InBev: Announces Disappointing UK Sales and Profits

InBev has announced a drop in second quarter UK sales in 2008. The Belgian-based brewer has deflected suggestions that its recent acquisition of Anheuser-Busch has distracted its European focus. The harsh reality for InBev and rivals is that European consumer trends are becoming less favorable for beer sales, lending increasing importance to emerging markets.

Global brewer InBev has announced a drop in UK sales, with second quarter sales in 2008 (April to June) down by 4.1%. It has also been reported that InBev is “far from satisfied” with the $290m profits from its European operations. While these figures are disappointing for InBev, the company has noted that its market share has increased as its rivals have been harder hit. However, no brewer will be content with gaining market share in a shrinking market.

InBev has sought to boost its bottom line by acquiring Anheuser-Busch (A-B) in the US, which will undoubtedly offer economies of scale in marketing and distribution. However, the company must manage its products effectively to ensure that the sales of A-B and InBev brands do not cannibalize each other, thus undermining the value of the acquisition. InBev insists that its pending acquisition of A-B has not affected its focus on European operations.

The problem for InBev and rivals is that consumer trends are not favorable to beer sales, with preferences moving towards wine and spirits in many countries. Many brewers have reacted by trying to attract new consumers with beers formulated for women. This has coincided with an ongoing feminization of the on-trade with airier, neutrally decorated, open-plan venues. However, the smoking ban in the UK has also had a negative effect by reducing the number of core on-trade consumers.

The second and more important move by brewers to counteract falling volumes has been to introduce more premium beers in order to maintain the value of sales even when fewer pints are poured. A slowing UK economy will further test this premiumization effort if consumers drink at home to save money by buying multi-pack beers through supermarkets. Increased price sensitivity in this channel may further hamper the sales and profits of InBev and its rivals.