Will The World Cup Have a Lasting Effect on Anheuser-Busch InBev?

Anheuser-Busch InBev's plans to cash in on the FIFA World Cup were four years in the making, and the brewer was all over the event as it drew the eyes of sports fans around the world. Now that the games are over, the real test begins.

Jul 19, 2014 at 9:00AM

Shares of Anheuser-Busch InBev (NYSE:BUD) have climbed more than 7% over the past three months, and it seems investors are expecting big things from the brewer's sponsorship of the FIFA World Cup.

A-B's Brahma and Budweiser were the only beers sold at the World Cup stadiums throughout the tournament, and the company set into motion four years' worth of planning designed to make the most out of the weeks-long sporting event that drew visitors and viewers from around the globe.

This event was made for the megabrewer
The World Cup provided a great platform for A-B. It was able to use the event both to promote its flagship Budweiser brand around the globe, and so it can further solidify the dominance of brands like Brahma in their regional markets. In ways, the event is a perfect match for A-B, since the brewer owns so many brands that drinkers in different countries may identify as their own, from Bass Ale in the U.K. to Spaten in Germany, Brahma and Skol in Brazil, or Harbin in China.

That's allowed A-B to create local promotions around the Cup that "tap into feelings of national pride and they will ignite fans to root for their teams," CEO Carlos Alves de Brito said.

"Of the 32 teams that are playing the tournament, over half originate from countries where we have a major presence," Brito said.

It also gives A-B a huge stage from which to sell Budweiser, which it introduced in a special "gold aluminum trophy bottle" in more than 40 markets for the Cup.

Its "Rise as One" campaign featured a documentary with star players broadcast in 84 countries. The company said it reached 600 million households. It sponsored the FIFA "Man of the Match" award at each game.

It operated the Budweiser Hotel in Rio, with performances by popular music acts and appearances by World Cup legends. It also hosted more than 14,000 smaller events across 150 cities.

"This campaign is meant to bring the World Cup experience to all soccer fans around Brazil, not only those who will attend games in stadiums," Brito said.

From the World Cup-related sales alone, A-B expects to add 1-2 percentage points in revenue growth for the second quarter in Brazil, a country where beer sales had been lackluster due to the lagging economy.

But that growth comes at a cost. In June, A-B reported that it increased sales and marketing spending for the first quarter by $250 million, or about 16.7%.  For the year, it expected an increase in the "low-to-mid teens," or about $600 million to $1 billion.  

For a company that brought in $14.4 billion in net income last year -- a banner year -- that's a serious investment.

The King looks overseas for growth
The U.S., home to A-B's iconic Budweiser brand, may still be a very important market for the megabrewer, but it's no longer an area of significant growth for its most popular beers.

Budweiser and its better-selling brethren Bud Light have seen sales slipping in the U.S. for some time. Indeed, American's tastes for beer have been shifting away from the straw-colored, light-bodied lagers to craft styles like India pale ales. That's been a boon for craft brewers like Boston Beer (NYSE:SAM), which saw a 35% surge in year-over-year revenue last quarter. Boston Beer is seeing a resurgence in sales of its 30-year-old Samuel Adams Boston Lager, and its new, West Coast-style Rebel IPA has been a hit as it rolls out in markets across the country, the company reported this spring.

To succeed against Boston Beer and all the smaller brewers that are driving 20% year-over-year growth in craft sales, A-B has looked to acquisitions and the introduction of newer labels, like Shock Top. As of 2012, Shock Top was the fastest-growing craft-style beer in the U.S., according to Moody's. The label notched 64% growth between 2011 and 2012, the company reported. Meanwhile, Goose Island, a craft brewer A-B acquired in 2011, saw sales up 62% in 2013.

Overseas, it's a different story. Budweiser continues to grow in Latin America and other developing markets like China -- global Bud sales were up 7.8%, year over year, last quarter. And the World Cup provided A-B a tremendous opportunity to reach those audiences through the world's most popular sport.

The Foolish bottom line
The larger question, however, is whether A-B's World Cup sponsorship and promotional efforts will have lasting effects on sales in those key countries. Investors will want to pay attention to the numbers A-B reports in the coming quarter – sales in Brazil are obviously key, but other soccer-crazed markets in Latin America, Europe, and Africa are important, too.

Even more important, however, will be what the company has to report in the quarters that follow, because it's the long-term traction from all that World Cup marketing that will really matter.

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John-Erik Koslosky owns shares of Boston Beer. The Motley Fool recommends Boston Beer. The Motley Fool owns shares of Boston Beer. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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