World: Beer stocks provide a heady return
Chris Varco, an analyst with Threadneedle Asset Management, and other investors predict that brewers' shares will continue to outperform stock markets worldwide this year. Stock in Anheuser-Busch, the largest brewer, is up 9.9 percent this year, and the billionaire Warren Buffett bought a stake in it last year, International Herald Tribune posted July 27.
Corona, Tecate and Dos Equis are among beers in demand outside their home markets, said Varco. Sales of consumer products like beer also will hold up as higher interest rates slow economic growth, he said.
"People might cut back on nonessentials like clothing and holiday trips, but they're still going to drink beer no matter what," said Varco, who prefers the taste of Stary Melnik, a beer made in Russia by Efes Breweries International.
Buffett is bullish on beer, too. He bought 43.9 million shares last year of Anheuser-Busch, based in St. Louis, Missouri. His Berkshire Hathaway is Anheuser's largest holder, with a 5.7 percent stake.
Shares of 7 of the 10 biggest brewers are beating the 3 percent gain this year in Morgan Stanley Capital International world index.
Stock in Modelo, based in Mexico City, is up 19.5 percent and Femsa, based in Monterrey, Mexico, has risen 26 percent.
Anheuser, which owns 50 percent of Modelo, is being viewed more favorably by analysts. Mark Swartzberg of Stifel Nicolaus and Marc Greenberg of Deutsche Bank raised their ratings to "buy" in recent months. Swartzberg had cut the stock to "sell" last year. The shares lost 15 percent in 2005.
"You get a nice warm, fuzzy sense going into these stocks because they've had a nice rebound after getting pretty beaten up last year," said Jack White, director of research at Todd Investment Advisors in Louisville, Kentucky. It holds 400,000 Anheuser-Busch shares among $3.5 billion in assets.
This year has been mixed as well. Anheuser's volume in the United States dropped 1.8 percent last year and earnings per share slid 15 percent. First-quarter profit this year dropped less than 1 percent. The company said Wednesday that second-quarter profit rose 7.4 percent on higher demand for Bud Light and Busch Light beers, and gains by Corona and other overseas brews.
The No. 2 brewer, InBev of Leuven, Belgium, and the maker of Beck's and Stella Artois, said in May that first-quarter beer volume dropped 7.7 percent in Western Europe, its largest market, because of declines in Belgium and Germany.
Third-place SABMiller said in May that its second-half earnings before interest, taxes and amortization dropped 7 percent in North America, its largest division, as price cuts hurt profit. Still, InBev shares have risen 8.2 percent this year and at least three analysts have raised their ratings on it to "buy."
Shares of Heineken, which is based in Amsterdam, have increased 34 percent. The company on July 18 raised its annual forecast because of expansion in Russia and higher sales of beers like its 99-calorie Heineken Light. Kirin Brewery in Japan is up 21 percent.
Beer makers increasingly are looking outside their own countries for faster growth.
The Chinese beer market will expand as much as 5 percent a year through 2008, compared with growth of 0.7 percent for the United States and 2.5 percent for Europe, said the research firm Canadean.
InBev agreed in January to buy China's Fujian Sedrin Brewery and raised its stake in Zhujiang Brewery to 25.3 percent.
Anheuser-Busch beat out SABMiller two years ago to acquire the Chinese beer company Harbin Brewery. Last year it tripled its stake in Tsingtao Brewery, the largest beer maker in China. Anheuser-Busch now gets almost 16 percent of its sales by volume outside the United States, up from 12 percent a year ago.
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