AB InBev’s Asia Success Requires Some Extra Fizz
Anheuser-Busch InBev (BUD) will have to deliver in Asia if it wants more fizz in its stock price. Shares in the Belgian brewer’s Budweiser Brewing Company APAC unit opened up a modest 1.5% in their trading debut in Hong Kong. The tepid reception is unsurprising given holidays and protests this week, but slowing global beer sales have dampened enthusiasm too. A successful attack on Southeast Asian consumers could unlock a rally.
Monday’s listing caps a tumultuous IPO process for Budweiser APAC. An initial attempt to sell shares fell flat in July, leading AB InBev to sell-off the unit’s slow-growing Australian division to Japan’s Asahi for $11.3 billion. It then relaunched the flotation, pricing shares at HK$27 each, the bottom of the marketed range. They opened at HK$27.40 on Monday, but rose as much as 6.3% in early morning trading.
This may not be the opening pop investors hoped for, but it’s not a bad start given the timing. Hong Kong’s bourse will close on Tuesday for a national holiday, and mainland exchanges are closed all week. At the same time, violent pro-democracy demonstrations continue apace, and have already helped knock 10% off the Hang Seng Index since early July.
Unfortunately, investors are sober about the beer market, too. Global consumption slowed last year, according to drinks consultancy IWSR. While growth is still playing out in emerging markets, particularly in the premium segment where Budweiser APAC operates, competition is fierce. AB InBev is weak in Southeast Asia, where Heineken and other rivals dominate. The Dutch company has top-three positions in Indonesia, Thailand and Vietnam, where the Belgian brewer isn’t even in the top five, according to Euromonitor.
Deals were a big part of Budweiser APAC’s IPO pitch, and the company can now use its own stock for transactions. It could partner with firms like Charoen Sirivadhanabhakdi’s Thai Beverage, or San Miguel Breweries in the Philippines. But large, willing acquisition targets are hard to find in this region.
An expected inclusion in MSCI indices should boost passive investment in Budweiser APAC’s stock, as could better-than-expected results. But it will probably take bolder moves to get the market excited enough to prompt a bigger rally.
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