IN years gone by, people used to respond to economic turmoil by hitting the bottle. If they’re drowning their sorrows this time round, they aren’t drinking beer brewed by Anheuser-Busch InBev, at least not in the West.
In North America, volumes fell 1.4 per cent in the second quarter and they were off 4.3 per cent in Western Europe. In the UK, which is considered to be one of the thirstier European countries, volumes tumbled by a painful 16 per cent.
Thankfully, weakness in developed countries is being offset by emerging markets, where Budweiser is considered an aspirational brand. In China, volumes were up by 11.7 per cent, with the Budweiser, Harbin and Sedrin beers up 21.3 per cent.
Cost-cutting also helped to shield the bottom line, with the gross margin expanding by 75 basis points to 56.5 per cent.
ABI is currently trading at 13 times 2011 consensus earnings, reducing to 11.4 times in 2012 – around a 20 per cent discount to SABMiller, its nearest rival. We think that discount is too large and rate the shares a buy.