Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Budweiser Brewing Co APAC Ltd (BDWBF, Financial) experienced strong growth in South Korea and India, which helped offset the negative impact of a soft industry in China.
- The company reported an expansion in EBITDA margin compared to the first half of the previous year, driven by gross margin improvements.
- Budweiser Brewing Co APAC Ltd (BDWBF) has successfully expanded its BEES digital platform to 300 cities, enhancing commercial capabilities and value creation.
- The company is making significant strides in sustainability, reducing water usage for beer production by 38% since 2017 and being recognized in the S&P Global's 2024 Sustainability China Yearbook.
- In India, the Premium and Super Premium portfolio grew by double digits, contributing more than two-thirds of the company's revenue in the region.
Negative Points
- Total volume and revenue decreased by 6.2% and 4.3% respectively, primarily due to a decline in the Chinese market.
- In China, volumes decreased by 10.3% in the second quarter, with revenue declining by 15.2% due to adverse weather and a soft industry.
- The company faced challenges in the APAC West region, with volumes, revenue, and normalized EBITDA all experiencing declines.
- Consumer confidence in China remains low, impacting overall performance and posing a challenge for future growth.
- Budweiser Brewing Co APAC Ltd (BDWBF) is experiencing increased competition in China, particularly in the Core and Value segments, which could affect market share and profitability.
Q & A Highlights
Q: How is the shift in the in-home channel in China affecting Budweiser APAC, and what strategies are being implemented to address this change?
A: Jan Craps, CEO, explained that as markets develop, in-home channel volumes typically increase. In China, this trend has been ongoing, with in-home channel volume rates rising annually. Budweiser APAC is expanding its route-to-market and leveraging digital tools like BEES to enhance distribution and capture growth opportunities in the in-home channel.
Q: Can you provide insights into the premiumization strategy in South Korea, particularly with Stella Artois?
A: Jan Craps highlighted that South Korea's premium segment is underdeveloped, offering growth opportunities. Budweiser APAC introduced Stella Artois in the on-premise channel with initiatives like exclusive packaging and the Perfect Serve program. These efforts have led to market share growth for Stella Artois, supported by a strong portfolio including Budweiser and Hoegaarden.
Q: What progress has been made with the Swire collaboration in China, and how is it impacting Budweiser's regional penetration?
A: Jan Craps reported positive results from the collaboration with Swire Coca-Cola in Anhui and Hubei provinces. The partnership aims to leverage synergies between Budweiser APAC's premium brands and Swire's soft drinks, resulting in market share growth in the premium segment in these regions.
Q: How is Budweiser APAC addressing the challenges in China due to adverse weather and soft consumer confidence?
A: Jan Craps acknowledged the impact of adverse weather and soft consumer confidence on performance. The company remains focused on executing its strategy, emphasizing mega brands and innovations like Zero Sugar in the Core++ segment. Despite challenges, Budweiser APAC is committed to long-term growth in China.
Q: What are the key drivers of margin expansion in South Korea, and how sustainable are these factors?
A: Ignacio Lares, CFO, explained that margin expansion in South Korea is driven by revenue management initiatives, operational efficiencies, and premiumization. The October 2023 price increase and excise tax adjustments were significant contributors. These factors, along with continued premiumization, are expected to sustain margin growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
