Bud Light sales are still a major problem for the world’s biggest brewer.
Bud’s parent company,
Anheuser-Busch InBev,
managed to grow profit and revenue on an organic basis in the fourth quarter despite ongoing softness in Bud Light sales.
U.S. revenue declined 17.3% in the fourth quarter and sales to retailers dropped 12%, the company said, driven by a decline in volumes of Bud Light.
Growth in other markets helped boost revenue 6.2% to $14.5 billion but that missed analysts’ estimates of $15.6 billion, according to FactSet. Earnings per share of 82 cents beat expectations of 77 cents.
Anheuser-Busch’s growth is being driven by price increases, rather than volume of sales. Total volumes fell 2.6% in the fourth quarter and 1.7% over the full year, while revenue was up 6.2% and 7.8% respectively.
The company managed to avert another potential problem late Wednesday as it reached a tentative agreement on a new labor contract with the Teamsters union. The union, representing about 5,000 workers at 12 Anheuser-Busch breweries, had threatened to strike if a deal wasn’t reached by Thursday.
U.S.-listed shares of Anheuser-Busch were falling 2.2% on Thursday.
This is breaking news. Read a preview of earnings below and check back for more analysis soon.
One year after Bud Light’s involvement with transgender influencer Dylan Mulvaney triggered a broad consumer boycott of the brand, the beer is still suffering from diminished sales.
Although some critics have recently shifted camp, things aren’t improving. And a looming labor strike could spell trouble for Bud’s parent company, Anheuser-Busch, which is set to report its earnings on Thursday.
On the positive side, Anheuser Bush stock has rebounded after a loss linked to the boycott. It ended Wednesday’s trading session up 3.7% from this time last year.
Bud Light has spent millions of dollars on marketing, including a high-profile commercial at the Super Bowl, as it seeks to make a comeback. It also struck a deal to become the official sponsor of Ultimate Fighting Championship in 2024.
Even Donald Trump appears to have sought to take the heat off. In a February post on Truth Social, the former president said Anheuser-Busch isn’t a “woke” company, but simply made a “mistake of epic proportions” and deserves a second chance.
Anheuser-Busch CEO Michel Doukeris said last year that a survey showed 40% of the Bud Light customers who had abandoned the brand said they were open to returning to drinking the beer.
Still, in the two weeks before and after the Super Bowl weekend, Bud Light sales were 30% below where they were a year ago, according to the beverage and alcohol consulting firm Bump Williams. The brand accounted for 7% of all U.S. beer sales, down from 10% in the same two weeks of 2023.
“Sorry, I don’t support Bud Light,” wrote one user in the comment section of Trump’s post, “It wasn’t a mistake, they did it purposely knowing exactly what they were doing.” Other comments echoed the same view.
Weaker Beer
Bud Light’s trouble came as the beer industry was already fighting a decadelong decline. Domestic light beer, especially, has been losing market share to premium imported brands such as Modelo.
Sales volume for beer nationwide tumbled 5.8% from a year ago in January, according to Nielsen IQ data. Craig Purser, president of the National Beer Wholesalers Association, warned of an “industrywide, five-alarm fire” in a speech last fall.
Part of the problem is that consumers have more choices. Younger people are less interested in beer and wine, turning to flavored spirits like hard seltzers, cannabis, and e-cigarettes instead.
“It’s a scuffle that’s been going on for a while, and there’s not a ton of optimism,” says Dave Williams, president of Bump Williams.
New Habits
The intense competition makes it especially important for Bud Light to win back its former customers from competitors. It has been challenging so far.
“A good chunk of consumers that left initially have found their alternative, and they’re happy with that alternative,” says Williams.
And changing shoppers’ routines isn’t easy. “A lot of it is about brand loyalty,” says Wedbush analyst Gerald Pascarelli. “People have a tendency to go back to the beers they become familiar with.”
The boycott has hurt other Anheuser-Busch brands as well. Year to date, sales of Michelob Ultra—another top seller at the company—have fallen 3.5% from a year ago, while Budweiser was down 14.5%, according to Bump Williams.
Looming Strike
Another challenge is that the Teamsters union, representing 5,000 workers at 12 Anheuser-Busch breweries, has threatened a walkout if it can’t reach an agreement with the company before Thursday.
In addition to requests for higher wages and better benefits, the union has called out the company’s spending on marketing, which has increased 13% in the first six months of 2023 compared with the year before.
“This company has got to get its priorities straight,” says Teamsters general president Sean O’Brien, “They can throw billions of dollars at Super Bowl ads and Wall Street, but they can’t seem to bargain a contract that respects the Teamsters who do the real work inside these breweries.”
The brewer could ask retailers and wholesalers to boost inventories in case production is disrupted. But that would be just a temporary fix. “If this stretches out for a long run, it could be catastrophic to the supply chain,” says Williams.
Anheuser-Busch Earnings
Still, investors shouldn’t fret too much about Anheuser-Busch, which has a wide spectrum of products across nearly all alcohol categories and sells most of them overseas. Less than a quarter of the firm’s revenue comes from North America, and only portions of that is from Bud Light.
Anheuser-Busch is set to report fourth-quarter earnings on Thursday. Wall Street analysts expect total revenue to rise 6% from a year earlier to reach $15.6 billion, although North American sales are expected to decline 10%. Earnings are expected to fall 21% from last year to 77 cents a share.
Write to Evie Liu at evie.liu@barrons.com
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