AB InBev bucks series of gloomy earnings in troubled booze sector
Cans of AB InBev's Bud Light hard seltzer are seen next to White Claw at Jewel-Osco supermarket in Chicago, Illinois, U.S. October 21, 2020. REUTERS/Richa Naidu/File Photo
Anheuser-Busch InBev on Thursday outshone rival alcohol companies which had struck a downbeat tone in their quarterly results, but even the top brewer was cautious amid low consumer confidence, bad weather and emerging market turmoil.
Forecast-beating profits at the world's largest brewer by volumes cheered investors after a series of missed forecasts and warnings of trouble ahead from other beer and spirits companies.
Shares in Diageo, the world's top spirits maker, fell more than nine per cent to a four-year low on Tuesday after the company warned serious challenges endured in its most recent financial year could persist into the next.
Heineken shares also dropped by nearly as much on Monday, when the number two brewer said poor weather in Europe had hurt its performance and meant it would achieve lower annual operating profit growth than analysts expected.
AB InBev's volumes and revenues also missed estimates and the Belgian company maintained its full-year forecast for between four per cent and eight per cent core profit growth despite exceeding expectations in the second quarter.
Its caution may be a sign of the challenges facing all alcohol companies. Tough economic conditions in many markets have left some under-pressure consumers cutting back on drinking or swapping expensive labels for cheaper ones.
Spirits suffer
Spirits makers especially have faced a serious downturn after a post-pandemic boom in sales, where cash-flush consumers splashed out on expensive booze. Pricier labels are now instead gathering dust on shelves around the world.
Some investors said the shift had shown the companies' core strategy - shifting drinkers towards more expensive products - was more vulnerable to economic conditions than previously thought.
Consumers were resistant to further price increases, thinking twice before buying bottles of liquor and switching to cheaper products, Moritz Kronenburger, a portfolio manager at Germany's Union Investment said.
He added that while likely temporary it was unclear how long this would last.
In emerging markets like Mexico, Diageo has been losing market share as some drinkers swap international spirits for local brands with Mexican heritage.
Heineken meanwhile has been struggling in Vietnam amid tough economic conditions and stricter drink-driving laws. AB InBev was also hit by bad weather in China, as well as spiralling sales in inflation-hit Argentina, dragging volumes down.
Gen Z drinks less?
Longer-term, some investors wonder whether a shift to healthier lifestyles could dent sales as people cut back on alcohol. Gen Z in particular is thought to drink less.
Diageo chief executive Debra Crew said that while Gen Z consumers in the United States have a preference for moderation, data shows they are spending more on spirits than millennials at the same age.
That could mean they are more likely to buy a few cocktails rather than drink beers. That for now appears to work more in favour of spirits companies, said Fred Mahon, fund manager at spirits investor Church House.
Church House has, however, sold out of beer stocks, concerned that such trends are driving a long-term decline in beer volumes in key markets like the United States, where a large number of blue collar workers used to fuel consumption, Mahon said.
"People don't have those careers as much; their children might work in an office in a city - it is just a different environment."
Retailer Marks & Spencer forecast "further progress" in the balance of the year after reporting a better-than-expected 17.2 per cent rise in first-half profit, helped by market share gains, adding to evidence its latest turnaround plan is working.
After over a decade of failed revival efforts, M&S under chief executive Stuart Machin is reaping the rewards of a costly programme to improve the value and quality of its food and clothing, overhaul its store estate, upgrade its technology and e-commerce operations and modernise its supply chain.
The group made profit before tax and adjusting items of £407.8 millionin the six months to 28 September - ahead of analysts' consensus forecast of £361m and the £348.m made in the same period last year.
Revenue rose 5.7 per cent to £6.48 billion, with food sales up 8.1 per cent and clothing and homeware sales up 4.7 per cent.
"In the first five weeks of the second half overall trading remains on track and we are confident of making further progress in the remainder of the year," M&S said.
Prime minister Sir Keir Starmer has dismissed need for a March 2025 deadline for compensating Post Office Horizon scandal victim, saying "an arbitrary cut-off date could result in some claimants missing the deadline".
In a response to Sir Alan Bates' call for a March 2025 deadline, Sir Keir Starmer's spokesperson today (5) stated that there would not be a deadline imposed.
"What we don't want to do is set an arbitrary cut-off date which could result in some claimants missing the deadline," the spokesperson said. "We obviously don't want to put pressure on claimants and put them off contesting their claim."
However, victims involved in a landmark case against the Post Office that ended in 2019 "should receive substantial redress by the end of March and we are doing everything we can to achieve that goal", the spokesperson added.
Earlier today (5), Sir Alan was giving evidence to the Business Select Committee when he told MPs that he has twice written to the Prime Minister in the past month to say "it needs to be finished by the end of March 2025".
"I never received a response," Sir Alan said, adding, "Deadlines do need to be set. People have been waiting far too long."
Sir Alan first wrote to the PM on Oct 2 and again a few days ago, urging him to make sure victims get full financial redress by March next year.
“People have been waiting far too long, over 20-odd years, there’s over 70 that have died along the way in the GLO group. There are people well into their 80s now that are still suffering. They’re still having to put up with this as well. They shouldn’t. They really shouldn’t," he said.
Bates himself has twice declined compensation this year, saying the first offer in January was "cruel" and "derisory", and about a sixth of what he had claimed.
When asked today by Liam Byrne, the committee chair, whether he would consider crowdfunding to return to court, Sir Alan said, “I would never say never.”
Legal action was one of several options his campaign group was planning to discuss at a meeting in the coming weeks, he said.
“I know that if we decide to go down that route we are going to halt the current scheme, and it’s going to be at least six, 12 or 24 months before it moves forward in that direction," Sir Alan said, adding: "That might be a choice people are prepared to take."
More than 900 subpostmasters were prosecuted between 1999 and 2015 after faulty Horizon accounting software made it look as though money was missing from their shops.
Appearing alongside Sir Alan were former subpostmaster Dewi Lewis, who was jailed for four months after being wrongfully convicted of theft from his branch, and Jill Donnison, a claimant who worked in her late mother’s branch.
Donnison criticised some of the questions she had been expected to answer as part of her efforts to seek compensation as “long-winded and impossible to answer”.
She said claimants were expected to know how much they had lost even though key data was missing from the records, with documents provided by the Post Office “practically illegible”.
Convenience store body has expressed concern over licensing scheme for retailers to sell tobacco, vape and nicotine products in England, Wales and Northern Ireland under Tobacco and Vapes Bill introduced in the Parliament today (5), saying that the licensing scheme has been outlined without any consultation with the retailers who will be most affected by it.
The Bill confirms the Government’s intention to create a "smoke free generation" by phasing out the sale of tobacco products to anyone currently aged 15 or younger. The generational ban will come into force in 2027, meaning that there will be a single date that retailers have to reference for age restricted sales on tobacco – rather than checking if a customer is over the age of 18.
The Bill will also include powers to introduce a licensing scheme for retailers to sell tobacco, vape and nicotine products in England, Wales and Northern Ireland, and will introduce on the spot fines of £200 to retailers found to be selling these products to people underage. The licensing scheme, which has been outlined without any consultation with the retailers that will be most affected by it, includes the potential to limit the number of businesses in an area based on their proximity to other retailers in the area as well as other conditions determined by local authorities.
ACS chief executive James Lowman said, “A licensing scheme has the potential to help tackle the illicit market and punish those who sell to children, but unless properly structured it could also prevent legitimate traders from operating based on the presence of other outlets in the area, or the specifics of where that store is located. This requires detailed consultation with local shops and other stakeholders, and none of this has taken place. We now need proper discussion of the detail as regulations are drafted, or we fear that this legislation will significantly impact investment, growth and service provision in our sector.”
Other measures in the Bill include a ban on vape advertising and sponsorship, as well as powers to restrict the flavours, display and packaging of all types of vapes, as well as other nicotine products.
The Bill follows confirmation last month that the Government is planning to go ahead with a ban on disposable vaping products, which will come into force on June 1st 2025.
Lowman continued: “The Tobacco and Vapes Bill will require retailers to make significant changes in their businesses, both on age restricted sales processes and the way that their stores are stocked and managed. It is essential that the Government provides retailers with clear guidance on the rules, and communicates the changes not just with retailers, but with the public as well.
“The introduction of £200 fines to act as a deterrent for retailers selling products to underage customers is welcome, but we are concerned that there is not enough enforcement right now to deal with the rogue operators in the tobacco and vaping market. Trading Standards need significantly more funding to be able to make a difference through targeted local enforcement, not just against those selling to young people, but also those who sell illicit products.”
Associated British Foods (ABF), the owner of retail-chain Primark, today (5) issued a buoyant trading update for the 16 weeks up to 6 January.
The group's grocery arm clocked in a revenue of £1,414 million for the period, with ingredients coming in at £698 million. Revenue from agriculture for the same 16 weeks raked in £572 million while sugar added its own sweetness to the figures with a revenue of £825 million.
The group's grocery unit’s sales grew 4 per cent, reflecting “good demand” across a number of its international brands and regionally-focused businesses. Its international brand businesses, which include Twinings, Ovaltine, Blue Dragon, Patak’s, Jordans and Mazzetti, accounted for approximately a third of total grocery sales.
Twinings saw “strong” sales momentum led by volume growth across its largest markets, the UK, US and France. The group noted that this reflected increased distribution, particularly in the US, strong commercial execution to strengthen in-store visibility and a significant increase in investment and focus on marketing.
Growth also benefitted from recent product launches, as ABF continued to expand its presence in the wellness category, including a growing portfolio of herbal and infusion teas.
Meanwhile, its UK-focused businesses, which accounted for approximately a quarter of grocery sales, also performed relatively well.
Allied Bakeries had a “much-reduced” operating loss compared to 2023 as a result of improved sales and operational performance. Silver Spoon delivered “strong” growth, benefitting from lower pricing and a brand refresh. The group’s Ryvita brand also made good progress, supported by recent product launches and advertising.
Adjusted operating profit margin for the Grocery segment improved to 12.1 per cent overall, driving adjusted operating profit up 17 per cent to £511m. ABF noted that the margin improvement reflected an easing in input cost pressures, strong performance in its US-focused businesses, and reduced losses in Allied Bakeries, partially offset by an increase in marketing investment.
The grocery arm was boosted easing input costs, increased investment in marketing, and new product launches. Retail, however, surpassed all the other departments by taking a whopping £3,376 million in revenue. Primark saw sales inching up 7.9 per cent in the 16 weeks, with the retail chain increasing its market share to a new high of 7.1 per cent in the 12 weeks leading up to 10 December.
Looking ahead, ABF said: "We continue to look forward to a year of meaningful progress in both profitability and cash generation, with the profitability improvement being driven by a recovery in Primark margin, a marked improvement in British Sugar profitability, and by reduced losses at Vivergo.
"We also feel more confident in the delivery of the Primark adjusted operating margin in this financial year, driven by a further improvement in product gross margin. This should insulate us well against potential additional costs of supply due to the disruption in the Red Sea, should they arise."
A generational smoking ban, as proposed in Labour’s updated Tobacco and Vapes Bill, would spell chaos for small businesses and retailers, according to JTI.
A generational smoking ban aims to gradually end the sale of tobacco products across the UK by increasing the legal age of sale by one year. This means individuals born on or after 1 January 2009 will never be able to legally be sold tobacco products.
The burden of enforcing a generational ban will fall squarely on retailers, and disproportionately on smaller, independent retailers. Recent British Retail Consortium data revealed 1,300 instances of shop workers being verbally or physically assaulted every day in 2024, with a significant proportion of these attacks following a request for age verification.
The proposed generational ban and subsequent increase in ID checks will put retail workers at even greater risk, particularly in small and independent businesses that have no security staff or additional protections. The physical and mental impact on victims is estimated to cost UK retailers £3.3 billion annually – further highlighting the inconsistent approach from a Government that has just announced, as part of Chancellor Rachel Reeves’s budget, to "stop shoplifting in its tracks", removing legislation which means thefts worth less than £200 are subject to less serious punishments and promising more funding to crack down on organised crime gangs.
JTI is urging the Government to focus on evidence-based, effective solutions, and implement a minimum age of sale of 21 instead.
Government modelling shows that raising the minimum age of sale to 21 could achieve an equivalent fall in youth smoking as a generational ban, when “The majority of smokers start before the age of 20” according to the Government press release today.
Not only would increasing the age of sale to 21 help deliver the same health outcomes, it is simpler and less burdensome for retailers, and removes serious challenges pertaining to the legality of a generational smoking ban in Northern Ireland.
The Republic of Ireland announced in May that it would raise the minimum age for sale of tobacco from 18 to 21, stating “[p]reliminary legal advice suggests Ireland cannot pursue a ‘smokefree generation’ policy as has been suggested in other jurisdictions due to the EU’s Single Market rules and Tobacco Products Directive”. Under the Windsor Framework, Northern Ireland follows these same EU provisions which would prevent the introduction of a generational smoking ban in this part of the UK.
An age of sale of 21 would therefore not only be consistent with the UK’s international obligations, but also ensure a consistent approach across the Isles between Northern Ireland, the Republic of Ireland and Great Britain.
The legislation to increase the age of sale to 21 in the Republic of Ireland is expected to pass this week