Brazil and China are rescuing AB InBev from its Bud Light trans marketing debacle.

Brazil and China are rescuing AB InBev from its Bud Light trans marketing debacle.

AB InBev Faces Mixed Results in Second Quarter

In the second quarter of this year, AB InBev, the world’s largest brewer, saw mixed results across its global operations. While earnings in Brazil, China, and Colombia experienced growth of over 20%, the company faced a significant setback in the US, with a 28% decline in earnings. Despite this, global sales growth outperformed expectations, and AB InBev maintained its profit guidance for 2023. As a result, the company’s stock rose by as much as 5.1% on Thursday morning, reflecting a better outcome than initially feared.

Analyst Alicia Forry from Investec weighed in on the results, stating, “We consider this to be a better result than had been feared. The unchanged full-year outlook is also positive.” This positive sentiment aligns with the overall picture, suggesting that AB InBev is well-positioned to weather the challenges it faces in the US.

One of the controversies AB InBev encountered during the quarter related to a promotional video for Bud Light featuring transgender social media personality Dylan Mulvaney. Following calls for a boycott from right-wing conservatives, the company decided to cut ties with the influencer, who subsequently faced online threats and hate speech. The fallout from this decision resulted in a consumer backlash from supporters of Mulvaney, potentially causing a permanent drop in Bud Light’s sales volumes in the US.

Despite these challenges, AB InBev managed to deliver a 5% increase in second-quarter earnings on an adjusted basis, which was double the rate analysts had anticipated. This growth can be attributed to the strong performance of the company’s global brands, such as Budweiser, Stella Artois, and Corona, which saw an 18% increase in sales outside their home markets.

The decline in AB InBev’s market share in the US, observed in April, stabilized between the last week of April and the end of June. Two-thirds of the profit decline in the US stemmed from this market share drop, with the remainder coming from decreased productivity, increased marketing expenses, and support for wholesalers during the ongoing crisis.

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While AB InBev faced challenges, some of its competitors were able to capitalize on the situation. Constellation Brands Inc., for example, reported revenue that surpassed analysts’ expectations, thanks to the success of its Modelo brand, which overtook Bud Light as the top-selling beer in the US. Similarly, Molson Coors Beverage Co. achieved record sales, buoyed by the popularity of its Miller Lite brand.

AB InBev heavily relies on North America for approximately a third of its annual profit, as highlighted by Bloomberg Intelligence analyst Duncan Fox. The company’s recent struggles in the US market have prompted action, with reports indicating that AB InBev has placed marketing executives involved in the Bud Light controversy on leave and is cutting several hundred jobs in the country. To regain traction, the brewer has tripled its media spending on the brand this summer and is sponsoring a series of country music concerts.

Despite the challenges faced during the quarter, AB InBev remains optimistic about its performance for the year. The company reiterated its forecast of a 4% to 8% increase in earnings. Analysts are generally aligned with this expectation, anticipating a gain of approximately 5.2%.

Overall, AB InBev’s second-quarter results reflect a mix of successes and setbacks. While the company faces hurdles in the US, its performance in other markets has been strong, reassuring analysts and investors. The brewer’s ability to adapt and strategize in response to consumer demands and market dynamics will be crucial in shaping its future trajectory.