Anheuser-InBev (AB InBev) probably has another five or so years to prove that being a massively dominant global beer group makes good financial sense.
Despite making steady progress extracting the synergies from the 2016 acquisition of SABMiller, the enlarged group’s results have been on the disappointing side since.
The operating efficiencies are there but consumers across the globe — with a few notable exceptions — seem to have lost their appetite for beer.
The AB InBev share price remains significantly below the R2,000 level at which it listed on the JSE back in 2016.
The US continues to haunt the group’s performance. That market, which is the most valuable in the world in terms of profit pool, is unlikely ever to produce the sort of returns enjoyed in the heyday of Anheuser-Busch.
AB InBev is continuing to lose market share in the US, particularly with its Bud Light and Budweiser brands. Consumers in China appeared to be more excited about Budweiser, particularly in the second quarter, and the World Cup helped push volume growth in that country. However, further escalation in the trade war between China and the US could threaten this contribution, given that beer is an easy enough target for Chinese consumers angered by President Donald Trump.
The grim performance in SA, with a shocking mid-teens volume decline in the second quarter, underpins the message from retailers about consumers being under severe pressure.
Group performance may settle onto a firm growth path in the next few years but if it fails to, can it be much longer before the 3G Capital guys behind AB InBev start to look to the benefits of deconsolidation?
It is unlikely that President Cyril Ramaphosa — last seen hobnobbing with the developing world’s most powerful leaders at the Brics summit — has had the chance to cast his eye over the latest numbers out of the private equity industry.
However, gunning as he is for $100bn in new investment into SA in the next five years, he will be pleased when he does.
While investment activity in Southern Africa’s private equity industry, which hit a record R31.1bn last year, may seem small change alongside $15bn investment injections from China, it does signal the private sector’s growing commitment to the region. And also its realisation that it needs to help the state solve social problems.
Increased investment into infrastructure and education is encouraging. On the other hand, the decline in private money going towards agriculture, energy and healthcare is not.
The overall trajectory is positive, with 30% of investments going towards start-ups, many of them with a developmental focus. Of course, much more is needed. Millions of Africans still do not have access to clean water, electricity and education. This presents a powerful imperative and opportunity for private equity funds.
As Elias Masilela, the executive chairman of DNA Economics and a former CEO of the Public Investment Corporation, said at the launch function for the private equity industry survey: "If inequality goes unchecked, [investment] returns are not sustainable".
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