Recently, global beer giant AB InBev announced that it has ordered 40 Tesla Semi autonomous trucks, aiming to save on transportation costs, a move that aligns with its established pattern of 'acquire, cut costs, acquire again.' However, AB InBev's series of acquisitions also pose certain risks: one is the uncertain outlook for cross-industry deals, and another is the decline in its overall global sales.
Cross-Industry Acquisition Prospects Uncertain; Old Playbook May Not Work According to data, the commercial autonomous truck Semi is a new model recently unveiled by Tesla, with sales starting in 2019 and a base price of $150,000. The company claims the model can significantly reduce freight costs while improving safety, and it has low energy consumption per unit. It is understood that all 40 trucks will be used in the company's supply chain in the United States. According to a rough calculation by its logistics director James Sembrot, one Tesla Semi can carry approximately 51,744 cans of 12-ounce Budweiser beer, a huge capacity. They have not yet decided which U.S. state will be the first to use these autonomous electric trucks; the decision will be made after receiving the vehicles in 2019 based on local market deployment. In recent years, AB InBev has not stopped its acquisition pace. It is understood that two years ago, AB InBev established ZX Ventures to seek out investable and acquirable craft beer brands globally. Earlier this year, the unit acquired the Belgian-style craft beer bar Kaiba, and quickly expanded its outlets after the acquisition. Then, in March, ZX Ventures formally acquired the Shanghai craft beer brand Boxing Cat. In addition to its 'land-grab' acquisitions in the beer sector, AB InBev has also begun to venture into the non-beer beverage market. As early as June last year, AB InBev partnered with Starbucks, investing $1 billion to produce and sell Starbucks' ready-to-drink product Teavana in the U.S., developing business beyond beer. In July this year, AB InBev announced the acquisition of beverage company Hiball. AB InBev stated that this would be a 100% acquisition, with the transaction initially expected to close in the third quarter of 2017. However, it is not yet known whether the deal has been completed. A long-time beer industry professional commented that according to 2016 industry data, the growth rates of global energy drinks, sparkling water, and tea beverages are much faster than beer. Whether it is acquiring energy drink brands, partnering with Starbucks, or, as rumored, 'intending' to acquire Coca-Cola, AB InBev urgently needs to enter the soft drink sector. The traditional beer market continues to underperform, and despite AB InBev's continuous push into craft beer, it is not satisfied. Entering the soft drink sector across industries, breaking down the barriers between alcohol and soft drink manufacturing and sales in the U.S., could open a new chapter for AB InBev. As a latecomer in the beverage industry, AB InBev is trying to leverage partnerships with soft drink companies like Starbucks to expand its channels, but this does not necessarily give it a competitive advantage. Declining Beer Sales in Multiple Regions; New Assessment Mechanism Questioned While revenue and profits surged, AB InBev's sales volumes declined. Data shows that in the third quarter of 2017, AB InBev reported revenue of $14.74 billion, a year-on-year increase of 3.6%, and net profit attributable to shareholders of $2.055 billion, compared to just $557 million in the same period last year. However, sales volume was 161,000 kiloliters, down 1.2% year-on-year, with beer sales down 1.5%. Furthermore, AB InBev saw sales declines in multiple regions. In North America, sales fell 6.1%, with beer sales down 6.2%; in Latin America North, sales fell 3.5%, with beer sales down 4.1%; and in China, revenue grew 4.6% year-on-year in the third quarter of 2017, but sales volume fell 0.2%. An insider from AB InBev's China operations attributed the better performance this year mainly to more integration, which involved relocating or laying off staff from acquired craft beer operations, maximizing cost savings and improving gross margins. The decline in beer sales is due to changes in AB InBev's assessment mechanism. According to the insider, AB InBev has implemented strict revenue and net income assessments for regional directors in China, with sales volume taking a backseat. Although this assessment model has brought substantial revenue to AB InBev, the decline in sales volume also impacts its market expansion. This means AB InBev's market share will face threats, thereby laying hidden dangers for its future development. -END-