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Brewer AB InBev Stung By Brazil’s Weak Economy

Aluminum Bottle PlantAluminum Bottle Plant
Aluminum Bud Light beer bottles move along a conveyor while inside a newly expanded facility.Jeff Roberson—AP

Anheuser-Busch InBev posted disappointing fourth-quarter results as the big brewer’s sales in Brazil were stung by an economic recession that has clipped consumer spending.

The brewer on Thursday reported fourth-quarter beer volume tumbled 7.1% in the fourth quarter in Brazil—worse than the overall category’s steep 6.2% drop. A prolonged economic slowdown in the nation’s economy has put pressure on big consumer brands like Anheuser-Busch InBev, which has long depended on Brazil as an engine of growth. The results in Brazil were a big reason that AB InBev reported results that missed Wall Street’s expectations, resulting in poor annual earnings that will result in CEO Carlos Brito missing out on his bonus for the first time since 2008.

The company’s shares slipped about 4% on the New York Stock Exchange.

“A challenging environment in Brazil has put pressure on the consumer,” AB InBev said on Thursday. Net revenue increased by just 2.4% last year but would have risen a more impressive 4% when excluding the woeful Brazilian results.

AB InBev had ended 2016 with a significant milestone in the rear-view mirror: It successfully completed a roughly $100 billion takeover of SABMiller, a merger that combined the world’s two largest brewing powerhouses. That deal was implemented so AB InBev could enter new markets where it had little business, including Africa, Asia and some regions of Central and South America.

While Brazil’s poor performance dragged down AB InBev’s 2016 results, the big brewer said it did see growth in other key markets, including a double-digit revenue gain in Mexico. Results were also fairly firm in Europe and the company gained market share in China.

The company’s performance in the U.S. was more mixed. Sales to retailers slipped 1% last year, hurt by declines for Bud Light and Budweiser. Stella Artois and Michelob Ultra—two of the company’s more premium-marketed beers—performed well and continued to gain market share in the U.S.

AB InBev’s recent deal-making in the world of craft beer has also been helpful. It reported the regional “craft” portfolio grew by 30% last year. That business segment includes Goose Island, Elysian and 10 Barrel. Big brewers like AB InBev have been scooping up craft brewers because that sub-segment of beer commands higher price points and has seen stronger volume growth of late that has mostly come at the expense of traditional American lagers. AB InBev has been more aggressive than most and it is even taking that craft-beer acquisition strategy abroad. On Thursday, it announced it acquired a “significant stake” in Boxing Cat Brewery, one of China’s best known craft brewers.