InBev U.S. Gamble Could Pay Off

on 05/11/10 at 10:03 am

Industry

As befits a brewer, Anheuser-Busch InBev is always up for a fight. Two years after its ill-timed takeover of Budweiser, the Brazilian-Belgian beer giant is taking on its own customers, gambling that U.S. beer drinkers will swallow above-inflation price increases despite the sluggish economic recovery. AB InBev’s expectation-beating third quarter results suggest that bet may be paying off. If so, the shares could be due a further rerating.

Reviving the fortunes of America’s iconic beer brand is proving a challenge. The U.S. beer market shrank 3.2% by volume on a rolling 12-month basis in July after having grown by an average 0.3% the previous 20 years, according to UBS. U.S. unemployment at 10%—and nearer 18% among 21- to 27-year-olds—is weighing on volumes. AB InBev’s North American volumes fell 1.5% in the third quarter, a modest improvement on the 3.4% drop in the second quarter. Raising prices is clearly a risk.

{Full story via Wall St. Journal}

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