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Brewers have tried to restore volumes for years

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Heineken, AB InBev shares suffer amid Q2 declines

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AB InBev has plans to combat declines in China, Brazil

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Investors worry tariffs could derail efforts

By Emma Rumney

LONDON, Aug 1(Reuters) - From the beaches of Copacabana

in Brazil to the neon bars of Shanghai, the world's largest

brewer AB InBev needs to convince consumers to order

more Budweiser beers and Coronas.

The company's shares slid 11.5% on Thursday, the biggest

daily drop since 2020, after its second quarter volumes missed

estimates, dragged down by sharp declines in Brazil - a key

market - and China, the world's second largest economy.

Rival Heineken's shares also fell more than 8% on

Monday after it warned volumes would be softer than expected for

the remainder of the year and opted not to raise its annual

profit guidance, citing volatility including from the U.S. trade

tariffs.

Amid wider challenges facing the alcohol sector, worries

over growth and volumes at both the top two brewers overshadowed

other aspects of their performance, including strong profit

generation, investors and analysts said.

"Volume was not where we would like it to be," AB InBev CEO

Michel Doukeris told investors on Thursday, pointing out however

that other performance indicators like profit and revenue were

growing consistently.

He said that bad weather had driven the drop in Brazil and

it was preparing its business to grow in the second half.

In China, where AB InBev's portfolio of pricey beers has

suffered versus rivals, it was looking to grow sales for at-home

consumption rather than bars and restaurants.

Drinking in venues, AB InBev's focus in China until now, has

suffered amid a slow economy and new government rules banning

civil servants from dining out in large groups.

That was not enough, though, to head off investors losing

patience on volume growth - a fundamental part of the investment

case for brewers, where they have struggled to deliver on in

recent years.

Brewers hoped to restore volumes in 2024, after price hikes

drove prolonged declines in beer sales. But their plans were

knocked off course by bad weather and inflation. Now they seem

at risk of stagnating again in 2025, with U.S. President Donald

Trump's trade tariffs in focus.

VOLUME GAME

Siphelele Mdudu, investment analyst at Matrix Fund Managers,

which invests in beer stocks, said it was not sufficient to

deliver growth based on price increases alone.

"Eventually you are going to drive your consumers to

alternative products," he said, adding the beer was

fundamentally a "volume game".

Mdudu and Daniel Isaacs, equity analyst at AB InBev

shareholder 36ONE, said a key factor in AB InBev's decline in

Brazil was pricing: AB InBev hiked prices earlier than rival

Heineken, which benefited as a result.

Doukeris said the market was now adjusting to price changes.

Heineken also suffered in Europe as a result of prolonged

and strained price negotiations with retailers. It also warned

that tariff uncertainty was weighing on consumers across the

Americas and could hit volume growth.

Trevor Stirling, analyst at Bernstein, pointed out that

brewers were still seeing good performance in some markets where

threats of U.S. levies loom large, like Mexico.

But if brewers want to prevent similar share price reactions

going forward, they will need to find ways to reassure jittery

investors they can deliver on volumes.

"If you have got anxieties about the robustness of the

volume growth story, you tend to over-react," Stirling said.