The sales declines of Bud Light amid a conservative-led boycott led to double-digit declines in revenue, shipments and depletions in the U.S. during the second quarter for Anheuser-Busch InBev (A-B).
A-B’s Q2 revenue in the U.S. declined -10.5% due to Bud Light’s volume declines, even as its revenue per hectoliter increased +5.2%.
U.S. shipments (sales-to-wholesalers) declined -15% and depletions (sales-to-retailers) fell -14%.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) declined -28.2%, with A-B pinning two-thirds of the decline due to its market share performance and the rest on “productivity loss, increased sales and marketing investments and support measures for our wholesaler partners.”
Nevertheless, A-B execs said its market share in the U.S. has stabilized since late-April.
Through the first half of 2023, A-B’s revenue in the U.S. is down -3.6%. Shipments at the halfway point of the year are down -8.6%, while depletions down -9.2%. EBITDA has declined -14.8% through the first two quarters.
Bud Light Consumers Asking for ‘Beer Without A Debate’
To try curb Bud Light declines, A-B surveyed 170,000 consumers of the brand and identified three core desires (details of respondent demographics were not shared):
- The desire to enjoy “beer without a debate;”
- For Bud Light to “focus on beer;”
- And for Bud Light to focus on platforms that “all our consumers love,” including the National Football League (NFL), Folds of Honor – a nonprofit benefiting military service members, first responders and their families – and music.
The survey, conducted starting in April, after negativity began, also found that the majority of consumers surveyed are “favorable toward the Bud Light brand,” while approximately 80% are “favorable or neutral,” A-B InBev CEO Michel Doukeris said during Thursday’s quarterly results with investors.
“The consumer will always be at the center of everything we do,” Doukeris said. “All of us at ABI deeply care about and respect all our customers.
“The brands still have very high equity, but people, they want to enjoy their beer without the debate,” he continued. “They want us to focus and concentrate in platforms that all consumers love. And this is what we’re doing.”
Global Revenue +7%, Volume -1.4%; Middle Americas Continue to Push Ahead as No. 1 Region
Even as A-B’s business in the U.S. has faltered, the company’s global revenue in Q2 increased +7.2%, as revenue per hectoliter increased +9%.
A-B’s worldwide Q2 volume declined -1.4%, with its own beer volumes down -1.8% and non-beer volumes up +0.5%.
Through the midway point of 2023, A-B’s total volumes are down -0.3%, with its own beer volumes down -0.8% and non-beer volumes up +2.1%.
A-B’s global brands combined – Budweiser, Stella Artois and Corona – increased revenues +18.4%.
Middle Americas continues to widen the gap as A-B’s No. 1 region, ahead of North America, contributing 33% of the company’s total EBITDA, with a +10.2% increase in organic revenue and +15.4% increase in organic EBITDA.
In Q2 2022, North America and Middle America (Mexico and Columbia) were tied for the No. 1 spot, each contributing 30% of A-B’s total EBITDA. A year later, following Q2 2023, North America contributed 29%. The trend of Middle Americas pulling ahead started in Q3 2022, before North American sales were impacted by the most recent Bud Light trends.
The company reported that around 64% of its revenue now follows through its B2B digital platforms, with its BEES platform having a monthly active user base of 3.3 million. The company reported more than $115 million of revenue generated by its direct-to-consumer platforms.
Bernstein analysts called A-B’s global results “strong across the board,” with the exception of “expected U.S. weakness.” Bernstein’s rating for A-B (BUD) stock is “outperform.”
U.S. On-Premise Performance ‘Pretty Similar’ Off-Premise Blues
During Thursday’s call, Evercore analyst and senior managing director Robert Ottenstein asked A-B leadership about “concerns” from investors “that the on-premise may be worse” than the declines recorded in off-premise scan data.
Doukeris said the on-premise performance numbers are “pretty similar” to the off-premise, with “nothing big to highlight.”
He noted that there has been “a quite meaningful rotation in terms of taps” since the COVID-19 pandemic, with bars and restaurants now “optimizing for high turnover” and brands with “higher sales and turnover” getting more tap handles, while “very low productivity” brands are being “delisted.” That strategy has impacted some of A-B’s craft brands, as well as its “brands that have low turnover,” Doukeris said. However, the company has been able to retain 98% of its taps throughout the year.
“Some of our brands are gaining a lot of taps, some of brands are declining some taps, but all-in-all, our on-trade and off-trade performance [is] very similar,” Doukeris said.
Slight Increase in Off-Cycle Shelf Resets; Pricing Environment ‘Healthy’
A-B leadership was also asked about rumblings of retailers moving up shelf reset plans, in part due to Bud Light’s continued declines.
In a typical year, about 20% of retailers do shelf resets in the fall, Doukeris said. This year, about one-third or one-fourth of that 20% are doing those adjustments earlier than usual, he added.
Doukeris was also asked about A-B’s in-store promotional activity, which drew headlines earlier this summer. Doukeris reminded retailers and analysts that the company had made its plan to concentrate its promotional activity in the middle of the year well before the Bud Light boycott and that the plan “doesn’t have anything to do with the Bud Light situation.”
He added that the activity is in-line with historical levels and “not different” or more extreme than promotions put in place for “Super Bowl activities” or promotions.
Additionally, Doukeris characterized A-B’s U.S. brand pricing as “healthy” despite inflation, following the two price increases the company took in 2022.
Wholesaler Support to Continue Through End of 2023
In June, A-B began rolling out financial support for its wholesalers to counteract some of the losses felt by Bud Light’s declines. Doukeris reiterated that the company has committed to continue that support through December.
“Given the situation in the U.S., we thought that [it] would be extremely important to extend support to our wholesalers linked to their volume sales,” Doukeris said.
“[It’s] very important as we bridge the situation here and we maintain [that] our wholesalers competitive and focused on what they do best, which is high quality service level for their customers and making sure that they are bringing moments of joy to our consumers through our brands, platforms and activations that we have,” he continued.