AB InBev Buzzes While Coke Feels the Hangover
The Coca-Cola Company (NYSE:KO) is going to need a cold one after this report, since it looks like the Atlanta-based soda giant has a new rival on its hands. Its competitor doesn’t serve soda and it doesn’t serve juice — it serves beer. That would be Anheuser-Busch InBev (NYSE:BUD), the beer giant whose brands include Budweiser, Corona, and Stella Artois. The Belgian-Brazilian multinational beverage and brewing company reported its latest earnings Wednesday, and subsequently enjoyed a stock surge that rose to above $167 billion in intraday trade that day.
The Wall Street Journal reported the news Wednesday, and said that AB InBev’s $167-billion ceiling topped Coke’s by a few hundred million dollars at one point, temporarily usurping the soda giant from the beverage throne. Coke ultimately caught up to AB InBev later in the day, but it is still significant that the beer company was able to enjoy the top perch for a while Wednesday, as Coke has long ruled that post. AB InBev finished the trading day Wednesday up 1.55 percent at $103.75
The interesting fact about the Coke-AB InBev rivalry is that although both have been dominating headlines recently, neither of the companies have been enjoying particularly impressive sales. Over the past few months, we’ve heard time and time again that Coke is suffering disappointing sales thanks to health-conscious consumers, and the beer industry isn’t exactly thriving either. According to the Journal, AB InBev reported Wednesday that its beer volumes dropped 2 percent last year. So, what is the company’s current saving grace? Interestingly enough, that would be its high-profile acquisitions.
The Journal reminds us that AB InBev spent a whopping $52 billion to take over Anheuser-Busch in 2008, and it dropped an additional $20 billion last year to get its hands on Mexico’s Groupo Bodelo. The two investments weren’t paltry ones, but it’s safe to say they are paying off for the beer behemoth, as it is finally catching up to Coke, the world’s largest soda maker, and though the two companies’ bubbles are a little different, there’s no mistaking the fact they’re still in competition.
Even though AB InBev said on Wednesday its beer volumes dropped 2 percent last year while Coke reported last week that its beverage volumes rose 2 percent, investors are still showing more skepticism with Coke stock because they recognize how the soda industry is turning. Coke’s main rival, PepsiCo (NYSE:PEP), is also continuing to navigate slowing sales, and both companies have yet to convince investors how they can adapt to the current consumer base and forge forward in the future.
AB InBev, on the other hand, has impressed investors recently, according to the Journal, thanks to its ability to cut costs and boost profit margins following its high-profile acquisitions. The brewer has reportedly already realized $460 million in cost synergies from the Modelo deal, and the company has made it clear that when it makes big investments, it does everything it can to see big returns.
Following AB InBev’s impressive earnings release Wednesday, the company’s CEO Carlos Britos said in an earnings call that the beer maker is now focusing on organic growth, although it isn’t against the consideration of any more acquisitions. Around the same time Coke made news earlier this month that it was buying a 10-percent stake in Green Mountain Coffee Roasters (NASDAQ:GMCR), Ab InBev closed on its acquisition of South Korea’s Oriental Brewery for $5.8 billion, further extending its control over international beer operations. It is thus clear that AB InBev is making moves, and it doesn’t look like the company is stopping anytime soon. Although AB InBev and Coke market different beverages, they could still benefit from drawing on a couple of each other’s strategies, especially AB InBev’s — since, currently, its stock is only on its way north.