AB InBev Q1 Profit Surges as Strategic Moves Offset Volume Slump

Anheuser-Busch InBev (AB InBev) (BUD) delivered a stronger-than-expected Q1 2025 profit, with its Normalized EBITDA jumping 7.9% year-over-year to $4.855 billion. The brewer’s ability to grow margins despite declining sales volumes underscores the power of its premiumization strategy and cost discipline. While regional headwinds persisted—particularly in North and South America—key brands like Corona and the BEES Marketplace (its e-commerce platform) provided critical growth engines.

Key Results: Margin Expansion Drives Outperformance

AB InBev’s Underlying EPS rose to $0.81, a 7.1% increase from 2024, easily surpassing analyst estimates of $0.77. This outperformance was fueled by a 218-basis-point margin expansion to 35.6%, reflecting strict cost controls and pricing power. Revenue grew 1.5% to $13.9 billion, driven by a 3.7% rise in revenue per hectoliter, even as global beer volumes fell 2.2%.

The company’s focus on premium brands and non-alcoholic products paid off:
- Corona revenue outside Mexico surged 11.2%, with its global appeal amplified by its 100th-anniversary marketing push.
- The non-alcoholic beer portfolio jumped 34%, benefiting from health-conscious consumer trends.
- The BEES Marketplace hit $645 million in GMV, up 53%, as the platform expands into new markets.

Regional Performance: Challenges and Silver Linings

While AB InBev’s global footprint is its strength, regional performance was uneven:
- North America: Revenue dropped 3.7%, with the U.S. market down 5.1% due to fewer selling days, delayed Easter timing, and harsh winter weather.
- South America: Revenue fell 9%, driven by economic struggles in Argentina and Brazil.
- Asia Pacific: Revenue declined 8%, partly due to lingering weakness in China’s on-premise channel.

Despite these headwinds, margin resilience shone through. Management emphasized that operational efficiencies and pricing offset volume declines.

The Drivers: Pricing Power and Digital Ecosystems

AB InBev’s success hinges on two pillars:
1. Premiumization: Brands like Corona and Stella Artois are growing at double-digit rates, leveraging their premium positioning. For example, Corona’s price premium over competitors is now 20%, and it’s the world’s most valuable beer brand.
2. Digital Ecosystems: The BEES Marketplace is a growth accelerator, with GMV up 53% to $645 million. This platform enables third-party sales, expanding AB InBev’s reach beyond traditional beer distribution.

Meanwhile, non-alcoholic beer (e.g., Corona Cero) is a sleeper hit, with triple-digit growth, now accounting for ~10% of beer revenue. These trends align with broader shifts toward lower-ABV beverages.

The Risks: Regional Softness and Macro Uncertainties

While AB InBev’s results were strong, risks remain:
- U.S. Labor Negotiations: Ongoing union talks could disrupt production and pricing in its largest market.
- China’s Slow Recovery: The Asia Pacific region’s 8% revenue decline highlights lingering consumer caution. Management admits China’s 2024 Q1 comp (a 6.2% volume drop) was a “tough base” but expects improvement.
- Input Costs: Aluminum tariffs and inflation in Latin America could pressure margins if not offset by productivity gains.

Outlook: 2025 EBITDA Growth on Track

AB InBev reaffirmed its medium-term EBITDA growth target of 4–8%, with Q1’s results putting it on course. The company also aims to further reduce net debt to below 3x EBITDA, a milestone achieved in late 2024 for the first time since 2015.

CEO Michel Doukeris emphasized that strategic initiatives—such as brand revitalization, digital innovation, and geographic expansion—are key to navigating 2025’s challenges.

Conclusion: A Resilient Brew with Long-Term Momentum

AB InBev’s Q1 results prove its ability to grow margins and outperform expectations even amid macroeconomic headwinds. The company’s focus on premium brands, digital ecosystems, and cost discipline positions it to capitalize on secular trends like premiumization and e-commerce.

While regional softness and U.S. labor risks are valid concerns, the 45.7% reduction in Scope 1/2 emissions since 2017 and its 22% dividend hike signal a sustainable, investor-friendly trajectory.

Investors should note that AB InBev’s 1.5% Q1 revenue growth and margin resilience are solid foundations for 2025. With $3.5–4.0 billion in capex and a $2 billion buyback program, management is prioritizing growth and shareholder returns.

The brewer’s Q1 success isn’t just about profit—it’s about proving that its strategy can thrive in both strong and turbulent markets. For now, the $0.81 EPS and $4.855 billion EBITDA are clear signals that AB InBev remains a force in the global beverage landscape.