* AB InBev Q3 volumes surge in China, down in U.S., Europe
* AB InBev core profit up 9.6 pct in North America
* MillerCoors Q3 net up 37 pct, Molson Coors EPS up 9 pct
* AB InBev shares down 3.2 pct, Molson up 4.3 pct (Adds comments from Molson CEO interview, analyst)
By Philip Blenkinsop and Martinne Geller
BRUSSELS/NEW YORK, Nov 3 (Reuters) - Anheuser-Busch InBev NV ABI.BR and smaller rival Molson Coors Brewing Co TAP.N reaped higher third-quarter profits from the U.S. beer market they dominate, even as consumers drank less beer.
Price increases, cost savings and sales of premium brands were the key in North America for AB InBev, the world’s largest brewer, and MillerCoors, the combined U.S. operations of world No. 2 brewer SABMiller Plc SAB.L and No. 6 Molson Coors.
AB InBev -- maker of Budweiser, Stella Artois and Beck’s with almost half the U.S. beer market -- said overall core profit rose 9.1 percent, slightly short of expectations, with a 9.6 percent improvement in North America and a 6.4 percent drop in Europe.
Molson, whose brands include Coors Light, Blue Moon and Molson Canadian, reported third-quarter earnings higher than market expectations, driven by profit improvements in its key markets of Canada, the United States and Britain. [ID:nN03246146]
AB InBev shares fell 3.2 percent in Brussels, while Molson shares rose 4.3 percent in New York.
AB InBev sold 4.1 percent more beer globally in the July-September period than a year earlier, driven by a 12 percent surge in key market Brazil, but suffered declining volumes in North America and Europe. [ID:nLDE6A114Q]
Molson, which lacks large businesses in emerging markets, saw overall volume decline 4 percent in the quarter.
“You’re not going to get growth in developed markets,” said Morningstar analyst Philip Gorham. “These major brewers that want to grow their top line have to be in emerging markets ... Emerging markets are driving growth in almost every consumer staples industry.”
Gorham said that a key driver for Molson’s surprising profit performance was cost cuts related to the 2008 formation of MillerCoors, which is expected to achieve $750 million of cost savings by the end of 2012. The total stood at $564 million by the end of September.
AB InBev, formed in November 2008 from InBev’s takeover of Anheuser-Busch, has set a target of $2.25 billion of cost savings by the end of 2011.
Chief Financial Officer Felipe Dutra said AB InBev is likely to exceed its $500 million target for this year but has no plans to raise the overall target.
U.S. consumers broadly embraced lower-priced beers during the recession, but have recently been trading up, executives from both companies said on Wednesday.
Dutra said AB InBev’s top-end beers were even winning over some wine and spirits drinkers, although stubbornly high unemployment had led to lower overall volumes.
In the key 21-27 age group, the jobless rate, at 18 percent, was almost double the U.S. national average, something the company was watching closely, Dutra said.
“The overhang on our category continues to be unemployment of our key beer drinker,” said MillerCoors Chief Executive Leo Kiely. “That’s got to turn around before we see the whole category become more buoyant.”
Still Kiely said he is encouraged by sales trends of the company’s “premium light” beers, such as Coors Light and Miller Light.
Earlier this year, Molson bought a stake in a joint venture with a Chinese brewer and entered Vietnam and Russia.
Chief Executive Peter Swinburn said Molson is learning from these moves and should now be able to make new forays at a faster clip.
“We’re in a position, both from a knowledge base and a financial base, that we can now accelerate to a much greater extent our market entries,” Swinburn said in an interview.
“But are we going to spend $4 billion or $5 billion on buying a business in India? Absolutely not, because we don’t have that expertise yet and I think it would be too risky a use of shareholder money.”
Molson raised its 2010 free cash flow target to $900 million from $760 million, due to timing issues.
It also said that during the first month of the current fourth quarter, sales to retailers rose at a low-single-digit rate in Canada and slightly in the United States. Sales fell at a mid-single-digit rate in Britain.
AB InBev sounded an upbeat note on the months ahead, with core profit growth set to be “materially” better than in the third quarter because it spent heavily at the end of last year on U.S. product launches, a cost it would not be repeating.
AB InBev shares closed down 3.2 percent at 43.35 euros. Molson Coors shares were up $2.02 at $49.24 in U.S. trading. (Writing by Philip Blenkinsop; Editing by Michael Shields and Gerald E. McCormick)