Anheuser-Busch InBev’s U.S. sales-to-retailers dip 4.1% in Q1 2013

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(St. Louis, MO) – Anheuser-Busch InBev reported Q1 2013 earnings on Tuesday morning. Below are some U.S. highlights from the earnings press release.

In the United States:


• We estimate that industry selling-day adjusted STRs declined by 3.0% in the quarter, against a tough 1Q12 comparable which saw industry growth of 1.3%. Our own selling day adjusted STRs declined by 4.1%, against solid 1Q12 growth of 1.0%. Volume performance in the quarter was impacted by short term pressures on consumer disposable income, increased gas prices and a difficult weather comparable, with many parts of the country seeing negative quarterly temperature variances of more than 10°C/20°F compared to 1Q12

• Our reported STWs declined by 5.2% in 1Q13, with the difference between the decline in STWs and STRs being due to one less selling day in 1Q13 Revenue Management

• US beer-only revenue per hl continues to perform well, growing by 4.0% in the quarter. This growth was due to the carryover benefit of the price increase taken in 4Q12, as well as brand mix contribution of approximately 150 bps. The favorable brand mix contribution was driven by innovations launched in both FY12 and 1Q13, including Bud Light Platinum, Budweiser Black Crown, Bud Light Lime Lime-A-Rita and Bud Light Lime Straw-ber-Rita, and the growth of our high-end brands, especially Stella Artois and Shock Top Commercial Strategy and Brands

• We estimate that our Focus Brand families gained market share collectively in the first quarter, as measured by STRs, with our total estimated market share declining by approximately 50 bps. This was due primarily to the performance of our sub-premium brands, given the pressure on disposable income, and our strategy of narrowing the price gap between our premium and sub-premium brands

• Share for the Bud Light family was marginally down versus the same period last year by our estimates. Bud Light Platinum has held a stable market share of around 0.8% since the middle of 2012, with a decline in the quarter due to the cycling of exceptionally strong 1Q12 launch volumes. This decline was partially offset by solid results from Bud
Light Lime Straw-ber-Rita, which was only launched at the beginning of March, and Bud Light Lime Lime-A-Rita. These two brands achieved a combined market share of 0.6% during 1Q13, with IRI data indicating a combined share of 1.3% in April

• Market share for the Budweiser family was essentially flat by our estimates, with Budweiser Black Crown, launched at the end of January, offsetting a share decline in Budweiser

• We estimate that Michelob Ultra and our high end brands, led by Stella Artois, Shock Top and Goose Island, gained share in the quarter. The national rollout of Goose Island continues to be well received

• Our innovation pipeline in the US remains strong with more liquid and packaging innovations to come during the remainder of the year

• We continue to drive our Balanced Portfolio Approach (BPA) in the retail channel, and have very clear evidence that retailers who maintain a balanced approach to shelf space allocation deliver better sales results than the rest of the market. Extensive testing of the approach last year demonstrated revenue improvements across multiple retail channels and hundreds of retailers. As a result of the BPA, premium beers gained share of features in 2012, for the first time in many years

Latest on Grupo Modelo

We are pleased that all regulatory approvals necessary for closing the transactions have now been obtained and we expect the combination with Grupo Modelo to close in June 2013.

We remain very excited about the Mexican market and the potential of the Modelo brands internationally. Our integration plans are ready to be implemented as soon as the combination has been completed, and we are looking forward to working with our new colleagues in Mexico to deliver the approximately 1 billion USD of cost synergies, as previously committed. In addition to the cost synergies, we believe there are significant revenue synergies available through further expansion of Corona’s sales worldwide (excluding the US) and through sharing of best practices.

Recent events:

• On 19 April 2013, AB InBev, Grupo Modelo, S.A.B. de C.V., Constellation Brands, Inc. and Crown Imports LLC, announced that they had reached a final agreement with the U.S. Department of Justice on the terms of a settlement of the Department of Justice’s litigation challenging AB InBev’s proposed acquisition of the remaining stake in Grupo
Modelo that it does not already own. The agreement is substantially in line with the revised transaction announced on 14 February 2013

• On 19 April 2013, the parties jointly approached the Court with the terms of a proposed Final Judgment. The proposed Final Judgment presented to the Court includes additional binding commitments to the revised transaction, which are designed to ensure a prompt divestiture of assets by AB InBev to Constellation, the necessary build-out of the Piedras Negras brewery by Constellation, as well as certain distribution guarantees for Constellation in the United States

• On 22 April 2013, the Stipulation and Order (which was filed concurrently with, and requires the parties to comply with, the proposed Final Judgment) was signed by the Court. AB InBev, Grupo Modelo and Constellation have begun moving swiftly to complete the pending transactions. These include an all-cash tender offer of USD 9.15 per share
by AB InBev for all the outstanding Grupo Modelo shares it does not already own and, upon completion of the tender offer, the sale of Grupo Modelo’s Piedras Negras brewery and stake in Crown to Constellation

• On 25 April 2013, AB InBev announced the completion of the mergers of Diblo, S.A. de C.V. and Dirección de Fábricas, S.A. de C.V. with and into their affiliate, Grupo Modelo. Following the mergers, AB InBev’s economic interest in the Grupo Modelo companies remains largely unchanged at 50.3% and AB InBev has the right to appoint a tenth director on Grupo Modelo’s 20 person Board of Directors

• The Mexican Competition Commission approved the revised transaction with Constellation in early April 2013. Now that the Stipulation and Order has been signed, all regulatory approvals necessary for closing the transactions with Grupo Modelo and Constellation have been obtained. The transaction is expected to close in June 2013

• Once the tender offer has been completed and the transaction has closed, Ricardo Tadeu, previously Business Unit President for Brazil, will assume the role of Zone President Mexico and Chief Executive Officer of Grupo Modelo. Mexico will become AB InBev’s seventh Zone.

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