Photographer: Nevena Uzurov/Getty Images

Big Beer Is Back as European Economy Boosts AB InBev, Carlsberg

Updated on
  • Results show European market is improving: Bernstein analyst
  • AB InBev’s Dutra forecasts stronger demand in U.S., Brazil

A rebounding European beer market is buoying Anheuser-Busch InBev NV and Carlsberg A/S, lifting demand for mainstream brands such as Stella Artois and Tuborg.

The U.K. return of AB InBev’s Bud Light, the pale lager bleeding market share in the U.S., is fueling sales in western Europe, while Carlsberg’s low-alcohol beer brand Nordic is driving sales in Scandinavia, the companies said separately on Thursday.

“Europe is definitely picking up for all the beverage alcohol companies as consumer spending is starting to rise in most of the region,” said Trevor Stirling, an analyst at Sanford C. Bernstein. A surge in euro-area economic confidence to the highest in almost a decade stokes beer sales and offers brewers more pricing power, Stirling said.

AB InBev, the world’s largest brewer, and Danish rival Carlsberg joined Heineken NV in surprising the market with first-quarter results that beat estimates after headwinds in Latin America and eastern Europe hurt performance through most of last year. Carlsberg’s focus on more expensive beers such as Grimbergen paid off in France and Italy. Sales volume of the Belgian brew rose 25 percent in the quarter.

“We’re really stepping up the distribution in France, Switzerland, Denmark and Italy,” Carlsberg Chief Executive Officer Cees ’t Hart said by phone, cautioning that “growth at these high levels is of course difficult to continue.”

AB InBev shares rose as much as 5.1 percent, while Carlsberg gained as much as 2.9 percent.

Beyond its Stella Artois and Corona, which posted sales growth of 21 percent and 18 percent respectively, AB InBev is also seeking to ramp up sales of more expensive beers in developed markets. On Wednesday, the Leuven, Belgium-based company announced it’s acquiring North Carolina’s Wicked Weed Brewing, which will join a stable of so-called craft brands that includes Karbach Brewing in Texas, Devils Backbone in Virginia and Breckenridge Brewery in Colorado.

The U.S. beer industry is “progressing towards a better place” after years of stagnation, Chief Financial Officer Felipe Dutra told reporters, and Brazil should pick up this year. Carlsberg expects revenue to grow faster than volume this year, helped by pricing power, ’t Hart said.

The beermakers reported first-quarter revenue growth of 3.7 percent for AB InBev and 4 percent for Carlsberg, exceeding the 2.8 percent revenue growth analysts were expecting for each company. Sales declines in previous years had spurred intense consolidation, which culminated in AB InBev’s $103 billion takeover of rival SABMiller in the industry’s largest-ever deal.

The maker of Budweiser is cutting more than 5,500 jobs as it aims to capture $2 billion in cost savings from its acquisition of SABMiller in the next three to four years. The company reiterated its forecast that total revenue growth will accelerate in 2017. Sales rose 2.4 percent last year, held back by the recession in Brazil.

AB InBev’s adjusted earnings before interest, tax, depreciation and amortization rose 5.8 percent to $4.81 billion in the first quarter. Analysts expected 3.8 percent growth. Earnings climbed 12 percent excluding Brazil.

Other highlights of the results:

  • Carlsberg CEO said he has been in Vietnam three times over the past six weeks to discuss raising its stake in Habeco; co. expects update in the second half
  • AB InBev’s revenue from China grew 11 percent as sales of Harbin Ice lager were helped by New Year celebrations at the end of January
  • AB InBev’s Dutra says North American growth missed the company’s expectations
  • AB InBev said the comparisons for Brazilian business will be better in the second quarter and later timing of Carnival festival pushed some sales into that period
  • Carlsberg says Indian volume dropped 20 percent in the first quarter and it expects most impact of that country’s ban on alcohol sales near highways in the first half
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE