria comes from people who can go on holiday again and can visit bars and nightclubs again. Sales to these locations have a higher margin. But what is sadly missing from post-corona euphoria is China. That is exactly the opposite. And I think this is the risk to the entire global economy, not just AB InBev.”
AB InBev will report first quarter results on Thursday. Analysts expect the company – just like Heineken that released figures on April 20 – to come with good news regarding pricing. Watson: “We have seen from Heineken’s results that higher prices are not as damaging to sales volumes as the company had expected. This bodes well for AB InBev.”
On the other hand, sales in certain markets may still be disappointing, says analyst Fernand de Boer of Degroof Petercam. “Predicting results is difficult because with a company like AB InBev you have to deal with so many different markets. One has been hit by the pandemic – see China – and the other – see Brazil – also by cold weather in January. On balance, I expect a decline in volumes of 1.5 percent. This puts me slightly below the prevailing consensus.”
Investors are also curious about AB InBev’s prospects for the remainder of 2022, especially when it comes to commodity prices and the impact of high inflation on beer consumption.
A version of this article also appeared in the newspaper of May 2, 2022