Summer heralds the start of peak beer drinking season in the United States. Warm weather and barbecue are traditionally accompanied by cold beer. The four months between May and August can produce between 35 and 40 percent of all annual beer sales.
One brewery has little to raise a glass to. American conservatives are furious with Anheuser-Busch InBev, the Belgian company behind Budweiser. They take issue with Bud Light’s marketing campaign that featured a transgender influencer.
The uproar hit Bud Light sales hard. They fell 24.3 percent year over year in the week ending May 20, according to Bump Williams Consulting, citing NielsenIQ data.
The stock has lost a fifth of its value — or $22 billion — since the first week of April, when the controversy began. Shares of AB InBev now trade at about 16 times forward earnings, down from 20 times forward earnings two months ago.
The disaster is ridiculous. AB InBev wanted to broaden its appeal to millennials and the LGBT+ community as traditional customers drink less beer.
Beer consumption in the United States has been steadily declining. Last year, it fell 2.7 percent to 21.5 billion liters, according to beverage market advisory firm IWSR. Per AB InBev, North American beer volume is down 4 percent in 2022.
AB InBev’s problems have been a boon for competitors. Shares in Molson Coors, the Canadian brewer behind Coors and Carling, have risen by a fifth since early April. Constellation Brands, which owns the brand license for Corona and Modelo in the US, gained 11 percent during the period.
AB InBev investors shouldn’t jump ship just yet. Molson’s business is concentrated in the mature markets of Canada, Britain and the United States. AB InBev can count on a strong presence in emerging markets that is counteracting slow growth in Western markets. The company is also more profitable than Molson’s. Its normal EBITDA margins, at 33.5 percent, are double Molson’s.
Investors should consider the possibility of a rebound in AB InBev shares when the ridiculous spat over a frothy marketing campaign is forgotten.
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