When we think of alcohol businesses, there are many that range from vodka and whiskey to local delights (like China’s baijiu).
However, given the sheer volume that is sold and its global popularity, beer is among the most popular alcoholic beverages.
In Asia, the story of beer growth is even more exciting given the drink is a natural tipple for those looking for alcoholic refreshment in many of the hot climates around the region.
Within the beer segment in Asia, there’s a prominent giant – Budweiser Brewing APAC Company (HKEX: 1876). That’s because it’s the largest beer brewer and distributor in the Asia Pacific, with over 50 famous beer brands, including the eponymous Budweiser and Corona, Blue Girl, Stella Artois, and Cass.
Budweiser APAC Was Part Of A Larger Beer Empire Before IPO
Before its IPO, Budweiser APAC was owned by Belgium-based global alcoholic drinks giant Anheuser-Busch InBev SA (BRU: ABI), better known as AB InBev. AB InBev decided to raise money by spinning off its Asia beer business – via Budweiser APAC – in a 2019 IPO in Hong Kong.
After initially failing to list it in the middle of 2019 due to a valuation that was too demanding, AB InBev successfully spun off the business after Budweiser APAC shares made their debut at the end of September 2019. The Budweiser APAC IPO raised just over HK$39 billion (US$5 billion), and its shares were priced at HK$27 apiece.
The focus of the business then was very much focused on the China story. That remains the case today, as China is the world’s largest beer market by volume (see below).
Sources: Budweiser Brewing APAC 2023 Investor Day presentation, Nielsen, Euromonitor, and World Economic Forum (WEF)
The company stated at the time of its IPO that it intended to focus on the premium beer market in China given the rising affluence of the Chinese consumer and the likelihood that they would “trade up” in their beer tastes as they got wealthier.
Challenging Market Environment During COVID
Unfortunately for Budweiser APAC, shortly after it was listed on the Hong Kong Stock Exchange, Covid-19 hit the world. Food & Beverage (F&B) companies in Asia were particularly hard hit as lockdowns from China to Vietnam were implemented.
Indeed, for the whole of 2020, Budweiser APAC saw its sales decline by 12% to US$5.59 billion. Besides operating in China, the company’s other key geographies include Vietnam, India, and South Korea. However, the company maintained its strategy of focusing on the premium and super-premium beer segments within its markets to drive growth.
This has helped the company drive revenue growth after the decline seen in 2020. Budweiser APAC is also looking to expand its channels of customer-facing distribution to mainstream restaurants and traditional trade, versus nightlife and premium restaurants – where most of its beer brands currently dominate.
Part of that goal has been to focus on building out distribution capabilities for its premium and super premium brands across more Chinese cities – something it has been able to do successfully in recent years and which it has ambitious targets for in future (see below).
Source: Budweiser Brewing APAC 2023 Investor Day presentation, PLC = Prefecture Level City
Struggling Share Price On Worries Over Chinese Consumer
While the company has been able to improve its fundamentals, with organic revenue growth of 14.0% year-on-year in the first six months of 2023, its share price has been hobbled by market worries over the health of the Chinese consumer and the deflationary environment.
Because Budweiser APAC is also focusing on the premium and super premium segments, the market’s impression is that any slowdown in consumer spending will hit the discretionary segment (like pricier beer) first.
Given all these considerations, Budweiser APAC’s shares are down around 38% in 2023 and still around 43% below its IPO price. The good news for investors is that the Budweiser and super premium brands saw double-digit percentage revenue growth for the company in the first half of 2023.
Likewise, the premium and super premium segments of Budweiser APAC’s business in India are outperforming the broader industry and notching up double-digit volume growth.
For investors who are bullish on the growth of the high-end beer market in China, as well as across Asia, Budweiser APAC is certainly one stock worth keeping an eye on.
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