Bloomberg — AB InBev, the world’s largest brewer, and distiller Diageo Plc posted better-than-expected sales and profits as consumers proved willing to drink more despite higher prices.
Beverage makers and consumer brands from Nestle to Unilever are boosting prices to offset higher raw material costs and rising inflation. Their financial results show consumers are accepting the price hikes, so far.
AB InBev shares fell as much as 4.2% in early trading, while Diageo shares gained as much as 2.7%.
The Budweiser brewer’s small beat on earnings before interest, tax and depreciation in the second quarter and unchanged guidance may be disappointing to investors given stronger performances from other consumer staples stocks so far this quarter, Morgan Stanley analyst Pinar Ergun wrote in a note to clients.
Diageo, the maker of Johnnie Walker Scotch, said Thursday that “price increases and supply productivity savings more than offset the absolute impact of cost inflation.” The company has been fighting off a jump in raw material and shipping costs by raising prices on drinks such as Scotch and tequila.
It reiterated its forecast for growth of 5% to 7% in sales and 6% to 9% in earnings over the next three years, on an organic basis.
“We certainly are seeing continued inflationary pressures on our cost of goods,” Diageo Chief Executive Ivan Menezes said in an interview with Bloomberg Television.
Menezes said Diageo has “multiple levers” to deal with inflation. For example, much of the company’s premium spirits are made years in the past and then aged in barrels before being sold.
“We are very surgical and careful on how much pricing we take and where,” he said.
Meanwhile, AB InBev said sales and volumes rose in most major markets, except for China, where Covid-19 lockdowns crimped consumption. Sales in Latin America were particularly strong.
Brewers have been raising prices to offset higher costs as pubs and bars reopened and social gatherings returned. So far, consumers have kept up their drinking habits despite soaring inflation in the US, Europe and other parts of the world.
Leuven, Belgium-based AB InBev reiterated its annual Ebitda growth target of 4% to 8% citing “a healthy combination of volume and price” it said in a statement Thursday.
Chief Executive Officer Michel Doukeris said the company’s well-known brands, which also include Stella Artois and Corona, “enabled us to meet the moment in an ongoing dynamic operating environment.”
Ebitda rose 7.2% in the second quarter, AB InBev said, beating analysts’ expectations. Analysts had predicted earnings would rise 6.7%, according to the average of a Bloomberg survey.
The company also said revenue grew by 11.3% in the second quarter, beating estimates of 10.4%. Volumes increased by 3.4%.
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