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Anheuser Busch InBev (ABI BB) - Fundamental Investment Case


Publication Date: 23 Apr 2019 - By Robert Prather By Robert Prather

Equity Fundamental Equity Global USA EU ex-UK Consumer

AB InBev is the world's number one beer brewer based on volume, with over 500 brands. Beer brewing makes up 92% of sales. Non-beer business (i.e. soft drinks) is the remaining 8%. The largest geographic concentration of revenues comes from Latin America at 40% and North America with 28%. EMEA and Asia Pacific roughly split the balance.


Please download the full report for details on the Bear Case outlined below.


Qualitative Concerns:

  • Beer growth has been decelerating and continues to face headwinds. Anheuser's portfolio weighting not ideally positioned with ~81% of volumes still mainstream or discount.
  • Multiple geographies are under pressure. United States beer volumes are on a multi-year decline, with ABI BB losing share. Heineken is making aggressive inroads into Brazil and China.
  • Craft beer is beginning to gain steam internationally
  • NABLAB products are seeing an influx of products from traditional brewers and outside entrants
  • Cannabis products may be seen as a substitute for beer, negatively impacting demand
  • Top to bottom estimates by consensus seems optimistic for an industry facing volume pressure and increased competition
  • Some growth figures may not be as good as stated, with potential brand overlap between key growth generators Global Brands, High End Business Unit, and ZX Ventures

Fundamental Concerns:

  • Volume trends remain challenged with declines on a reported basis and approximately flat organically
  • Operating performance light versus prior World Cup years
  • Elevated leverage and encountered difficulty de-leveraging
  • Cash flow generation declined last year and dividend was halved to aid in debt paydown
  • Gross margins slipped MRQ
  • DIOs and DPOs are rising. Received a big OCF tailwind from stretching payables.
  • Intangibles make up nearly 80% of total assets
  • ROIC on a years-long downtrend
  • Valuation trades about in-line with itself historically and is not inexpensive compared to peers

Bottom Line: Challenges might be brewing with slowing beer volume growth and competitor inroads placing further pressure on weak volumes and an elevated leverage profile.

AB InBev

Source: VR Fundamental

Pages: 65

Released: 23 Apr 2019

Unlock for 35 credits

The Author

Robert Prather

Equity Analyst

Industrials, Telecom & Media, Technology, Consumer



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