VALUATION HIGHLIGHTS

1. Middle Americas constitute 30% of the Trefis price estimate for Anheuser-Busch InBev's stock.
2. North America constitutes 22% of the Trefis price estimate for Anheuser-Busch InBev's stock.
3. South America constitutes 21% of the Trefis price estimate for Anheuser-Busch InBev's stock.

WHAT HAS CHANGED?

1. BUD Stock Performance

   
   BUD stock has seen over 10% decline from levels of $70 in early January 2021 to around $60 in early-November 2024, vs. an increase of about 50% for the S&P 500 over this roughly four-year period.
   Overall, the performance of BUD stock with respect to the index has been quite volatile. Returns for the stock were -13% in 2021, -1% in 2022, and 8% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that BUD underperformed the S&P in 2021 and 2023.



2. Q3'24 Performance

   AB InBev's revenues increased 2.1% to $15.0 billion in Q3'24, led by pricing gains, while volume was down 2.4%. Looking at segments, EMEA sales were up 8%, the Middle Americas up 2%, South America sales were up 6%, and North America 1.5%. Volume decline was led by the Asia Pacific region, down 11.4% y-o-y. AB InBev's earnings of $0.98 on a per-share and adjusted basis reflect an 18% rise over the $0.86 figure the company reported in the prior year quarter.



3. 2023 Performance

   AB InBev's revenues increased 3% to $59.4 billion in 2023, led by pricing gains, while volume was down 1.7%. Looking at segments, South Americas drove the sales growth, with segment revenue up 27% on an organic basis. AB InBev's earnings of $3.05 on a per-share and adjusted basis reflect a marginal rise over the $3.03 figure the company reported in 2022.



4. Bud Light Controversy

   AB InBev decided to feature Bud Light in a social media promotion by a transgender influencer, Dylan Mulvaney, in April 2023. This was followed by calls for a boycott of Bud Light by some of the influential voices. Lower Bud Light sales weighed on AB InBev's U.S. sales in Q2 of this year. Following the boycott, the company decided to put two of its executives on leave of absence.



5. Anheuser-Busch's APAC Listing

   AB InBev raised $5 billion by listing its Asia-Pacific operations in Hong Kong in September 2019, in what was the second-biggest IPO of 2019, behind Uber. The company's primary reason for this listing was the healthy growth seen and expected in China and other emerging markets in Asia.
   

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Anheuser-Busch InBev that present opportunities for upside or downside to the current Trefis price estimate:

BUD EBITDA Margin

BUD EBITDA Margin has witnessed slight pressure in recent years as a result of increased costs and foreign currency translations, as well as the addition of Global Export and Holding companies in the Trefis estimates. The figure stood at 33.7% in 2023.

Going forward, Trefis expects margins to grow to 37% by the end of our forecast period. However, if margins rise to 42% on a favorable product mix and improved operational efficiencies, there could be a 25% upside to our current price estimate for Anheuser-Busch InBev.

BUSINESS SUMMARY

Anheuser-Busch InBev is the world's largest brewer by volume and one of the world's top five consumer products companies by revenue. It produces, markets, distributes and sells over 500 beer and other malt beverage brands. Some of its beer brands include global brands such as Budweiser, Stella Artois, and Corona (not in the U.S.), international brands such as Hoegaarden, Leffe, and Beck's, and popular local brands such as Bud Light, Brahma, and Antarctica. The company also produces and distributes soft drinks, particularly in Central and South America and Africa, and other near-beer products, such as Lime-A-Rita and other Rita family products in the United States and Mexico; MixxTail in China, Argentina, and other countries; and Skol Beats in Brazil

Inbev was formed in 2004, combining the Belgian company Interbrew and the Brazilian company Ambev, which, in turn, comprised the brewers Brahma and Antarctica. In 2008, InBev and Anheuser-Busch came together to form Anheuser-Busch InBev, with around $54.8 billion required to fund the deal. As a result, the company opted for a formal divestiture program, including the sale of stakes in the brewers Tsingtao and Oriental Brewery, in order to reduce the debt taken on for the combination of Anheuser-Busch and InBev.

In June 2013, the company completed the acquisition of leading Mexican brewer Grupo Modelo, in a deal valued at $20.1 billion. With this combination, Anheuser further grew its presence in Mexico, the world's fourth-largest profit-pool for beer manufacturers, and could benefit from the expected growth of Corona, Grupo Modelo's popular flagship beer, around the world. However, Anheuser-Busch InBev transferred the operations of the Mexican Piedras Negras brewery and sold the exclusive rights to market and sell Corona as well as some other beers made by Grupo Modelo in the U.S. to Constellation Brands, as part of an antitrust agreement with the country's Justice Department.

BUD acquired control of SABMiller and completed the business combination in October 2016. The transaction was valued at a gross purchase consideration of USD 114 billion. InBev has added several global brands to its holdings, including Beck's and Foster's. In 2019, the company agreed to sell its Australian affiliate Carlton and United Breweries—including Foster’s—to Asahi for $16 billion. The company also sold off its China operations, including Tsingtao and Snow, the country’s top-selling beer.

SOURCES OF VALUE

Budweiser is one of the top-selling beers in the United States. Globally, Budweiser volumes have been on the rise. Budweiser was a sponsor of the 2014, 2018, and 2022 FIFA World Cup. High viewership of the FIFA World Cup has aided the company's volume growth.

Increasing disposable incomes to boost demand for premium beer Budweiser

The global beer brand Budweiser has a premium brand positioning worldwide. With an increase in disposable incomes, consumers might shift to more expensive beer brands, boosting the brewer's volumes as well as revenues per unit volume.

1. Increasing disposable incomes and falling unemployment rates should boost sales of premium beers going forward, thereby improving the average revenue generated by breweries. The unemployment rate in the US fell to below 4.5% in August 2024, compared to higher levels of 7% seen in 2020, during the pandemic.

KEY TRENDS

Diversifying beer portfolio

Flavored beer is an area that can provide growth for the company going forward. BUD has witnessed considerable success in this category in emerging and developed markets. For example, in South Africa, Flying Fish grew volumes by recruiting females and younger LDA (legal drinking age) consumers into the beer category and grabbing shares from cider. In Western Europe, Cubanisto, a rum-flavored premium beer, grew its top line over the recent years (except for 2020) by successfully competing against spirits in the nightlife occasion category. The company is also trying to make in-roads in the craft beer industry, with partnerships with almost a dozen craft breweries. The company's craft portfolio is growing ahead of the industry, driven by organic growth, as well as expanded distribution. Even in France, its Leffe brand has grown to become the number one beer brand by penetration.