Anheuser-Busch InBev’s U.S. shipments and depletions both declined -4.7% in the third quarter of 2021, the company reported today.
The declines were “driven by a lower industry, segment shift and supply chain disruptions resulting in out-of-stocks,” the world’s largest beer manufacturer wrote in a press release detailing its third quarter earnings.
In the U.S., total revenue declined -0.8% compared to the same quarter in 2020, but “grew mid-single digits” compared to the same quarter in 2019.
“Third quarter last year was an amazing quarter for beer with industry growth, and we grew both top line and bottom line,” CEO Michel Doukeris said. “As we cycle this third quarter, we are faced with tough comps, but also a lot of supply chain disruptions.”
However, its performance outside the U.S. allowed A-B to paint a rosier picture for the quarter, resulting in the company nudging up the lower end of its financial guidance for the year.
“Our results were driven by relentless execution demonstrated by our teams, consistent investment in our brands and accelerated digital transformation,” Doukeris said. “In light of our continued momentum, we are raising the bottom end of our EBITDA growth guidance from 8% to 12%, to 10% to 12%.”
Globally, A-B’s volume increased +3.4% during Q3, and revenue increased +7.9%. Doukeris attributed the disparity between the company’s performance in the U.S. and abroad to disparate market conditions.
“Last year, the U.S. had a very different behavior in terms of the industry during the pandemic, as compared to the rest of our markets,” Doukeris said. “This difference was driven by two things I would say. … One is the difference in channels in the U.S. where the off-trade represents more than 80% of the category. When you had all the lockdowns, the off-trade was open and there was a lot of pantry-loading.
“The second part was how quick the government reacted in the U.S. with the stimulus package,” he continued. “Then people had money and they had the channels open, and they bought a lot of beer.”
At off-premise retailers tracked by market research firm IRI in the U.S., A-B’s dollar sales have declined -3.4% year-to-date through October 3 compared to the same period in 2020. For the 12 weeks that ended October 3, they declined -5.4%, more than double the decline rate of the overall beer industry for that same period (-2.2%).
The slowdown of hard seltzer sales did not figure as prominently in A-B’s conference call for investors and analysts as it did during similar calls hosted by Boston Beer Company and Constellation Brands. Both companies faced millions of dollars in charges for the destruction of out-of-code hard seltzer and other fees after producing too much of the bubbly beverage due to over-confident forecasting. At the beginning of 2021, A-B called for hard seltzer growth between 20% and 50%.
“As of today, growth is around 20%, the bottom end of what we said there,” Doukeris said. “We continue to grow 1.8 times what the category is growing so we’re happy. We continue to invest, continue to innovate, and we are very excited with ready-to-drink cocktails.”
Dollar sales of Bud Light Seltzer, A-B’s largest hard seltzer brand family, have increased +17.6% year-to-date, but declined -8.9% for the 12 weeks that ended October 3.
Cutwater Spirits, the RTD canned cocktail brand the company acquired in February 2019, “once again grew by triple-digits this quarter,” the company said.
Hard seltzer and beyond beer are a boon to the overall industry because they “attract consumers from outside the category,” Doukeris said.
“More than 50% of growth for beyond beer and seltzers is from wine and spirits occasions and consumers,” he said. “Therefore there is a lot of incredible value to them. The manifestation of beyond beer, it came across these markets in different shapes and forms — first ciders, then seltzers, then ready-to-drink cocktails.
“This is good, it’s in transformation all the time,” he continued. “But what is true is that this is incremental, and we do have capabilities because of the packaging in which beyond beer shows up because of the channels and because of our ability to constantly innovate, to take advantage of this not only in North America, but also globally.”
In Mexico, A-B’s Michelob Ultra Hard Seltzer has a 50% segment share, compared to the 3.1% share it has in the U.S., according to NielsenIQ data provided by Bump Williams Consulting. A-B plans to introduce the Mike’s Hard Lemonade portfolio, which it sells outside the U.S., to 15 new markets by the end of the year.
Worldwide, A-B’s beyond beer offerings have contributed $1.2 billion in total revenue year-to-date, the company said.
To capitalize on consumers’ interest in health and wellness, A-B plans to seed Michelob Ultra in 10 new markets and will send non-alcoholic offering Budweiser Zero to 10 more markets as well.
Doukeris also discussed BEES, the company’s business-to-business e-commerce platform, which boasts 2.1 million monthly active users. During Q3, BEES posted $5.5 billion in gross merchandise value, a 20% increase over Q2.
In the first three quarters of 2021, A-B’s direct-to-consumer platforms have posted more than $1 billion in revenue, with 90% coming from e-commerce. Zé Delivery, A-B’s direct-to-consumer e-commerce platform in Brazil, is available to 50% of that country’s population, and the company is ramping up courier platforms in its Latin American markets, such as Mexico, Colombia and Ecuador.
About an hour before A-B’s conference call, tobacco giant Altria announced that it plans to maintain its investment in the company — the 185 million shares of A-B it received when A-B merged with SABMiller in 2016. Altria was restricted from transferring those shares for five years following the deal, but that period ended October 10.
“Altria determined that selling its investment in ABI at this time would not maximize long-term shareholder value; therefore, Altria currently plans to maintain its ABI investment,” the company wrote. “Altria continues to have confidence in ABI’s long-term strategies; premium global brands; experienced management team; and capability to successfully navigate near-term challenges.”
Altria recorded a $6.2 billion non-cash, pre-tax impairment charge “reflecting the difference between the fair value of Altria’s investment in ABI using ABI’s share price at September 30, 2021.” The company attributed the decline in A-B’s stock price to adverse effects from “COVID-19 variants, supply-chain constraints across certain markets, transactional foreign exchange and commodity cost headwinds.”