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ABI pushes Budweiser toward global status

Anheuser-Busch InBev is pushing to increase sales of Budweiser in overseas markets.

Fred Prouser/Reuters/Fred Prouser/Reuters

Anheuser-Busch InBev, the world's biggest brewer by sales, is working to turn Budweiser into a global brand, increasing volumes worldwide by 3 per cent.

Almost 44 per cent of Budweiser's sales now come from outside the U.S., up from 28 per cent three years ago, ABI said as it reported a 4.6-per-cent growth in overall annual revenues on Thursday.

Budweiser is the No. 2 global brand after Heineken, and ahead of Corona, according to 2010 data from data group Plato Logic. In 2009, it ranked at No. 3. In beer, local brands predominate and truly global brands are few and far between. However, like other premium beers, they are growing faster than local or regional mainstream beers as drinkers trade up. They typically have higher gross margins and, once up and running in countries and investment normalizes, also boast fatter net profit margins.

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ABI's results trounced market expectations and the brewer delivered its 13th-consecutive quarter of margin expansion on earnings before interest, tax, depreciation and amortization before recurring items.

Overall on this basis EBITDA grew 7.7 per cent organically to $15.3-billion (U.S.) last year, increasing 12.2 per cent year-on-year in the fourth quarter.

Brazil generated what Trevor Stirling, analyst at Bernstein Research, dubbed "awesome" EBITDA margins, driving Latin America margins up 2.92 per cent to 50.5 per cent. ABI attributed this to revenue growth, cost of sales increases running below inflation and higher tax incentives in Brazil.

The company also said it is on track to hit net debt/normalized EBITDA of two times this year, down from a peak of almost six times at the time of the Budweiser acquisition in 2008.

While several analysts speculate this could be the trigger for a huge deal in the sector – a takeover of SABMiller – others are more skeptical.

Mr. Stirling said that SABMiller's share price is too high for ABI to make the necessary returns on capital, and others have pointed out that the U.K.-listed brewer already sweats its assets hard, leaving less scope for a new owner to squeeze out more.

"At two times net debt/EBITDA, a deal is possible," he said. "But I don't think we should be assuming a mass rush of blood to the head … because, for them to pay a premium over an already-elevated share price, it's going to be very difficult to make a return on their money."

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