Despite substantial criticism from economists and investor advocates, stock buybacks have significantly increased, even among international brewing groups in recent times. In the United States alone, the total value of stock buybacks amounted to USD 950 billion last year.
According to critics, stock buybacks artificially inflate the company's stock price while simultaneously depriving the firm of capital needed for essential investments in the market. It is often interpreted that companies from stagnant or declining industries, such as the beer market in Western industrialized nations, resort to stock buybacks due to the lack of investment alternatives, following the motto: "Better to buy back your own shares than pay dividends to shareholders."
However, in reality, bonus payments to executives, often linked to rising stock prices, are likely a more significant incentive for stock buybacks.
In the beer industry, despite declining beer sales, AB InBev and Carlsberg have announced share buybacks.
Within the next twelve months, InBev plans to repurchase shares worth USD 1 billion, while the primary focus remains on reducing the company's debt: "We continue to focus on debt reduction and have approved a cash offer for outstanding bonds of up to three billion dollars," the company stated.
Carlsberg, ranked third in the beer world following AB InBev and Heineken, is also grappling with declining sales figures. Nevertheless, the Danish brewing group has also launched a new share buyback program worth DKK 1 billion (USD 144 million).
Carlsberg managed to increase its revenue in the third quarter by 0.3 percent to DKK 20.3 billion (USD 2.91 billion). This was attributed in part to rising sales of premium beers, according to CEO Jacob Aarup-Andersen. Nevertheless, the company warned that the weak consumer sentiment in Europe and Southeast Asia could negatively impact beer markets.
InBev's shareholders welcomed the announced share buyback and sent the shares up by almost three percent. On the other hand, Carlsberg saw a decline in its stock price by around 1.5 percent.