Recession Cracks Open Big Beer

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Despite its status as the world's biggest brewer, Anheuser-Busch InBev (NYSE: BUD) isn't immune from the imbibing trends that have affected competitors such as SABMiller (OTC: SBMRY) and Molson Coors (NYSE: TAP). Beer volume is down. Like its peers, Anheuser-Busch InBev has tried to cope by cutting costs constantly -- and raising prices occasionally.

In the third quarter, the brewer's U.S. shipment volume dropped 5.1%, a comparison the company attributed in part to a 2.3% gain in the year-ago quarter. Worldwide beer volume fell 3.1% from the year-ago period, but revenue declined only 0.4%, to $9.76 billion.

On a GAAP basis, earnings per share rose to $0.98 from $0.72. Excluding special items, earnings dropped to $0.72 a share from $0.87.

Competitors' volumes fall, too
Anheuser-Busch InBev appears to have been hit harder than the world's second-biggest brewer. SABMiller said volume fell 1% for the six months ended Sept. 30; it will provide details next week. Both Heineken and Carlsberg also have reported recent quarterly declines in volume. One of the few standouts was the much smaller Boston Beer (NYSE: SAM), which boosted volume by about 7% and profit by 40%, following the end of a packaging contract with Diageo (NYSE: DEO).

Worldwide volume for Molson Coors dropped 2.9% in the third quarter, compared to the year-ago period. However, adjusted income rose to $1.14 a share from $0.93 a share, thanks to a lower tax rate and results from the MillerCoors joint venture in the U.S. with SABMiller.

Volume for the MillerCoors joint venture was flat for the third quarter. However, net revenue rose 3.1%, to just more than $2 billion versus the year-ago period. Adjusted net income, excluding special items, rose 28.1%, to $244.4 million.

Get ready for more spending
While multinational brewers continue to cut costs, most notably at the MillerCoors joint venture, none can match Anheuser-Busch InBev, which is wringing savings from last year's takeover of St. Louis' Anheuser-Busch by Belgium's InBev.

The company has cut so much so fast -- asset sales have exceeded its goals -- and refinanced enough debt that it feels ready to launch two new brands. Bud Light Golden Wheat and Select 55 will appear in the U.S. during the fourth quarter. "We can now focus all of our efforts on growing our core business," said CEO Carlos Brito.

As a result, the company will spend more on marketing and sales in the fourth quarter. Although demand will be "soft," the company forecasts "improved volume performance" in year-over-year comparisons for the fourth quarter versus the third.

In a few days, Anheuser-Busch InBev will mark the one-year anniversary of the takeover. If the first year of Brito's performance owes to the financier's skill, the second year will measure the depth of a salesman.