AB InBev Reorganizes as Marketing Weighs on Second Quarter
(Bloomberg) -- Anheuser-Busch InBev NV streamlined its global management structure after marketing spending on the soccer World Cup hurt second-quarter profit growth at the world’s largest brewer.
The Leuven, Belgium-based company is trying to become more agile by shifting to six geographic zones from nine, with new Middle Americas, South America and Asia Pacific areas combining previously separate regions, it said in a statement Thursday. The changes are part of an ongoing effort to integrate SABMiller Plc, which the company acquired in 2016 for more than $100 billion.
“We are now close to two years in the new company following the integration, and we just feel this is the right time to adjust our structure to better reflect the opportunities before us,” Chief Financial Officer Felipe Dutra said on a call with reporters. The reshuffle is primarily a sales-growth exercise but could also help reduce costs, he said.
The shifts come as the maker of Stella Artois said earnings rose 7 percent to $5.57 billion on an adjusted basis before interest, taxes, depreciation and amortization. Analysts surveyed by Bloomberg expected 8 percent growth. The shares fell as much as 4.9 percent in early Brussels trading, the most since November 2016.
The World Cup campaign for Budweiser, AB InBev’s flagship lager, began in May as the company readied to square off against Carlsberg A/S, the market leader in host nation Russia. AB InBev is seeking to drive more revenue from athletic tournaments and social occasions after the past decade’s influx of smaller brands weaned drinkers off its mass-market brews. To address that challenge, the company is investing $2 billion in promoting its brands and improving supply chains in the U.S.
The brewer had forecast a drag on earnings growth of between 0.5 percentage point and 1 percentage point from increased spending on the World Cup, saying the marketing boost would be more weighted to the second quarter.
AB InBev’s restructuring also brings marketing and the company’s ZX Ventures incubator unit under common leadership, and creates new executive positions overseeing nonalcoholic beverages and company-owned retail. The changes are effective Jan. 1.
AB InBev cut a further $199 million worth of costs in the second quarter from the acquisition of SABMiller, the benefits of which were partly offset by the brewer’s increased marketing spending.
Sales in the U.S., AB InBev’s largest driver of revenue, fell by 3.1 percent in the second quarter, the brewer said. The company attributed the weakness in part to the earlier timing of Easter and the Fourth of July holiday.
In Brazil, the company joined Unilever in calling out the setbacks of a trucking strike in the country, which delayed shipments. That was mitigated by high sales during the World Cup, AB InBev said.
The company’s marketing efforts helped it sell more beers in stadiums during the World Cup than in the 2014 tournament, hosted in Brazil, it said.
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