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AB InBev profit more than doubles

AB InBev profit more than doubles

May 4th, 2011 in News

BRUSSELS (AP) - The world's largest brewer Anheuser-Busch InBev NV on Wednesday posted sharply higher net profit for the first quarter, but the results were skewed by high costs last year.

Price increases and a push to get consumers to trade up to more expensive beer brands helped the maker of beers such as Stella Artois and Budweiser to compensate for sluggish beer sales in the United States, where high unemployment continues to rattle demand.

AB InBev's net profit more than doubled to $964 million for the three months ended March 31, up sharply from $475 million for the same period a year earlier, when high financing costs weighed on the bottom line. Revenue grew 8.1 percent to $9 billion from $8.33 billion.

The Leuven, Belgium-based brewer said overall beer volumes were mostly flat, as continued declines in the United States wiped out growing volumes in all other regions.

AB InBev, like its main rival in the U.S. market, Molson Coors Brewing Co., which reported lower earnings Tuesday, has been hit by high unemployment among key consumer groups such as men in their 20s and construction workers.

However, AB InBev said it still believed "that a recovery in the U.S. economy is a question of when and not if." Finance Chief Felipe Dutra told reporters the company was seeing first signs of improvement in the unemployment rate, but that it was too early to start celebrating.

AB InBev also sold less beer than expected in Brazil, its second-biggest market after the U.S., where floods and rain as well as price increases lowered demand. On top of that, revenue was hit by higher distribution costs and an increase in the minimum wage.

Overall volumes were down 0.4 percent as non-beer sales dropped.

AB InBev was created when Belgium's InBev bought U.S. giant Anheuser-Busch in 2008, shortly before the collapse of Lehman Brothers. Since then the company has been working hard to cut costs and boost the image of some of its core brands, most prominently by trying to push Budweiser - whose popularity has been suffering in the U.S. - in other regions such as Europe, Asia and, later this year, Brazil.

Marketing spending increased by $52 million in the first quarter and AB InBev said sales and marketing investments were set to go up further this year, Dutra said.

The company has been using its advertising dollars to get to consumers to trade up to more expensive brands and promote new products, such as Jupiler Force, a nonalcoholic brewed soft drink "for adults" being rolled out in Belgium, and Stella Artois Cider targeted at the U.K. market.

As part of that strategy, the AB InBev also recently bought up the Chicago-based Goose Island Brewery, an acquisition that closed last week.

The brewer said its outlook for the rest of the year remained largely unchanged from its previous earnings report, where AB InBev predicted volume growth would pick up in the second quarter and the second half of the year.