Anheuser-Busch InBev’s Profit Growth Amid Revenue Slump: A Strategic Turnaround or a Passing Phase?

Anheuser-Busch InBev (AB InBev) reported mixed results for the first quarter of 2025: revenue fell 6.3% to $13.6 billion due to currency headwinds and volume declines, while profit surged 100% to $2.1 billion, driven by margin expansion and cost discipline. This divergence underscores a critical question for investors: Can the brewer’s strategic shift toward premiumization and operational efficiency offset macroeconomic and regional challenges, or is this a fleeting victory?

Ask Aime: Can AB InBev's premium strategy offset currency and volume losses?

The Revenue Decline: Currency, Volumes, and Regional Headwinds

AB InBev’s revenue slump was largely notional, as organic growth (excluding currency effects) rose 1.5%. The reported decline stemmed from two factors:
1. Currency Translation: Unfavorable exchange rates shaved 6.3% off revenue, with emerging markets like Mexico and Brazil contributing significantly to this drag.
2. Volume Contractions: Total volumes fell 2.2%, driven by calendar-related factors (e.g., Easter timing shifts) and weak demand in key regions.

Regionally, the pain was uneven:
- China: Revenue dropped 12.7%, reflecting industry-wide softness and inventory adjustments.
- South America: Revenue fell 9%, with Argentina’s economic turmoil weighing heavily.
- North America: A 5.1% revenue decline masked gains in premium brands like Michelob Ultra, which expanded market share.

Profit Growth: Margin Expansion as the Engine

While revenue stumbled, profit soared due to strategic cost discipline and pricing power. Normalized EBITDA rose 7.9% to $4.85 billion, with margins expanding 218 basis points to 35.6%. This margin boost was fueled by:
1. Premiumization: Higher-margin brands like Corona (up 11.2% outside Mexico) and no-alcohol beers (surging 34%) drove revenue per hectoliter up 3.7%.
2. Cost Optimization: Overhead reductions and supply-chain efficiencies offset inflationary pressures.
3. Digital Ecosystem: The BEES Marketplace (third-party sales platform) saw 53% GMV growth, while direct-to-consumer revenue rose 12% via platforms like Zé Delivery in Brazil.

Regional Bright Spots

Despite the overall revenue slump, certain markets showed resilience:
- Mexico: Revenue grew mid-single digits, fueled by Modelo’s dominance and Corona Cero’s triple-digit volume growth in no-alcohol beers.
- Brazil: Premium brands like Stella Artois rose low-twenties in volume, while BEES Marketplace GMV surged 92%.
- Europe: EBITDA grew low-teens, as premium brands like Corona and Stella Artois outperformed.

Strategic Priorities and Risks

AB InBev’s medium-term EBITDA growth target of 4–8% remains intact, underpinned by:
1. Sustainability Initiatives: CO2 emissions per hectoliter fell 45.7% versus 2017, aiding compliance with global ESG standards.
2. Share Buybacks: 70% of its $2 billion buyback program was completed by May, signaling confidence in its capital allocation strategy.
3. Beyond Beer: The 16.6% growth in non-beer products (e.g., Cutwater in the U.S.) highlights diversification efforts.

However, risks linger:
- China: Weak demand persists, and recovery timelines are uncertain.
- Currency Volatility: Emerging markets’ exchange rates remain unstable, threatening revenue translation.
- Inflation: Commodity and logistics costs could squeeze margins further if not managed aggressively.

Conclusion: A Sustainable Turnaround?

AB InBev’s Q1 results reflect a strategic pivot toward profitability over top-line growth, with margin expansion and premiumization as its pillars. The company’s ability to grow EBITDA by nearly 8% while navigating currency headwinds and regional slumps is a testament to its operational rigor.

Yet, the path ahead is fraught with challenges. China’s sluggish beer market and emerging-market currency instability could cap revenue recovery. That said, the brewer’s 4–8% EBITDA growth target for 2025—bolstered by a 203 basis point gross margin expansion and disciplined capital allocation—suggests management is on track to deliver “reliable compounding growth.”

For investors, the key question remains: Can AB InBev sustain margin gains amid persistent macroeconomic headwinds? The answer hinges on its execution in premium markets, cost control, and the stabilization of its Chinese operations. If these factors align, the profit rebound could mark a sustainable turnaround—not just a passing phase.

Data sources: AB InBev Q1 2025 Earnings Release, Zacks Investment Research, and company presentations.