Bud Brewer Is Buoyed by Pricier Beer

Bud Brewer Is Buoyed by Pricier Beer



Beer drinkers are so far stomaching higher prices for their brews.

How much companies can raise prices without losing customers has become a key question across the consumer-goods industry this year as makers of everything from beer to shampoo seek to offset soaring input costs.

AB InBev’s results are the latest indication that drinkers have been willing to pay up. Rivals

Heineken

NV,

Carlsberg

A/S and

Molson Coors Beverage Co.

all recently reported higher first-quarter prices and volumes, helped in part by the reopening of bars and restaurants across the U.S. and much of the world.

Other consumer-goods companies like

Nestlé SA

and

Procter & Gamble Co.

have also reported similar growth in volumes and prices, showing that consumers so far have been willing to pay up for a range of everyday items. Several executives, however, have warned that as prices continue to rise, consumers are likely to trade down to cheaper products.

AB InBev Chief Executive

Michel Doukeris

said consumers in the U.S. have emerged from the pandemic flush with cash, and that with unemployment low, there is no reason to expect them to trade down. In some developing markets that are net commodity exporters, surging commodity prices are also buoying the economy and employment, he added. “Consumers continue to be in good shape,” he said.

Mr. Doukeris said it was too early to say how consumers will react to a continued rise in prices. However, he noted that beer price rises are lower than the rate of inflation and that the beverage tends to perform well even as incomes come under strain, since trading up to a pricier beer costs significantly less than with other feel-good products like cars or clothes. “When inflation goes up and demand gets constrained, usually beer trades up not down,” he said. “There’s very low incremental spend for you to trade up in beer.”

AB InBev reported a 7.8% jump in revenue per hectoliter in the first three months of the year from a year earlier. Despite this, the company said volumes rose 2.8%, helping the brewer log a rise in sales to $13.24 billion, from $12.29 billion a year earlier.

Strong top-line growth allowed AB InBev to offset rising costs from commodity inflation and its supply chain to report a profit on an underlying basis—which strips out currency and one-time impacts—of $1.2 billion, up from $1.1 billion a year earlier.

On a reported basis, profit fell to $95 million from $595 million as the company took a $1.14 billion impairment charge tied to its decision to exit Russia.

In North America—where drinkers have for years been moving away from AB InBev’s two blockbuster brands Bud and Bud Light—the brewer said volumes declined 4.2%. The company has been working to diversify away from these brands in the U.S., investing in Michelob Ultra and spirits-based canned cocktails, which it said performed well.

Volumes also declined in China, with demand hit by Covid-19 lockdowns. Across the rest of the Americas and in Europe, volumes grew.

“As long as employment is good and the overall economy performs well and inflation doesn’t get totally out of control we should not see a dramatic trade down or slowdown in consumption,” said Mr. Doukeris.

Boston Beer Co., owner of popular brands like Sam Adams and Dogfish Head, launched its hard seltzer Truly in 2016. CEO Dave Burwick explains the company’s cultural pivot that made it No. 2 in the rapidly growing category.

Write to Saabira Chaudhuri at [email protected]

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Rachel Meadows

Rachel Meadows

Trending topics news writer who enjoys cooking, walking her dog and travel.

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