ABI Trying Not to Copy Kraft Heinz Mistakes

Dear Client:

There wasn’t a whole lot of talk on the U.S. in ABI’s earnings call yesterday, but there were a few nuggets. Most importantly, Anheuser-Busch doesn’t wish to be painted with the tainted Kraft Heinz brush, which is where the financial press has been heading this week. So as we pointed out previously, they’re being proactive AF.

On to the nuggets:

A-B is now testing “Budweiser 0.0” in some U.S. markets, ABI chief Carlos Brito said on the call.

As you have heard before, ABI’s goal is for no and low alc beer (which they define as 3.5% ABV or less) to reach 20% of their global volumes by 2025.

No and low alc brews, or NABLAB as Brito calls it, currently make up 8% of their volume globally. So still a ways to go.

What better way to try and elevate that volume than roll out a non-alc like “Budweiser 0.0” in the U.S.?

Indeed, Brito says the U.S. is part of their plan. To that end, they’re testing “Budweiser 0.0” in some U.S. markets, he said. They were heartened by good tests in Canada and “think the U.S. will also follow that trend.” [Ed. note: We believe the actual name of this particular brand is Budweiser Prohibition Brew, but Brito only referred to it as Bud 0.0 on the call. Slip up, nickname, or name change coming?]

FOCUS ON ZX AND THE HIGH END. Elsewhere, ZX Ventures and high end brands got a lot of nods on the call. For good reason…
A-B’s growth and innovation group, ZX Ventures, contributed 10% to the brewer’s global revenue growth. Besides that, their high end has “established itself as the number one growth engine of our company, responsible for 10% of our total revenue and about 30% of our revenue growth,” said Brito.

THE TOP CRAFT BREWER IN THE WORLD. In more high end highlights, Brito noted that they have solidified the position as the number one craft brewer in the world with “a portfolio of more than 35 brands across 30 countries to meet the needs of every consumer occasion.” A good example of their “success” in the craft arena too, Brito said, is the global expansion of Goose Island with brewpubs now open in Brazil, Canada, China, Mexico, South Korea, and the U.K.

ABI’s global premium segment got some love on the call as well. They estimate that the premium segment will reach 200 mill hectoliters by 2020. The segment is expected to grow about 5 times faster than the core and value segments. Good thing, because it is a “very profitable segment,” Brito said, “driving two times more revenue for every hectoliter sold.”

Brito also called out Budweiser, saying it had an “outstanding year,”growing revenue by 10% outside the U.S.

HOOKUP WITH OXXO: “MASSIVE OPPORTUNITY.” But while global premiumization is a huge focus for ABI, they’re also securing new outlets around the world, too.

We reported earlier this week on A-B’s coup with Mexico’s primary, giant c-store chain, OXXO. It’s the largest convenience chain in Latin America. So it’s a massive opportunity for the brewer, which is having to pace itself at the giant prospect.

Describing their entry, Brito said they’ll be part of the OXXO team, “a chain in which we had no sales up until this point,” beginning April.

“We’re going to introduce products in a sequenced fashion throughout December 2022. And let’s be clear,” he said, “there was no other way to do it.

“With the amount of stores, and the amount of sales we’re counting on, we’d have to prepare in terms of production,” he said. Lucky for them, they’re “inaugurating” their new brewery in Centro next week, so they’ll be “ready with capacity, but “we also need to be ready in terms of service levels, depots, so we can start this partnership on the right foot.”

The “good thing,” he said, is they’re “starting in regions that are very important to us, like Mexico City, “a huge area where most of the consumption” in the country takes place, and a city “where they overindex in share bigtime.”

THE WHY BEHIND CUTWATER ACQUISITION. Finally, in some of the most recent A-B news: Pressed on the “why” of their recent Cutwater acquisition [see CBD 02-20-2018], Brito framed the prospect as ZX’s Modus operandi: “The idea is when we enter established categories, we try to do it in a disruptive [manner].”

With spirits they “don’t want to do enter trying to do a me-too, big brand, national brand,” rather they’re “entering with a craft mindset,” Brito said, pointing out that they did the same thing in their entrance to wine in the U.S., with Babe.

“All these things are ways to try to enter established, profitable categories with a different spin than incumbents.” Cutwater belongs in that broader framework, said Brito.

JANUARY DOMESTIC TAX PAIDS UP 1.3% ON EASY COMP

U.S. domestic beer shipments started the year off in positive territory, up 1.2% for the first month of 2019, per Beer Institute estimates. But that doesn’t necessarily mean beer made it out of Dry January unscathed.

January 2019 taxpaids were going up against a pretty easy comp, down 5.6% last January, meaning volume was up a modest 143,000 bbls over the January prior.

The gain loses a little luster too, when you add in the fact that “some suppliers reported distributors building inventories on new products, such as hard seltzers, in January in anticipation of demand growth in the coming warmer months,” as BI chief economist Michael Uhrich noted.


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Until Monday,
Harry, Jenn, and Jordan

“Always forgive your enemies; nothing annoys them so much.”

  • Oscar Wilde

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