Morgan Stanley sees risk for ABInBev and Heineken after Brazil's elimination

The elimination of Brazil and Mexico in the round of 16 last night of the World Cup could have negative effects on the results of AB Inbev (ABI) and Heineken, assessed Morgan Stanley.

In the case of the Brazilian team, the bank saw reality differ "significantly" from expectations.

"We identified a potential risk to third-quarter demand for ABI and Heineken following the elimination of Brazil and Mexico in the round of 16 last night, given our assessment that the increase in beer sales volume is concentrated in teams advancing to the final stages of the tournament," analysts at the bank wrote in a report.

"Expectations deviated significantly for Brazil, and to a lesser extent for Mexico," the analysts wrote. In early June, Brazil was expected to play 0.90 "deep run" games, while Mexico was expected to play 0.26 "deep run" games, according to Bet365 odds at the time, analysts listed.

"Brazil's early elimination is, therefore, the most relevant negative surprise, given the size of the Brazilian beer market and the greater expectation of progress", they pointed out.

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According to the bank's estimates, this translates into a fiscal year (FY) sales growth differential of -60 bps versus the original projected regression result for Brazil of +70 bps in FY (based on June probabilities), and a differential of -20 bps for Mexico versus the original regression predicted result of +30 bps.

Now, analysts will monitor the performance of the US team to assess the impact on AB Inbev, as the country represented around 20% of ABI's revenue in 2025.

"Tonight's game against Belgium is now a central focus for the ABI following the eliminations of Brazil and Mexico," they wrote.

Source: CNN