- Sales to nightclubs and restaurants has come to a halt amid the public health crisis sparked by coronavirus outbreak
- Net profit fell 2 per cent in 2019, partially due to weaker sales to nightclubs and restaurants last quarter
Budweiser Brewing Company APAC, the most profitable brewer in Asia, said revenue and profit in China plunged in the first two months of this year as nightclubs and restaurants were shut across the country amid the coronavirus outbreak.
The Asia-Pacific business of Anheuser-Busch InBev estimated its China sales to have declined by US$285 million in January and February compared to the same period last year, it said in notes to its 2019 financial results on Thursday. The hit is equivalent to about 4 per cent of its revenue last year, based on its latest accounts.
Profit also declined by US$170 million over the period, the company said in the report, referring to its normalised earnings before interest, tax, depreciation and amortisation or Ebitda. That is about 8 per cent of its full-year figure in 2019. The company's top beer brands in China include Budweiser, Corona, Hoegaarden and Harbin.
"The impact of the virus outbreak on our business continues to evolve," Budweiser said in the financial report. "We have observed almost no activity in the nightlife channel and very limited activity in restaurants."
Coronavirus hitting China's manufacturing sector worse than Sars as Covid-19 slows production
Other retail channels also recorded a meaningful decline, it said, but e-commerce sales growth accelerated significantly.
The viral outbreak has so far infected more than 82,000 people and killed at least 2,800, mostly in mainland China. The epidemic put a halt to a strong start in the opening three weeks of 2020 just as Budweiser was launching its largest ever Lunar New Year campaign, prompting the brewer to also shut some of its breweries including in the epicentre of Wuhan.
How long the negative impact from the epidemic will last depends when its customers " including nightclubs, bars, restaurants and supermarket chains " decides to resume their operations, chief executive Jan Craps said in a post-earnings media teleconference.
"Looking at the average of China, we anticipate our customers to reopen business in the course of the second quarter," Craps said on the call, adding that the timing will also be determined by consumer sentiment and various local government policies.
One silver lining, however, is that online shopping behaviour strengthened by the virus outbreak is likely to stay, he said, further fuelling the strong growth in Budweiser's e-commerce channels over the past few years.
Last year, the volume sold through e-commerce channels climbed by double digits. Budweiser also reported strong demand for its brands during Alibaba Group's November 11 online shopping gala known as the Double 11 event.
Coronavirus: China's manufacturing supply chain pummelled from all sides in efforts to restart
Meanwhile, Budweiser said it has reopened over half of its beer factories in China and obtained permission to reopen the rest, except for one in Wuhan, after the country extended the Lunar New Year holiday by a week to contain the virus.
The firm also expressed concerns over its business in South Korea, where the novel virus is spreading rapidly, adding to pressure from price competition last year. South Korea recorded a surge in infection and death this week, stoking concerns about a wider contagion.
Budweiser said net profit fell 2 per cent to US$994 million last year, while revenue was little changed at about US$6.55 billion. Still, total volume sold last year declined by 3 per cent from the previous year, mainly "due to a challenging industry and competitive environment in South Korea and softness in the China nightlife channel," it said.
Hong Kong-listed shares of Budweiser fell by 2.3 per cent to HK$23.75 as of 2:15pm local time, bringing the loss to 12 per cent versus its IPO price of HK$27. Budweiser raised US$5 billion in its listing plan, one of the five biggest IPOs in the world's last year.
Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
