Budweiser was incepted by Anheuser-Busch InBev after taking a great deal of debt so that it can acquire the immediate rival SABMiller. The finalizing of the deal allowed InBev to enter multinational markets viz. Africa and parts of the world rather than America. The SABMiller overtake lead AB InBev into a staggering debt of $100 billion.
When AB InBev got pressure from Wall Street as well as several credit rating companies, BUD started to raise capital to maintain the balance sheet. At present AB InBev cut short the dividend into half, the company unloaded the Australian unit for about $11.3 billion and organized an IPO for division at Asia Pacific.
Leverage and debt to cash ratio of AB InBev took a hike after dealing of SABMiller and was closed in 2016. During that year, net debt of the company rose by 5.5 times to EBITDA. Companies which have high leverage are bound to face excessive borrowing costs and can even face financial trouble during downturn or when credit markets get freeze.
As per Giulio Lombardi AB InBev is at the lowest low point of investment grade since high debt hasn’t been materially diminished since the company acquired SABMiller. He further stated that the market share of AB InBev is degrading since the last 10 years in America.
During Q1, core light as well as value brand of AB InBev lost one more percent out of its market share. As per the statement from one of the company’s spokesperson, mainstream segment of AB InBev is at high pressure as consumers have started to focus on tiers which are high priced.
While speaking to the press Linda Montag stated that since last 10 years super premium beer was in high demand since the economy was too strong and consumers have started to trade up. The company was further got hit due to economic trouble, though SABMiller deal further increased AB InBev’s exposure to volatile market.