Anheuser-Busch, the St. Louis-based unit of Anheuser-Busch InBev SA/NV BUD or AB InBev, plans to invest over $1.5 billion in its U.S. operations with a view to strengthen the position of its brands in the country. The company will mainly focus on the areas of U.S. brewing, agriculture, packaging and distribution.
A break-up of the total investment indicates that more than half ($850 million) of amount will be spent on projects focused on brewery and packaging expansion. Of the remaining investment, about $220 million will be allocated toward product innovation programs and $720 million toward efficiency efforts. These investments aim at improving the company’s brands while developing the local communities and will be made over the next three years.
Some of the projects that are underway include, a $150 million project to increase the capacity of the company’s Metal Container Corporation facility in St. Louis area in order to boost production of the Bud Light aluminum bottles and a $45 million investment to construct a new can line and expand the warehouse capacity at the Fort Collins brewery to enhance the production of the slim, 12-ounce cans. Other investments include an $18 million sustainability project at the Columbus brewery that will improve energy efficiency; $12 million investment at its St-Louis brewery to improve resource conservation and support new innovations; and $11 million across multiple breweries for developing and producing new products like Bud Light MIXXTAILs and Oculto.
Anheuser-Busch has always displayed sustained growth through investments in local communities that improves the visibility into future projects. Some such investments that have benefited its operations include environmental sustainability initiatives that drive water conservation, energy savings, and recycling efforts for its breweries.
In the past, Anheuser-Busch has spent over $1 billion on U.S. operations between 2011 and 2014, including investments in resources to uphold modern brewing processes, advance environmental projects, and to install equipment for new products and innovations. These investments not only helped the company to launch several new products and to expand its footprint in the flavored malt beverage (FMB) and cider categories but also to woo consumers with new packaging of its core brands.
This announcement comes at a time when the beer maker is witnessing soft sales of its core brands, namely Budweiser and Bud Light, in the U.S. This, however, has been offset by strength in sales of these brands in Brazil, China, Argentina and Chile and thus bears no impact on the company’s overall sales.
The company registered organic revenue growth of 7.6% in fourth-quarter 2014, driven by its ongoing revenue management initiatives and enhanced brand mix due to its premiumization strategies. Further, AB InBev remains optimistic of revenue growth in 2015 as it expects industry volumes to improve in the U.S., Mexico, Brazil and China.
Moreover, the U.S. Anheuser-Busch parent intends to make capital expenditure of $4.3 billion in 2015, mainly to be invested in its consumer and commercial initiatives, and capacity expansion.
AB InBev currently has a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in the beverages-alcohol industry include Constellation Brands Inc. STZ, Ambev S.A. ABEV and SABMiller plc SBMRY, each carrying a Zacks Rank #2 (Buy).
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