Finding hidden gems when stalwarts fall from grace

Long-term investment success relies on crafting resilient portfolios that draw on a diverse set of return drivers.

A core component of a portfolio should be steadily growing ‘stalwarts’, which are high-quality companies whose products are in demand even in tough times. These companies usually have long track records of stable growth, trade at a premium and are often found in sectors like cash retail, food producers or healthcare.

True bargains in stalwarts are rare and usually emerge when the market deems them “ex-growth.” When growth slows or margins dip, the crucial question is whether the problem is temporary or permanent. For patient investors, buying these fallen favourites at depressed valuations can unlock exceptional long-term returns.

The global brewers’ fall from grace
For decades, brewers were seen as the ultimate stalwarts and traded at a premium to the market. But over the past ten years, slowing sales and margin pressure turned sentiment sharply negative.

Concerns included declining beer consumption in favour of wine and spirits, lower drinking among younger generations, weak emerging-market currencies, demographic shifts, Covid’s hit to on-premise sales, rising regulation, health concerns, competition from legalised cannabis and soaring input costs.

Beyond sector headwinds, AB InBev (ABI), the world’s largest brewer, faced its own challenges. Investors saw growth as overly reliant on acquisitions and the subsequent cost cuts. The expensive 2016 SABMiller purchase left the company heavily indebted, limiting future deals and fuelling the view that ABI was ‘ex-growth’.

Transforming a giant in a very advantaged industry
That narrative is changing. While ABI clearly overpaid for SABMiller (SAB), the deal also brought valuable markets such as Colombia, Peru and South Africa, along with key intellectual property. SAB’s Anne Stephens had developed the Market Maturity Model and Category Expansion Framework, practical playbooks for driving organic growth across markets at different stages of development. Retained after the acquisition, she integrated these frameworks into ABI's global best practice, giving ABI a clear blueprint to reignite growth in a concentrated and advantaged industry.

In many countries the top two brewers control more than 60% of the market.

With limited power on the side of suppliers or customers, margins remain wide. Growth is also effectively funded by suppliers since brewers run with negative working capital balances.

This has resulted in ABI being very cash flow generative, and allowed the business to prioritise organic growth while steadily reducing debt. Gearing is now at acceptable levels and company has started returning capital to shareholders.

A return to growth
Although expectations for ABI’s long-term growth remain muted, several factors could surprise on the upside. Emerging markets account for about 70% of ABI’s sales. These markets offer strong demographics and growth potential, but their currencies have weakened against the US dollar for more than a decade. Many analysts assume this trend will continue indefinitely. We believe currencies move in cycles, and it is unrealistic to assume constant depreciation.

ABI is also actively growing the beer market, with beer once again gaining share against wine and spirits in many key markets. It focuses on removing what it calls barriers to beer choice. Low carbohydrate and low sugar options, led by Michelob Ultra which is now the second largest brand in the United States, appeal to health-conscious consumers. Alcohol-free beers are also expanding quickly, with Corona Cero showing triple-digit growth. These products, together with the flavoured ‘beyond beer’ range, are drawing customers from non-beer alternatives. They are also highly profitable, carrying premium prices and often attracting little or no excise tax.

Iconic brands at the core
ABI owns 8 of the world’s top 10 beer brands, including Corona, which is ranked as the world’s most valuable beer brand. Corona is marketed as a premium brand globally (outside of its home market, Mexico) and averages a 20 percentage point price premium over Heineken in ABI’s top 15 markets.

Younger generations are also now beginning to normalise alcohol consumption in their late twenties. The delayed start compared to previous generations seems linked to Covid lockdowns and the difficult economic environment.

A quiet digital transformation
ABI and its listed subsidiary Ambev have also invested heavily in technology over the past five years. Their tech team grew from just over 100 people in 2018 to about 4 000 by 2022, including 200 data scientists. The group has digitised around 85% of revenue through its BEES ordering app, which processed 32 million orders worth US$11.6 billion in the first quarter of 2025. The data gathered from BEES is transforming the business and allows ABI to run highly targeted marketing and promotions.

Despite ABI having much wider margins than the other brewers, they invest a higher percentage of revenue in marketing and promotions than, for example, number 2 brewer Heineken. With higher turnover in most markets, this translates into significantly larger absolute budgets. The BEES platform makes this spending even more effective by targeting it precisely, which should strengthen brand power and support revenue growth over time.

Diverse growth opportunities
Brewers have many ways to grow revenue. They sell both for home and on-premise consumption, offer a wide range of pack sizes, and can guide consumers toward more profitable premium brands as markets mature. This flexibility gives them more growth levers than for example most branded food companies. ABI also brews locally and sources much of its packaging and raw materials from domestic suppliers, which makes it resilient in a world of tariffs and trade tensions.

Looking ahead, AB InBev is positioned for healthy organic growth. Results will vary from year to year, but ABI’s global reach, strong balance sheet and attractive industry structure make it a resilient cornerstone investment. Management’s focus on growing the beer category, investing in digital platforms and returning capital to shareholders strengthens the investment case. Over time, we therefore expect the market to raise its long-term growth outlook for brewers, with ABI in particular likely to regain its premium status.