SABMiller, AB InBev brewing favorites for World Cup

By Philip Blenkinsop – Analysis

BRUSSELS (BestGrowthStock) – There’s no trophy at the end, but Anheuser-Busch InBev (ABI.BR: )(BUD.N: ) and SABMiller (SAB.L: )(SABJ.J: ) are likely to emerge as the brewing winners of this year’s soccer World Cup.

SABMiller should benefit from higher sales in hosts South Africa, where it has an 89-percent share of the market, while AB InBev stands to profit from its first World Cup sponsorship since its merger and a good showing from the Brazil team.

Hosting a World Cup is certainly good for beer sales, as Germany showed in 2006 when the influx of some 2 million foreign visitors helped stem a decade-long decline in consumption.

South Africa is expecting to benefit too. SABMiller has predicted sell an extra 17.6 million pints (10 million liters) of beer will be drunk in the country during the five-week World Cup period, a 4 to 6 percent boost.

Trevor Stirling, analyst at Bernstein Research, believes over the year South Africa will receive a 0.6-percentage point bump from the World cup. However, this is lower than the 1.8-percent average hosting boost for a number of reasons.

The distance for many foreign fans means only 200,000 are expected, although they will probably stay longer. It will be winter in the southern hemisphere, not core drinking season, and the host nation is not expected to go far.

No World Cup host has ever been knocked out in the group phases, but only North Korea is ranked lower than South Africa in this tournament. The hosts are 100-1 outsiders to win the tournament and tipped to come bottom of a group featuring France, Mexico and Uruguay.

“I think it is quite important for the South African team to do well but even if they fall away there will be plenty of momentum behind the event in the country,” said Alastair Hewitt, marketing manager for SABMiller’s South African operations.

“If South Africa gets to the last 16 there will be a phenomenal effect on the country’s psyche and that will be the cherry on the cake,” he added.

SOCCER-MAD LATIN AMERICANS

While few brewers will admit to favoritism, they stand to gain from the successes of teams from their core markets — a useful boost after a recession-hit 2009 when the big four, AB InBev, SABMiller, Heineken (HEIN.AS: ) and Carlsberg (CARLb.CO: ), sold between 1 and 5 percent less beer.

A good tournament for the five-time champions and second favorites Brazil could benefit AB InBev.

The country is firmly the territory of the world’s largest brewer, which controls two-thirds of the beer market. Indeed, AB InBev dominates most of Latin America, selling, for example, three-quarters of all beer in Argentina.

“On a global basis AB InBev is likely to enjoy the greatest relative uplift due to its dominance of the football-crazy Latin American markets in the winter months,” said Evolution Securities analyst Simon Hales.

Brazilian fans also suffer less from a “hangover” in the month after the tournament, according to Bernstein’s Stirling.

In Britain, for example, June beer volumes surged 5 percent in World Cup and European Championship years. However, they were 3.5 percent lower in the following month than a July in non-event years. The net effect is a 0.7-percent increase.

Stirling said there was a similar rise-and-fall pattern in many other spectator nations, with exceptions such as Brazil and possibly favorites Spain.

In brewing terms, the latter’s passage to the final would most benefit Heineken, the world’s third-largest brewer, whose Amstel and Cruzcampo give it a leading 29-percent share of the beer market.

The Dutch firm’s dream final could be one pitting Spain against Nigeria, another key and growing market.

Carlsberg, owner of the 1664 and Kronenbourg brands in France, would be happy with a Denmark versus France match. The failure of Russia to qualify has been a blow, given its Baltika unit has a 40.6-percent market share there.

SABMiller will miss Colombia, where it has market share of 98 percent, along with other non-qualifiers such as Poland and the Czech Republic.

Its dream final might be a somewhat improbable last match between South Africa and the United States.

OFFICIAL CUP BEER BUDWEISER

AB InBev could also gain from its sponsorship of the tournament.

Budweiser has been the official beer of the World Cup since 1986, an odd status given soccer remains a secondary sport in the United States, the beer’s chief market, where it is principally played by non-drinking children.

However, the 2010 World Cup will be first since Belgian InBev $52 billion purchase of Anheuser-Busch in 2008.

The company has said it plans to extend local sponsorship rights to leading former InBev brands such as Brahma in Brazil, Hasseroeder in Germany and Jupiler in Belgium and the Netherlands.

Hales of Evolution Securities cautioned about getting carried away: more beer sold does not necessarily mean greater profit.

“You do see a pick-up in volumes, but in a lot of cases that is partly offset by extra spending on promotions,” he said.

Heineken Chief Executive Jean-Francois van Boxmeer told shareholders this month that the World Cup would boost volumes for all brewers, but for his group the full-year effect would be less than one percentage point.

But in tough times, brewers will take any boost they can get.

AB InBev Chief Executive Carlos Brito this week enthused about the tournament: “It’s a great beer event… In the southern hemisphere, it’s like a second summer for four weeks.”

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 (Additional reporting by David Jones in London, Editing by Sitaraman Shankar)

SABMiller, AB InBev brewing favorites for World Cup