The world's largest brewer Anheuser-Busch InBev warned of challenging times in its biggest market, the United States, raising questions about whether it can keep hiking prices to counter sluggish sales.

The brewer of Budweiser and Stella Artois met second-quarter profit forecasts on Thursday by passing on higher raw material prices to customers but said it would have to monitor the U.S. closely after quarterly beer volumes there dipped 3.4 percent.

The company was more positive for its second biggest market Brazil where it expects beer volumes to recover in the second half after a dip in the second quarter.

The U.S. has been a more challenging market, we are monitoring what is going on with the economy and the politics, but we remain focused on the things we can control, said Chief Financial Officer Felipe Dutra, noting poor weather and higher fuel prices contributed to the fall in volumes.

Other food and drink companies have pushed through price increases to offset big hikes in commodity costs, but analysts doubt if these big rises can continue while many world economies remain sluggish, particularly the U.S. and Europe.

AB InBev shares slipped 1 percent to 34.7 euros by 5:42 a.m. EDT with analysts concerned about prospects for recovery in the U.S. and Brazil. Around three-quarters of the group's profits comes from the American region.

The numbers did confirm that in the two key markets which are crucial to AB InBev, the USA and Brazil, there's no momentum in terms of volumes. Expectations were relatively low and they delivered on the bottom line, but again it's confirmation that the momentum is not there in the two crucial markets, said analyst Karel Zoete at Rabobank.

The company's shares also suffered as investors ditched defensive stocks like AB InBev amid a market bounce from steep falls and plumped instead for bargain stocks, analysts said.

I think maybe investors are, in a positive market, picking up the most beaten stocks ... and jumping less on more defensive names that have dropped less, said Wim Hoste, an analyst at KBC Securities who maintained his accumulate rating.

The Belgian BEL20 index <.BFX> was up 1 percent.


Second-quarter core profits or EBITDA (earnings before interest, tax, depreciation and amortization) increased by 6 percent to $3.75 billion, in line with forecast from a Reuters poll as the group raised prices to offset flat beer volumes.

In Brazil, beer volumes fell 2.6 percent due to low growth of disposable income, and because of tough comparisons with last year which was boosted by the football World Cup.

We are confident the slowdown is temporary, AB InBev's Dutra told reporters. We see a significant increase in real terms for minimum wages...this has an impact on disposable income and therefore consumption as we approach the year end.

Worries over rising unemployment and stagnant wages pushed U.S. consumer sentiment to a two-year low in July, while in Brazil consumer sentiment also reached a two-year low in June due to concerns over inflation.

Miller Coors, the second-largest brewer in the United States, owned by SABMiller Plc and Molson Coors Brewing Co , also said earlier this month that it managed to increase profit in the second quarter by raising beer prices and cutting costs in the face of a tough market.

AB InBev stuck to its forecast that costs savings from its takeover of Anheuser-Busch in 2008 would total $2.25 billion by the end of 2011.

(Additional reporting by Robert-Jan Bartunek; Editing by Sophie Walker and David Jones)