Hackett Advisors in the News

Why It’s Time to Buy BUD

Justin Rohrlich April 13, 2010 12:50 PM|

       Analysts say Anheuser-Busch InBev’s outlook is positive, and new fees for its Clydesdales won’t hurt.

Anheuser-Busch InBev (BUD) released its annual report yesterday, reporting $36.8 billion in net revenues for 2009.

The soft North American economy contributed to a 2% shipment volume decrease in the United States, and adjusted sales-to-retailers decreased 1.9%, which the company described as “in line” with the broader industry. In Canada, volume fell 1.1%.

However, while those numbers may have dropped slightly, the outlook for the brewer is good.

Kris Kippers, an analyst at Belgium’s Petercam Group, tells Minyanville that InBev carried out a “very good and very fast execution of the A-B integration” and that it “outpaced [its] own target for the full year.” He says he has "no worries on the operational side.”

Shawn Hackett of Hackett Financial Advisors, a Florida-based firm with a focus on agricultural commodities, provides a look at A-B InBev from a different angle, noting that Budweiser, the company’s flagship brand, is well-positioned looking forward.

Hackett tells Minyanville:

Anheuser-Busch uses primarily rice to brew Budweiser. Rice prices have fallen pretty substantially, which, obviously is good for them. Barley prices have also fallen pretty substantially, which is another good thing. Looking at the market for rice and barley, it doesn’t appear we’re going to see a price spike anytime soon. We’ll have to see what kind of summer weather we get, but right now, the weather models are looking pretty favorable for at least the first half of the summer growing season. If the second half proves to be stable, that’s a win.

Hackett also says that, with unemployment at nearly 10% and people trimming their budgets, beer drinkers are more apt to choose Budweiser over more expensive imports like Diageo’s (DEO) Red Stripe or Tsingtao from Constellation Brands (STZ).

Further bolstering the case for A-B, retail-industry watcher Jeff Macke points out that “Beverages fight on the basis of shelf space. Budweiser products, like Coca-Cola (KO) products, have both, more or less, won that war.”

Petercam’s Kippers does say that there are “more costs to be squeezed out at the A-B level” by InBev, which is known for aggressive cost-cutting.

One of those costs getting “squeezed out”?

The iconic Budweiser Clydesdales.

No, the horses aren’t being retired. Though, Anheuser-Busch is no longer picking up the tab for the beasts’ appearances at events.

The official merger agreement between Anheuser-Busch and InBev “specifically requires the combined company to continue to support the Clydesdales operations,” according to the St. Louis Post-Dispatch.

But, putting a hitch team on the road costs $8,000 a day, and A-B is now asking for “increased participation” -- $2,000 a day -- from event organizers to help defray expenses.

A Budweiser Clydesdale appeared at the Naval Base San Diego hospital last December to help cheer injured soldiers at a "wounded warriors" holiday party.

The new fee will likely make it impossible for small events hosted by non-profits to afford visits by the Clydesdales in the future.

Keith Levy, A-B marketing vice president, says Anheuser-Busch will still continue to provide Clydesdale teams free of charge to the baseball All-Star Game and the St. Louis Cardinals home opener.

Which prompted this comment on

“Free appearances for Major League ball games, but pay up if you are a 20-something disabled veteran. Thanks, INBEV -- keep your horses and for that matter, keep your beer.”

Looks like Molson Coors (TAP) just picked up another customer.

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