AB InBev Financial Results
introduces may not be successful, while competitors may be able to respond more quickly to the emerging trends, such
as the increasing consumer preference for "craft beers" or beyond beer products. In recent years, many industries have
seen disruption from non-traditional producers and distributors, in many cases, from digital-only competitors. AB InBev's
business could be negatively affected if it is unable to anticipate changing consumer preference for such platforms. Any of
the foregoing could have a material adverse effect on AB InBev's business, financial condition and results of operations.
If any of AB InBev's products is defective or found to contain contaminants, AB InBev may be subject to product recalls or
other associated liabilities. Although AB InBev maintains insurance against certain product liability (but not product recall)
risks, it may not be able to enforce its rights in respect of these policies and, in the event that contamination or a defect
occurs, any amounts it recovers may not be sufficient to offset any damage it may suffer, which could adversely impact its
business, reputation, prospects, results of operations and financial condition.
In recent years, there has been public and political attention directed at the soft drinks and alcoholic beverage industries,
as a result of a rising health and well-being trend. Despite the progress made on AB InBev's Smart Drinking Goals, AB
InBev may be criticized and experience an increase in the number of publications and studies debating its efforts to reduce
the harmful consumption of alcohol, as advocates try to shape the public discussions. AB InBev may also be subject to
laws and regulations aimed at reducing the affordability or availability of beer in some of its markets. Additional regulatory
restrictions on AB InBev's business, such as those on the legal minimum drinking age, product labeling, opening hours or
marketing activities, may cause the social acceptability of beer to decline significantly and consumption trends to shift away
from it, which would have a material adverse effect on AB InBev's business, financial condition and results of operations.
AB InBev is now, and may in the future be, a party to legal proceedings and claims, including collective suits (class actions),
and significant damages may be asserted against it. Given the inherent uncertainty of litigation, it is possible that AB InBev
might incur liabilities as a consequence of the proceedings and claims brought against it, including those that are not
currently believed by it to be reasonably possible, which could have a material adverse effect on AB InBev's business,
results of operations, cash flows or financial position. Important contingencies are disclosed in Note 29 Contingencies of
the 2022 consolidated financial statements.
AB InBev could incur significant costs as a result of compliance with, and/or violations of or liabilities under, various
regulations that govern AB InBev's operations or the operations of its licensed third parties, including personal data
protection laws such as the General Data Protection Regulation adopted in the European Union, the California Consumer
Privacy Act, the Personal Information Protection Law of the People's Republic of China and the General Personal Data
Protection Law adopted in Brazil.
AB InBev may be subject to adverse changes in taxation, which makes up a large proportion of the cost of beer charged
to consumers in many jurisdictions. Increases in excise and other indirect taxes applicable to AB InBev's products tend to
adversely affect AB InBev's revenue or margins, both by reducing overall consumption and by encouraging consumers to
switch to other categories of beverages, including unrecorded or informal alcohol products, which could adversely affect
the financial results of AB InBev as well as its results of operations. Minimum pricing is another form of fiscal regulation
that can affect AB InBev's profitability. Furthermore, AB InBev may be subject to increased taxation on its operations by
national, local or foreign authorities, to higher corporate income tax rates or to new or modified taxation regulations and
requirements (including potential changes in Brazil). For example, in response to the increasing globalization and
digitalization of trade and business operations, the Organization for Economic Co-operation and Development (OECD)
has been working on international tax reform as an extension of its Base Erosion and Profit Shifting project. The reform
initiative incorporates a two-pillar approach: Pillar One, which is focused on the re-allocation of some of the taxable profits
of multinational enterprises to the markets where consumers are located; and Pillar Two, which is focused on establishing
a global minimum corporate taxation rate. In June 2021, the finance ministers of the G7 nations announced an agreement
on the principles of the two-pillar approach. Subsequently, in October 2021, the OECD/G20 Inclusive Framework
announced that 136 countries and jurisdictions had joined an agreement on the two-pillar approach, including the
establishment of a global minimum corporate tax rate of 15%. In December 2021, the OECD published detailed rules to
assist in the implementation of Pillar Two and in December 2022, the EU Council announced that EU Member States had
reached an agreement to implement the minimum tax component (Pillar Two) of the OECD's global international tax reform
initiative effective 1 January 2024. EU Member States are now obliged to adopt these new rules into their domestic
legislation by no later than 31 December 2023. Furthermore, on 16 August 2022, US President Joe Biden approved
the Inflation Reduction Act (IRA), whereunder US companies that report over 1 US billion in profits to shareholders are
subject to a 15% minimum tax based on book income. Changes in tax treaties, the introduction of new legislation or updates
to existing legislation in countries in which we operate, or changes to regulatory interpretations of existing legislation as a
result of the OECD tax reform initiatives, the IRA or similar proposals could impose additional taxes on businesses and
increase the complexity, burden and cost of tax compliance in countries where we operate.
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