For the beer industry, the epidemic is a double-edged sword, with the arrival of consumption upgrades and the early release of structural dividends, but the closure of drinking places has affected sales. Budweiser APAC Holdings, the largest beer company in the Asia-Pacific region that relies heavily on restaurants and bars, has the deepest experience.
From a double-digit year-on-year decline in revenue, profitability and beer sales in 2020, to a significant increase in performance due to the improvement of the epidemic in 2021, and then to a return to the decline range due to profitability at the end of 2022. Over the past four years, Budweiser APAC's performance has been a roller coaster.
On February 29, Budweiser APAC released its 2023 annual report, showing that when China's beer production declined year-on-year in the second half of last year, the company achieved a year-on-year sales growth of about 4% in the Chinese market last year, higher than the industry average, and revenue increased by 11% year-on-year. The Chinese and Indian markets became growth engines.
But Budweiser APAC is still slowing down. At the end of 2023, Budweiser APAC's earnings were still recovering, with normalized EBITDA of $2 billion, up 108%, but it is only close to the level of 2019, and it has not exceeded 21 in 2021A ** high of $3.9 billion. Its profit attributable to equity holders in 2023 is less than 7 percentage points in 2022.
The decline in performance due to the epidemic has given other domestic beer giants time to catch up quickly. When will Budweiser APAC's earnings move out of pre-pandemic levels and into the fast lane?
The answer is not certain.
In September 2023, at the "2023 China Beer T5 Summit" hosted by the China Alcoholic Beverages Association, Yang Ke, CEO and co-chairman of Budweiser APAC, said that the beer industry is a very resilient industry, and he is very optimistic about the future trend of high-end beer in the Chinese market.
This is confirmed by the 2023 annual report released by China's listed beer companies at the earliest.
Despite the year-on-year decline in beer production in the second half of last year, Budweiser APAC's revenue across the Asia-Pacific region grew by double digits year-on-year due to continued premiumization. According to the financial report, in 2023, the company will achieve revenue of 68$600 million, 11% year-on-year revenue growth rate far exceeded the year-on-year growth rate of 1 in 20198%。
The Chinese and Indian markets have been the engines of Budweiser APAC's growth.
According to the financial report, under the recovery of channels and premiumization, Budweiser APAC's revenue and normalized EBITDA in China increased by 12 percent last year8% and 17%, which are higher than their overall growth levels in the Asia-Pacific region.
Budweiser APAC attributes its growth in the Chinese market to three characteristics: First, sales volume increased by about 4% year-on-year. According to data from the National Bureau of Statistics, in January and December 2023, the beer output of enterprises above designated size in China (starting standard: annual main business income of 20 million yuan) was 355550,000 kiloliters, an increase of only 03%。
Second, due to the impact of high-end, the year-on-year growth rate of product revenue per 100 liters has accelerated. In 2022, Budweiser APAC's revenue per hectoliter in China decreased by 86%, an increase of 79%, down 11%, an increase of 64%。In 2023, the fastest growth rate will be 8%.
This is due to Budweiser APAC's continuous development of premium and ultra-premium products. In the third quarter of last year, the company debuted Budweiser Master Organic Beer, with each bottle coded and traceable from farm to fork. Budweiser APAC also opened its first Brewdog craft beer hall in Central, Hong Kong. In the fourth quarter, the Budweiser Master Reserve Beer Year of the Dragon Limited Gift Box was launched. Budweiser Gold and Black Gold achieved double-digit year-on-year growth, with combined sales exceeding 100 million liters.
Third, the market share has expanded. Including the mature markets of Guangdong and Fujian, Budweiser APAC expanded its distribution cities to 220 by the end of 2023 from 201 in 2022, and the distribution cities of the ultra-premium portfolio expanded from 51 in 2022 to 63.
The Indian market is also growing rapidly due to premiumization, and last year it was promoted to the fourth largest market for Budweiser APAC. In 2022, India is only one of the top five markets in the world for the Budweiser brand, and its high-end and ultra-high-end revenue has doubled compared to 2021! Continuing into 2023, Budweiser APAC's premium and ultra-premium portfolio revenue in India achieved double-digit year-on-year growth.
Four years after the pandemic, Budweiser APAC now has achieved sales of nearly US$7 billion, surpassing the US$6.5 billion in 2019. However, unlike its revenue growth, the recovery in profitability has been slower than pre-pandemic levels. This is directly related to the repeated and ongoing epidemic situation, which has affected the main venues for Budweiser APAC's premium and ultra-premium beer sales.
Let's start with the key metrics that Budweiser APAC management looks for. In 2023, Budweiser APAC's normalized EBITDA was US$2 billion, compared to US$2.1 billion in 2019.
In fact, in 2021, the epidemic situation has improved. Budweiser APAC's normalized EBITDA increased by 27% year-over-year due to revenue growth and cost savings. However, due to the recurrence of the pandemic in 2022, its normalized EBITDA decreased by 5% year-on-year. In particular, the fourth quarter of that year was called "the most challenging quarter" by Budweiser APAC. In the areas with the highest concentration of business, the flow of people and passengers continued to decline after the lifting of restrictions in December, and even affected the Spring Festival holiday.
Let's look at the net profit indicator. In 2023, Budweiser APAC's profit attributable to equity holders was 8US$500 million, a year-on-year decrease of US$61 million. In 2019, the company's profit attributable to equity holders was nearly US$900 million. In 2018, when there was no pandemic, and in 2021, when the performance was high, Budweiser APAC's attributable profit was close to US$1 billion, which has reached the highest point of its annual profit.
The rate of profitability of the pursuers is obviously faster. Tsingtao Brewery (600600.)SH) net profit first crossed the threshold of 2 billion yuan, and then crossed the 3 billion yuan mark. In 2022, its net profit after deducting ** subsidies will be close to 2 of the non-net profit deducted in 20195 times; Excluding the one-time compensation income from the sale of land in 2021, the profit attributable to shareholders of China Resources Beer in 2022 increased by about 33% compared with 2021 to RMB4.3 billion, which was 33 times!
Whether it is Snow Beer, which has the largest beer sales in China, or Tsingtao Beer, which has a higher premium capacity, the gap between the profitability of Budweiser APAC and Budweiser APAC used to be separated by tens of billions of yuan in profits, but after an epidemic, the gap has been greatly narrowed.
Who's slowing down Budweiser APAC? The company does not report absolute earnings figures for China and other countries in the Asia-Pacific region.
However, the Korean market had a significant negative impact on Budweiser APAC's earnings. The company said sales of Budweiser's beer in South Korea were flat due to the launch of new products by competitors and the return of Japanese brands to the market. Last year, Budweiser APAC's EBITDA in South Korea decreased due to increased investment and is gradually improving.
In fact, the Korean market is not a drag on Budweiser APAC for a while. Even before the pandemic in 2019, the company observed an overall decline in South Korea's beer industry, mainly due to weakening consumer confidence and increased competitive pressure in the industry.
The Chinese market is also full of twists and turns. After surviving the epidemic, beer consumption has been sluggish since the second half of last year. According to data from the National Bureau of Statistics, in the second half of last year, the monthly beer output of enterprises above the designated size fell year-on-year, and there was no "head high" by the end of the year. Counting the gratifying sales volume in the first half of the year, the annual industry sales volume was 355550,000 kiloliters, a slight increase of 03%。
In addition to the weakness in the industry, there are also short-term weather effects. In July last year, due to the impact of typhoons, there was heavy rainfall in many places in the north, which was obviously not conducive to beer consumption compared with previous years.
Therefore, judging from the third quarter report of 2023, beer consumption has declined. Budweiser APAC's sales growth, revenue growth and earnings growth in the Chinese market have all slowed. Tsingtao Brewery's revenue in the third quarter of 2023 fell 4% year-on-year6%, 1 September's revenue and net profit growth rate was also slower than the growth rate in the first half of the year.
For the whole year, the performance forecast of Chongqing Beer and Pearl River Beer shows that in 2023, net profit will increase by 5% year-on-year respectively8% and 44%。Among them, Chongqing Beer's net profit growth rate is significantly slower than the 19% growth rate in the first half of last year, and it is also lower than its net profit growth rate in 2022.
It is worth mentioning that last year, Budweiser APAC's revenue and EBITDA in China in the fourth quarter increased by 11% and 44% year-on-year, respectively. According to the financial report, it was driven by double-digit growth of premium and ultra-premium products in China and revenue management measures in the eastern Asia Pacific region, as well as operational efficiency and cost management. However, it should not be ignored that Budweiser APAC was severely affected by the epidemic in the fourth quarter of 2022 in areas where its business is concentrated in China, and its base was low.
Industry growth has generally slowed down, and Budweiser APAC is betting on high-end growth opportunities. "In China, high-end beer is a luxury that can be reached. Budweiser APAC thinks.
Yang Ke said at the results conference that the beer category is limited by the economic environment, although in the past six to nine months, some Chinese consumers have become more cautious and rational in their consumption decisions, but mainly the impact on the low-end beer market, high-end and ultra-high-end beer sales are still growing.
In the Indian market, Budweiser APAC has expanded Budweiser and Budweiser Black Gold, while upgrading high-end with Fujia and Corona. Southeast Asia is also considered an attractive region and a catalyst for value creation.
It is necessary to accelerate the expansion of the ultra-premium category, as this is the main profit pool growth driver and the next blue ocean in the beer industry. Budweiser wrote in its financial report.
Due to the epidemic, we missed the high-end consumption scene of beer at night, and in front of the cake of ultra-high-end consumption, Budweiser APAC did not want to miss it again. Author: Wen Jing.