Survey Says: Beer Distributors Believe Bud Light Has Suffered Permanent Damage

A pair of beer distributor surveys found that many in the middle tier believe that the conservative led boycott of Anheuser-Busch’s Bud Light brand may be permanent.

Financial services firm Jefferies’ survey found that a majority (65%) of distributors surveyed expect the Bud Light downturn to last at least another six months, while 32% believe it could be permanent.

A separate distributor survey – the quarterly “Bev Bytes” by Goldman Sachs analyst Bonnie Herzog – found that most respondents are “pessimistic about the potential for a full recovery” of Bud Light’s “brand equity and market share.” Those who do see the potential for a turnaround say it could take three to five years.

Right wing influencers and political figureheads have pushed the boycott of A-B’s Bud Light brand, the top-selling beer in the U.S., following a one-off influencer promotion with a transgender woman in early April.

Although the surveys by Jefferies and Goldman Sachs covered the broader beer category, Bud Light was a hot topic.

Around 64% of distributors indicated that A-B volumes were “down significantly” over the Memorial Day holiday period, per Herzog’s survey of 57 distributors, who combined service around 200,000 retail outlets and account for 35% of the total U.S. outlets that sell alcoholic beverages. Those trends have been in the low-single digits in the previous two years, which “shows how impactful the Bud Light boycott has been,” Herzog wrote.

A-B’s trends underperformed the overall market, with nearly 60% of distributors surveyed telling Herzog that the summer selling season started off strong and possibly stronger than summer 2022, and Memorial Day trends met or exceeded expectations.

Wholesaler inventory levels of A-B products are at a “record high … as sales falter,” Herzog found. Around 62% of distributors said their A-B inventories are “up significantly.” One wholesaler shared that they have 30 days of inventory on hand, and another said A-B has “continued to ship without regard for the impact of the Bud Light situation.”

Wholesalers said A-B’s rebate strategy – offering $15 cases of Bud Light and other Bud brands – has “had limited impact on stemming further declines.” One distributor said Bud Light is down -27% off-premise and more than -40% in the on-premise, per Herzog.

None of the distributors surveyed by Goldman believe that A-B can make their businesses “whole given the lost equity value of their businesses.”

The lion’s share of distributors surveyed (85%) by Jefferies said A-B has not done enough and more work is needed to “address the issue.” The firm noted that A-B plans to triple its summer media spend.

Nevertheless, Jefferies views “the Bud Light issue as transitory,” and pointed to recent controversies “generally fading with time,” such as Pepsi and Kendall Jenner in 2017; Colin Kaepernick and Nike in 2018; and Procter & Gamble’s “Toxic Masculinity” ad in 2019.

Both the Goldman and Jefferies surveys found “contagion” for other A-B brands. Respondents told Jefferies that the most affected brands have been Michelob Ultra (96% of those surveyed), Budweiser (84%) and Busch Light (68%).

Both surveys also pointed to Molson Coors’ Coors Light and Miller Lite as the biggest beneficiaries from Bud Light’s losses. Three-quarters (76%) of the distributors surveyed by Goldman said Coors Light and Miller Lite “continue to strengthen and hold onto at least some of their share gains.”

Meanwhile, Constellation’s beer brands (Modelo, Corona and Pacifico) are thriving, with volume trends accelerating through May and post-Memorial Day, Herzog wrote. However, the company’s trends are irrespective of the Bud Light boycott.

Around 55% of beer distributors told Jefferies that their April and May trends improved compared to Q1, calling Molson Coors and Constellation Brands the “clear winners.”

Constellation Brands distributors surveyed by Jefferies are “very bullish” on full year depletions trends 2023, expecting +7% volume growth for the year.

Who is Leaving Bud Light Behind?

Who are the lapsed Bud Light consumers? In a report last week, RBC Capital Markets analyst Nik Modi examined consumer demographic data from market research firm Numerator to nail down who is cutting Bud Light out. Here’s what Modi found:

Since early April 2023, 39% of Bud Light’s households were considered lapsed, while 33% were considered new and 28% repeat. Modi noted that Bud Light’s lapsed consumers for 2022 were 30.5%, by comparison.

“Compared to the rest of the beer drinking population, these recent lapsed Bud Light consumers over-index to lower income households (under $40k), tend to be 55 or older, are primarily white/caucasian, and have lower rates of higher education (college/graduate degrees),” Modi wrote, citing Numerator insights. Those lapsed Bud Light drinkers “over-index to TV and radio” for media consumption, “which is consistent with older age demographics.”

Nevertheless, the Bud Light brand continues to bleed across its purchasers, Modi wrote.

Bernstein: Bud Light to ‘Take a Permanent -15% Haircut’

Bernstein analyst Trevor Sterling called the Bud Light sell-off “much overdone,” but he expects Bud Light volumes to “take a permanent -15% haircut with an associated drag on operating leverage.”

“We assume that Bud Light volumes are down -30% for most of Q2 and ABI U.S. by -15% (possibly erring on the cautious, as trade comments on Memorial Day trends are sequentially less negative),” Sterling wrote.

Bernstein cut its North America expectations for A-B, but rates the stock at “outperform.” Sterling called the A-B’s stock (BUD) price an “attractive entry point ahead, as raw material inflation eases and translates into better margins.”

Other Bev Bytes Brand Highlights

Goldman Sachs’ Bev Bytes beer distributor survey also examined the performance of established and emerging brands. Here are a few highlights:

Modelo Oro, Constellation’s 4.2% ABV, 90-calorie Michelob Ultra challenger, is off to “a good start” too, but respondents say “it’s unlikely to take substantial share from Michelob Ultra given demographic differences.”

Boston Beer’s Truly Hard Seltzer isn’t showing signs of improvement despite Boston Beer’s “efforts to refresh the brand with new packaging, the addition of real fruit juice and new ad campaign.”

Although Truly is faltering, 70% of distributors are “enthusiastic about Twisted Tea.” They expect accelerated growth in the back half of 2023 with Twisted Tea Light and “substantial distribution opportunities.” Still, Goldman maintained its “sell rating,” believing “the risk/reward still skews more negative.”

More than half (55%) of distributors said Boston’s other beyond beer bet, Hard MTN Dew, has posted weak volume trends over the last few months. A quarter said they’ve seen strong volume trends, while 19% saw modest growth.

Monster Energy’s The Beast Unleashed flavored malt beverage has posted “strong or strong volume trends” over the last few months, according to 57% of distributors. A distributor who just introduced the product to their market is already out of stock.

Molson Coors’ Simply Spiked brand has also posted “strong or very strong volume trends,” according to 43% of distributors.

Two other Coca-Cola crossover brands are posting weaker trends. Constellation Brands’ Fresca Mixed has posted weaker trends, according to 77% of distributors surveyed. Meanwhile, the Jack Daniels’ and Coca-Cola ready-to-drink canned cocktail (RTD) has also posted weak trends, according to 58% of distributors. Around 31% of distributors say the RTD has posted modest growth, while just 11% saw strong growth.