The Wall St.Journal 28Feb2020

B4| Friday, February 28, 2020 **** THE WALL STREET JOURNAL.

BUSINESS & TECHNOLOGY WSJ.com/Tech

ket, Budweiser and Bud Light

continued to lose market

share. The company indicated

its rivals have done a better job

of capitalizing on a shift to

hard seltzers. The fizzy alco-

holic drinks are booming in the

U.S.

Hard seltzer and other selt-

zer-like products have a market

share of 2.6% of all alcohol in

theU.S.,upfrom0.85%ayear

earlier, according to industry

tracker IWSR. The U.S. market

is dominated by White Claw

hard seltzer, owned by Mike’s

Hard Lemonade Co., and Truly

Spiked & Sparkling, manufac-

tured by Boston Beer Co.

AB InBev has rolled out its

own hard seltzers but so far

Discovery Posts Ad and Licensing Gains as It Invests in Streaming

Revenue rose atDiscovery

Inc. in the fourth quarter as the

TV programmer’s licensing and

advertising segments posted

modest growth and the company

continued to ramp up its direct-

to-consumer streaming efforts.

Net income at Discovery,

whose channels include HGTV,

Food Network and Animal

Planet (above), was $476 million

for the quarter ended Dec. 31,

compared with $269 million a

year earlier.

Discovery said earnings per

share on an adjusted basis were

98 cents, beating analysts’ con-

sensus of 92 cents, according to

FactSet.

Discovery, which has rights to

broadcast the Summer Olympics

in international markets,

wouldn’t be impacted financially

if the games were canceled due

to the spread of the coronavirus,

the company’s finance chief said

on a conference call.

Revenue grew 2% to $2.87 bil-

lion. In the U.S., advertising reve-

nue rose 1% to $1.05 billion, and

distribution revenue increased 5%,

reflecting an increase in the

amount that pay-TV distributors

and video-streaming companies

were willing to pay Discovery to

license company programming.

Advertising revenue from the

company’s international net-

works, including Eurosport,

DMAX and TVN, grew 2% and

distribution revenue rose 5%.

Discovery said that its board

approved a buyback program for

as much as $2 billion in stock

earlier this month.

Discovery Chief Executive Da-

vid Zaslav has said that the

company invested between

$300 and $400 million in 2019

to develop new streaming ser-

vices.

—Benjamin Mullin

ANIMAL PLANET/EVERETT COLLECTION

remaining present as a sound-

ing board, says Anthony Ab-

batiello, who heads the leader-

ship and succession-planning

practice at Russell Reynolds As-

sociates, an executive-search

firm. Transitions can crumble if

the new chairman insists on

micromanaging, he said.

When Jim McCann, the

founder and longtime CEO of

1-800-Flowers.com Inc., became

executive chairman in 2016 and

handed the reins to his brother,

Chris McCann, he says he tried

to clearly separate the roles. He

stopped attending some meet-

ings and quarterly gatherings

of managers, and refrained

from participating in corporate

earnings calls. Instead, he took

on projects focused on innova-

tion and better serving custom-

ers, leaving his brother to han-

dle day-to-day operations.

A mentor advised the two

executives to never let others

drive a wedge between them.

“That’s rung in our ears,” Jim

McCann said.

Moving from CEO to chair-

man takes some adjusting. For

years, Daniel Lubetzky, the

founder of snack-bar maker

KIND LLC, had a quick answer

when people asked him about

his job: “I’m CEO.” Last year,

Mr. Lubetzky relinquished that

role and became executive

chairman, a title he says

doesn’t carry the same kind of

recognition in social settings.

“I’m the executive chairman,

what the hell does that mean?”

he jokes.

But the transition has been

smooth, he says, in part be-

cause he and the company’s

new CEO, Mike Barkley, com-

municate freely. Their offices

are adjacent and they chat sev-

eral times a day. Mr. Lubetzky

now focuses on new products

and creative endeavors, giving

Mr. Barkley space to run the

business. Mr. Lubetzky de-

scribes Mr. Barkley as a better

manager than himself.

In such situations, competi-

tion between the executives,

even unconscious, could de-

stroy a company, Mr. Lubetzky

says. “You manage your egos so

you’re there for each other.”

Only one in five non-CEO

board chairmen have executive

status, according to a study by

CAP. That is partly because cor-

porate-governance watchdogs

have been calling on boards to

appoint independent, nonexecu-

tive chairmen to serve as a check

and balance on CEO power.

Executive chairmen typically

participate in executive com-

pensation programs, including

a base salary and long-term in-

centives, albeit not at CEO lev-

els. The executive chairman’s

total compensation is often

about 60% of the CEO’s, CAP’s

Ms. Schroeder said. Mr. Iger,

who will still work full time as

executive chairman, is expected

to draw the same compensation

under his existing contract. He

earned about $47.5 million in

total compensation last year.

—Lynn Cook and Inti Pacheco

contributed to this article.

are often engaged in the day-

to-day operations of a business.

How deeply they are involved

and the authority they com-

mand can vary from company

to company.

Some industries, like energy,

have a history of executive

chairmen. Shale-oil pioneer Har-

old Hamm relinquished the CEO

role at Continental Resources

Inc.—a position he had held

since forming the company in

1967 at the age of 21—to become

executive chairman this year.

Such arrangements work

when an executive chairman

cedes enough control to give

the new CEO autonomy, while

Continued from page B1

Iger Move

Highlights

Rare Role

continues to lag behind the in-

dustry. Recently it began sell-

ing Bud Light seltzer, which it

advertised at the Super Bowl.

In August, it rolled out a low-

cost Natural Light Seltzer,

which has a higher alcohol con-

tent than many rival brands.

Early last year, it relaunched an

existing seltzer brand, naming

it Bon & Viv.

In an interview, AB InBev

Chief Executive Carlos Brito

said the company would look

to leapfrog rivals and dominate

the hard seltzer category the

way it came from behind to

dominate craft beer.

But he said AB InBev won’t

launch dozens of seltzer brands

and instead would look to gain

20% of the market with the

three it already has. Unlike craft

beer, hard seltzer as a category

is driven by national brands, he

said, which should make it eas-

ier for AB InBev to leverage its

distribution network and scale

to gain share.

Hard seltzers are growing in

popularity with women and

those who like wine and spirits,

said Mr. Brito. The category,

which brewers fold into their

beer sales figures, has propelled

beer industry sales back to

growth in the fourth quarter af-

ter a long decline, he added.

“It’s a way to broaden the

category for sure, to start ap-

pealing to consumers who

don’t have beer as their pre-

ferred beverage,” he said. “It

solves many problems—bloat-

ing, flavor, carbs, calories—lots

of things.”

Michelob Ultra, a bright spot

for many years now, continued

to sell strongly. AB InBev said

the brand has surpassed Coors

Light, owned by rival Molson

Coors Brewing Co., to become

the country’s No. 2 beer by re-

tail sales behind Bud Light.

For the current year, AB In-

Bev said it expects earnings be-

fore interest, taxes, deprecia-

tion and amortization growth

of 2% to 5%, with most of that

delivered in the second half.

Consensus analyst estimates

for this were 5.7%. The corona-

virus has resulted in lost reve-

nue of $285 million for the first

two months of the year, it esti-

mated.

Anheuser-Busch InBevSA

reported lower quarterly profit

that missed analysts’ estimates

and sent its shares down

sharply, blaming higher costs

and lost market share in the

U.S. to hard seltzer makers.

AB InBev—the world’s larg-

est brewer, with brands such as

Budweiser, Bud Light and Mi-

chelob Ultra—said its profit

margins were hit by the high-

est annual increase in commod-

ity and currency transaction

costs in the past decade. It said

consumers were trading down

and spending less.

Shares in the brewer fell

9.2%.

AB InBev’s fourth-quarter

net income dropped 75% to

$114 million, from $456 million

a year earlier. Revenue edged

down 1.3% to $13.33 billion.

“Our performance in 2019

was below our expectations,

and we are not satisfied with

the results,” the company said

in a statement.

Volumes on an organic ba-

sis, which strip out acquisitions

and divestitures, rose 1.6%. In-

put costs, though, rose 4.1%.

Revenue per hectoliter in-

creased 0.9%, compared with

growth of 3.1% in the prior

quarter. Earnings before inter-

est, taxes, depreciation and

amortization dropped 5.5% to

$5.34 billion, a much sharper

decline than the 1.9% analysts

had expected.

In the U.S., its largest mar-

BYSAABIRACHAUDHURI

AB InBev Misses Forecast Under

Pressure From Costs, Fizzy Rivals

The brewer’s stock fell 9.2% Thursday. A Leffe plant in Belgium.

GEERT VANDEN WIJNGAERT/BLOOMBERG NEWS

via Singapore.

WPP’s pretax profit fell to

£928.1 million ($1.20 billion)

from £1.26 billion with reve-

nue of £13.05 billion. Net

profit fell to £62.7 million.

“The second half of 2019

was stronger than the first,

with performance improving

globally and in the United

States, our largest market,”

Mr. Read said. However, WPP’s

North American operations

were hit by a 5.7% fall in net

sales for last year, dragging

the group’s performance.

Under its turnaround pro-

gram, launched in December

2018, WPP aims to return the

company to sustainable

growth in line with its peers in

2021 and operating profit mar-

gin of at least 15%.

Russ Mould, investment di-

rector atAJ Bell, said 2020

was supposed to be the year

when WPP started to deliver

the benefits of its restructur-

ing, but guidance for zero

growth this year and the

fourth quarter slump in sales

seemed “uninspiring” for in-

vestors. “The targets for 2021

have been maintained but the

market’s patience appears to

have snapped,” Mr. Mould said

in a note to clients.

any hit from the coronavirus

epidemic. Its projection fell

short of analysts’ expectations

and is well below recent fore-

casts from rivals such asOm-

nicom GroupInc. andInter-

public Groupof Cos. Earlier

this month, Omnicom said it

expects organic revenue

growth of 2% to 3% for 2020.

In response to the coronavi-

rus, WPP began restricting

travel at the end of January,

and its current policy is for no

travel to China, Hong Kong,

Singapore, South Korea or

Japan. Only essential business

travel is allowed within the

Asia-Pacific region or to Italy.

Earlier this week, Omnicom

closed the London office of

one of its subsidiaries until

Monday as a precautionary

measure after a staff member

developed flulike symptoms

after returning from Australia

Continued from page B1

WPP

Issues Glum

Outlook

GroupInc., which introduced

a Beyond sausage sandwich

nationwide in November.

The company lost $452,000

in the quarter, which Mr.

Brown said reflected tempo-

rary manufacturing problems

at plants Beyond recruited to

help meet demand for its

products. That compared with

a loss of $7.5 million loss in

2018’s fourth quarter.

Beyond reported an ad-

justed fourth-quarter profit of

$9.5 million. Analyst surveyed

by FactSet anticipated net in-

come of $725,000 on sales of

$81.2 million.

Beyond shares settled 5.7%

lower Thursday as U.S. stocks

broadly sold off, and fell an-

other 7% in after-hours trad-

ing. The shares have climbed

more than 40% since the be-

ginning of the year, lifted by

investor optimism for further

launches by restaurants.

The shares surged in the

months following its initial

public offering at $25 a share

last May, trading as high as

$239.71 on optimism for con-

tinued growth in restaurants

and supermarkets.

Shares sagged later in the

year as more Beyond shares

were freed up to trade and

competition mounted, includ-

ing from meat-industry giants

like Tyson Foods Inc. and

Hormel Foods Corp. This

week, beef supplier Cargill Inc.

said it planned to make its

own plant-based burger.

Beyond MeatInc. said it

plans a marketing push to pro-

mote the healthiness of its

plant-based meat alternatives

and push back on criticism

that its burgers and sausage

are heavily processed.

The California-based com-

pany said on Thursday that it

plans to place promotions on

social media and other digital

platforms bolstering the bet-

ter-for-you motto that helped

Beyond more than triple sales

in 2019, enabling the still-

small fake-meat business to

grow faster than sales of the

genuine variety.

Beyond and plant-based ri-

vals like Impossible Foods

Inc. are pushing back against

criticism, much of it driven by

beef producers, that plant-

based products are laden with

artificial ingredients and may

present health risks. Beef

groups have pushed legislation

to restrict the description of

products as meat to those

made from animal flesh.

“There’s noise out there

that we need to break

through,” Ethan Brown, Be-

yond’s chief executive, said in

an interview.

Beyond said sales for the

quarter ended Dec. 31 more

than tripled to $98.5 million,

driven by growing supermar-

ket sales and the placement of

its products at restaurants in-

cluding Dunkin’ Brands

BYJACOBBUNGE

Beyond Meat Plans

Marketing Blitz to

Address Criticism

Baidu’s core business relies

on advertising from Chinese

retail, health-care and other

companies and is considered a

bellwether for China’s private

sector.

In the most recent quarter,

however, Baidu reported a 2%

decline from online marketing

revenue.

At the same time, Baidu is

trying to move beyond its

search business, pushing into

areas related to artificial intel-

ligence, including autonomous

driving and smart speakers.

Baidu’s profit for the quar-

ter tripled to 6.35 billion yuan

($902 million), or 18.25 yuan

an American depositary re-

ceipt, from the year-earlier

quarter, it said Thursday. On

an adjusted basis, profit rose

to 26.54 yuan an ADR from

13.42 yuan an ADR a year ear-

lier.

Revenue rose 6% to 28.88

billion yuan, at the high end of

Baidu’s January preliminary

figures of 28.3 billion yuan to

28.9 billion yuan.

Analysts expected a profit

of 12.22 yuan an ADR, or 17.38

yuan an ADR as adjusted, on

28 billion yuan in revenue.

This quarter, Baidu expects

revenue will range from 21 bil-

lion yuan to 22.9 billion yuan.

Analysts expected Baidu’s rev-

enue this quarter will fall to

about 24.07 billion yuan from

a year earlier.

Chinese search provider

Baidu Inc.’s fourth-quarter

profit and revenue rose,

driven by its core business.

But the Beijing-based com-

pany, which had delayed its

earnings report due to the cor-

onavirus epidemic, on Thurs-

day projected core revenue

would decline 10% to 18% this

quarter, missing Wall Street

targets.

BYMARIAARMENTAL

Chinese Search Firm Baidu Warns on Revenue

The promise

inside Hazel

is greater than

the poverty

around her.

CHILDFUND.ORG