Anheuser-Busch Inbev Sa (BUD) Risk Analysis

We are now and may in the future be party to legal proceedings and claims and significant damages may be asserted against us. See "Item 8. Financial Information-A. Consolidated Financial Statements and Other Financial Information-Legal and Arbitration Proceedings" and "Item 5. Operating and Financial Review-G. Contractual Obligations and Contingencies-Contingencies" and note 29 to our audited consolidated financial statements as of 31 December 2024 and 2023, and for the three years ended 31 December 2024, for a description of certain material contingencies which we believe are reasonably possible (but not probable) to be realized. Given the inherent uncertainty of litigation, it is possible that we might incur liabilities as a consequence of the proceedings and claims brought against us, including those that are not currently believed by us to be reasonably possible. Moreover, companies in the alcohol beverage industry and soft drink industry – including us – are, from time to time, exposed to collective suits (class actions) or other litigation relating to alcohol advertising, alcohol abuse problems or health consequences. As an illustration, we and certain other beer and other alcohol beverage producers from Brazil, Canada, Europe and the United States have been involved in class actions and other litigation seeking damages for, among other things, alleged marketing of alcohol beverages to underage consumers. If any of these types of litigation were to result in fines, damages or reputational damage to us or our brands, this could have a material adverse effect on our business, results of operations, cash flows or financial position. See "Item 8. Financial Information-A. Consolidated Financial Statements and Other Financial Information-Legal and Arbitration Proceedings."

Taxation on our products in the countries in which we operate is comprised of different taxes specific to each jurisdiction, such as excise and other indirect taxes (such as value-added tax ("VAT")). In many jurisdictions, these taxes make up a large proportion of the cost of beer charged to consumers. Increases in excise and other indirect taxes applicable to our products either on an absolute basis or relative to the levels applicable to other beverages tend to adversely affect our revenue or margins. These increases also adversely affect the affordability of our products and our profitability, as they can result in significant price increases and have a significant impact on our sales of beer. In addition to excise taxes, additional charges may be levied in relation to tax stamps and other forms of fiscal marking. In recent years, costly and ineffective fiscal marking systems have been introduced in several markets. The cost of these marking schemes could adversely affect our businesses in the relevant countries (including their profitability). We are also subject to income and other taxes, and there can be no assurance that the operations of our breweries and other facilities will not become subject to increased taxation by local, national or foreign authorities or that we and our subsidiaries will not become subject to higher corporate income tax rates or to new or modified taxation regulations and requirements. 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 of 15%. Pillar Two is effective as of 1 January 2024 in many countries, including Belgium as the location of our global headquarters. These rules have significantly increased compliance burdens and complexity and may cause increased audit controversy with competent tax authorities. We are continuing to evaluate the impact of these legislative changes as new guidance becomes available, but there is no guarantee that we will be successful in mitigating the impact of the increased compliance burden. We are also subject to regular reviews, examinations and audits by tax authorities in the jurisdictions in which we operate. Factors such as increased economic and political pressures to increase tax revenues have contributed to an increase in audit activity, tax authorities taking increasingly opposing positions in their interpretation and enforcement of tax laws, more time and difficulty to resolve any audits or disputes and an increase in new tax legislation. Although we believe our tax estimates, methodologies and positions are reasonable and consistent with applicable law, significant judgment is required to evaluate applicable tax obligations and tax authorities may disagree with our judgments or may take opposing positions with respect to the judgments we make. For a discussion of any material outstanding tax cases, see "Item 8. Financial Information-A. Consolidated Financial Statements and Other Financial Information-Legal and Arbitration Proceedings-Anheuser-Busch InBev SA/NV-Belgian Tax Matters" and "Item 8. Financial Information-A. Consolidated Financial Statements and Other Financial Information-Legal and Arbitration Proceedings-Ambev and Its Subsidiaries-Tax Matters." A tax authority's final determination in the event of a tax audit could materially differ from our tax provisions and accruals or may require us to modify our business practices to reduce our exposure to additional taxes going forward, any of which may have an adverse effect on our business, results of operations and financial condition.

Despite the precautions we take, in the event that any failure to comply by us or our business partners with accepted food safety and regulatory standards (such as a contamination or a defect) does occur in the future, it may lead to business interruptions, product recalls or liability, each of which could have an adverse effect on our business, reputation, prospects, financial condition and results of operations. Although we maintain insurance against certain product liability (but not product recall) risks in certain markets, we may not be able to enforce our rights in respect of these policies, and, in the event that contamination or a defect occurs, any amounts that we recover may not be sufficient to offset any damage we may incur, which could adversely impact our business, results of operations and financial condition.

We rely on third-party suppliers for a range of raw materials for our beer and non-beer products, such as malted barley, corn, rice, hops, yeast, water, flavored concentrate, fruit concentrate, sugar and sweeteners, and for packaging material, such as glass, PET and aluminum bottles, aluminum or steel cans and kegs, labels, plastic crates, metal and plastic closures, folding cartons, cardboard products and plastic films. We seek to limit our exposure to market fluctuations in the price and supply of these raw materials by entering into medium- and long-term fixed-price arrangements. Although we generally have multiple suppliers of raw materials and packaging materials, the termination of or any material change to arrangements with certain key suppliers, disagreements with suppliers as to payment or other terms, or the failure of a key supplier to meet its contractual obligations to us or otherwise deliver materials consistent with current usage, including as a result of sourcing constraints, disruptions in its supply chain or other difficulties, would or may require us to make purchases from alternative suppliers, in each case at potentially higher prices or lower quality than those agreed with the original supplier. We may also be subject to potential reputational damage if one of our suppliers violates applicable laws or regulations or our internal policies, or fails to meet certain quality standards. These factors could have a material impact on our production, distribution and sale of beer, other alcohol beverages and soft drinks and have a material adverse effect on our business, results of operations, cash flows or financial condition. A number of our key brand names are both licensed to third-party brewers and used by companies over which we do not have control. See "Item 4. Information on the Company-B. Business Overview-8. Licensing." If we are unable to maintain such arrangements on favorable terms, this could have a material adverse effect on our business, results of operations, cash flows or financial condition. We monitor brewing quality to ensure adherence to our high standards, but, to the extent that one of these key licensed brand names is subject to negative publicity or one of our licensees or other business partners violates applicable laws or regulations or our internal policies, or fails to meet certain quality standards, it could have a material adverse effect on our business, results of operations, cash flows or financial condition. For certain packaging supplies and raw materials, we rely on a small number of important suppliers which increases the risk of disruption in our supply chain. For example, we have a limited number of suppliers of aluminum cans and glass bottles as consolidation of the aluminum can industry and glass bottle industry in certain markets in which we operate has reduced local supply alternatives. In addition, certain of our subsidiaries may purchase nearly all of their key packaging materials from sole suppliers under multi-year contracts. The loss of or temporary discontinuity of supply from any of these suppliers without sufficient time to develop an alternative source could cause us to spend increased amounts on such supplies in the future. If these suppliers became unable to continue to meet our requirements, and we are unable to develop alternative sources of supply, our operations and financial results could be adversely affected.

We compete with both brewers and other drinks companies and our products compete with other beverages. Globally, brewers, as well as other players in the beverage industry, compete mainly on the basis of the image and reputation of brands, price, quality, distribution networks and customer service. Consolidation has significantly increased the capital base and geographic reach of our competitors in some of the markets in which we operate, and competition is expected to increase further as the trend towards consolidation among companies in the beverage industry continues. Concurrently, competition in the beverage industry is expanding and the market is becoming more fragmented, complex and sophisticated as consumer preferences and tastes change. Such preferences can change rapidly and in unpredictable ways due to a variety of factors, including changes in prevailing economic conditions, changing social norms and attitudes regarding alcohol beverages, betterment trends and changing dietary preferences (including increased adoption of weight-loss drugs to reduce consumption overall or change consumption patterns), changes in consumer tastes, changing dietary guidance and warning label requirements from public health bodies, changes in leisure activity patterns or negative publicity resulting from regulatory action or litigation against us or comparable companies; for more information see "-Negative publicity and public advocacy regarding perceived or potential health risks, as well as changes in related government regulation, may harm our business." Furthermore, developments in the regulatory frameworks governing the usage of cannabis could result in shifts in consumer preference and the impact that cannabis legalization could have on alcohol sales remains unclear. Competition with brewers and producers of alternative beverages in our various markets and an increase in the purchasing power of participants in our distribution and sales channels could cause us to reduce pricing, increase capital investment, increase marketing and other expenditures and/or prevent us from increasing prices to recover higher costs, thereby causing us to reduce margins or lose market share. Further, we may not be able to anticipate or respond adequately either to changes in consumer preferences and tastes or to developments in new forms of media and marketing. Our marketing, promotional and advertising programs may not be successful in reaching consumers in the way we intend. Furthermore, innovation faces inherent risks, and the new products we introduce may not be successful, while competitors may be able to respond more quickly than we can to emerging trends, such as the increasing consumer preference for "craft beers" produced by microbreweries and the growth of the spirit-based ready-to-drink ("RTD") category in certain markets. In recent years, many industries have seen disruption from non-traditional producers and distributors, in many cases, due to a rapidly evolving digital landscape. Our business could be negatively affected if we are unable to anticipate changing consumer preferences for digital platforms or fail to continuously strengthen and evolve our capabilities in digital commerce and marketing. The success of our digital commerce activities depends in part on our ability to attract retailers, consumers and wholesalers to use our offerings and retain these relationships, which may be impacted by regulatory requirements, competitive pressures and other factors beyond our control. For more information regarding our digital commerce activities, please see "Item 4. Information on the Company-B. Business Overview-2. Principal Activities and Products- Digital Transformation and New Businesses".

Certain of our operations are dependent on effective distribution networks to deliver our products to consumers, and distributors play an important role in distributing a significant proportion of beer and other beverages. Generally, distributors purchase our products from us and then sell them either to other distributors or points of sale. Such distributors are typically either government-controlled or independent and privately owned. See "Item 4. Information on the Company-B. Business Overview-7. Distribution of Products" and "Item 4. Information on the Company-B. Business Overview-11. Regulations Affecting Our Business" for further information in this respect. There can be no assurance as to the financial affairs of such distributors or that these distributors, who often act both for us and our competitors, will not give our competitors' products higher priority, thereby reducing their efforts to sell our products. In the United States, for instance, we sell the vast majority of our beer to independent wholesalers for distribution to retailers and ultimately consumers. As independent companies, wholesalers make their own business decisions that may not always align themselves with our interests. If our wholesalers do not effectively distribute our products, our financial results could be adversely affected. In addition, contractual restrictions and the regulatory environment of many markets may make it very difficult to change distributors and, in some markets, we may be prevented from acquiring interests in wholesalers or distributors (for example, see "-Our failure to satisfy our obligations under the SAB settlement agreement could adversely affect our financial condition and results of operations."). In certain cases, poor performance by a distributor or wholesaler is not a sufficient reason for replacement. Such distributors could engage in practices that harm our reputation as consumers look to us for the quality and availability of our products. Our consequent inability to replace unproductive or inefficient distributors could adversely impact our business, results of operations and financial condition. Moreover, the retail industry, particularly in Europe, North America and other countries in which we operate, continues to consolidate, resulting in larger retailers with increased purchasing power, which may affect our profitability in these markets. Larger retailers may seek to improve their profitability and sales by asking for lower prices or increased trade spending. Such efforts by retailers could result in reduced profitability for the beer industry as a whole and adversely affect our financial results.

Our future success depends significantly on our ability to protect our current and future brands and products and to defend our intellectual property rights, including trademarks, patents, domain names, trade secrets and know-how. We have been granted numerous trademark registrations and patents covering our brands and products and have filed, and expect to continue to file, trademark and patent applications seeking to protect newly developed brands and products. We cannot be sure that trademark registrations and patents will be issued with respect to any of our applications. There is also a risk that we could, by omission, fail to renew a trademark or patent on a timely basis or that our competitors will challenge, invalidate or circumvent any existing or future trademarks and patents issued to, or licensed by, us. Although we have endeavored to take appropriate action to protect our portfolio of intellectual property rights (including patent applications, trademark registrations, trade secrets, domain names and ongoing enforcement actions), we cannot be certain that the steps we have taken will be sufficient, that third parties will not infringe upon or misappropriate our proprietary rights, or that governments will protect or enforce our rights. Moreover, some of the countries in which we operate offer less effective intellectual property protection than is available in Europe or the United States. If we are unable to protect our proprietary rights against infringement or misappropriation, it could have a material adverse effect on our business, results of operations, cash flows or financial condition and, in particular, on our ability to develop our business.

Like most major corporations, we rely on information and operational technology systems, networks and services ("information systems") to support our business processes and activities, including procurement and supply chain, manufacturing, sales, human resources management, distribution and marketing. We also rely on these information systems to collect, process, transmit and store large amounts of electronic data, including, but not limited to, sensitive, confidential or personal information of customers and consumers, to enable the operation and management of our business, including, but not limited to, internal and external communications, to provide services and to manufacture and distribute the products that we sell. These systems, including those fully or partially outsourced to or operated or maintained by third parties, including our suppliers, distributors, contractors, joint venture partners and other external business partners, and by others on which they rely, may be vulnerable to a variety of threats that can compromise the confidentiality, integrity or availability of our data or information systems or information about our company, customers, operations and employees that we may share with vendors that assist with certain aspects of our business. Additionally, e-commerce, including direct sales to customers and consumers, has become increasingly integrated in our operations and contributes significantly to our sales and revenues. For more information regarding our digital commerce activities, please see "Item 4. Information on the Company-B. Business Overview-2. Principal Activities and Products- Digital Transformation and New Businesses." Such digitization initiatives increase the amount of information that we process and maintain and therefore increase our potential exposure to a security incident impacting our information systems. The risks associated with informational and operational technology incidents have increased in recent years given the increased prevalence of remote work arrangements, the increasing sophistication of cybersecurity attacks, and may be further heightened by geopolitical tensions and conflicts. Unauthorized or accidental access to, or destruction, loss, alteration, disclosure, misuse or unavailability of, information systems, including those of third parties, could result in operational and supply chain disruptions, violations of data privacy laws and regulations, legal claims or proceedings, regulatory penalties, damage to our reputation or our competitive advantage, inability to meet contractual obligations, loss of opportunities to acquire or divest businesses or brands and loss of ability to commercialize products developed through research and development efforts and, therefore, could have a negative impact on net operating revenues. Other potential threats to our data and information systems include, but are not limited to, natural disasters, physical attacks, telecommunications failures, power outages, unintentional or malicious actions of employees or contractors, computer viruses, hackers, phishing attempts, cyber-attacks, malware and ransomware attacks. Further, the sophistication of cybersecurity threat actors continues to evolve and grow, including the risk associated with the use of emerging technologies, such as artificial intelligence, for nefarious purposes. Resulting technology disruptions can have a material adverse effect on our business, results of operations, cash flows or financial condition. In addition, our reliance on shared services centers for an increasing number of services important to conducting our business, including accounting, internal control, human resources and IT services, means that any technology disruption could impact a large portion of our business within the operating regions served. Any changes to or transitions of processes to, from or within shared services centers could lead to business disruptions, loss of sensitive or confidential data, and other harms. If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of, or failure to attract new customers, lost revenues resulting from the disruption or shutdown of computer systems, unexpected failure of devices and software in use by our IT platforms, operations or supply chain disruptions, alteration, corruption or loss of accounting, financial or other data on which we rely for financial reporting and other purposes, which could cause errors or delays in our financial reporting, or the loss of or damage to intellectual property. We take various actions with the aim of minimizing the likelihood and impact of cybersecurity attacks and other disruptions to our information systems, such as investing in cyber defense solutions, conducting internal and external assessments, building and implementing business continuity plans and reviewing risk management processes. Our third-party partners and enterprise customers of the BEES business, which is operated by our wholly-owned subsidiary, also increasingly demand rigorous contractual provisions regarding privacy, cyber security, data governance, data protection and confidentiality, which may also increase our overall compliance burden. Likewise, we may seek to impose contractual provisions on our third-party partners requiring security measures aimed at mitigating such cybersecurity threats. Regardless of such measures, we may experience financial and reputational damage because of the impact of any such cybersecurity incident, including business disruption, an inability to meet contractual obligations or lost or misappropriated confidential information belonging to us, our current or former employees, our customers or suppliers, or consumers or other data subjects. As a result of any such incident, we may also become exposed to legal action and increased regulatory oversight. We could also be required to spend significant financial and other resources to investigate and remedy the damage caused by a security breach or to repair or replace networks and information systems. While we continue to invest in prevention, detection, and response systems, no information system can be entirely free of vulnerability to attack, failure, or compromise. During the normal course of business, we have experienced and continue to expect to experience attempted breaches of our information systems and other cybersecurity incidents from time to time. In 2024, as in previous years, we experienced several cybersecurity incidents and other disruptions to our information systems. None of these incidents and systems disruptions, including those reported to us by our third-party partners, had a material impact on our business or operations or resulted in material unauthorized access to our data or our customers' data.