Many of Anheuser-Busch InBev's (BUD 0.70%) conservative customers were upset with the company earlier this year after learning that the Bud Light brand had entered a marketing promotional deal with transgender social media influencer, Dylan Mulvaney. This led to calls for a boycott of the brand. Musician Kid Rock even posted a video online, showing him shooting up cases of Bud Light in protest of the move.
The boycott does appear to have affected sales and Bud Light lost its top spot among beer brands in the U.S. market. Despite the seemingly big blow to the business, Anheuser-Busch isn't in bad shape. In fact, the company's coming off a strong quarter, thanks to its diverse and global business.
Anheuser-Busch posts solid earnings in Q2
For all the negative attention surrounding the business in the right-wing media, Anheuser-Busch's financials proved to be resilient this past quarter. Although it faced some challenging headwinds, including inflation, its adjusted underlying profit of $1.5 billion for the period ending June 30 was down just a modest 1% year over year. Sales of $15.1 billion also rose by 7.2% from the same period last year.
That's not to say the company didn't feel the effects of the boycott; it noted that revenue declined in the U.S. market by 10.5% year over year, with Bud Light being a particularly poor-performing product during the period. However, even with the product's weakness, Anheuser-Busch's business remained strong, and that's because of its strong diversity.
NYSE: BUD
Key Data Points
The company saw growth in all other markets
While sales in the U.S. did drag down the company's overall performance in North America, Anheuser-Busch did well in other parts of the world, achieving double-digit organic revenue growth in every other key region:
Image source: Anheuser-Busch Q2 investor presentation.
Anheuser-Busch also says that its global brands have done exceedingly well outside their home markets, noting that the Budweiser brand generated 16.9% revenue growth outside the U.S. and sales of Corona were up 23.7% outside of Mexico.
Why the company's Bud Light sales should recover, too
The past quarter wasn't a great one for Bud Light, but there is reason for optimism. In its earnings presentation, company management said that after engaging with customers, it recognizes the customers want the focus to be on beer, without a debate.
Assuming that the company is able to simplify its strategy and avoid further controversy on Bud Light, that area of its business should get back to generating growth in the North American market as well. Boycotts, while they may be damaging in the short term, generally don't weigh down a business for the long haul. The company says that through a research firm, it has been engaging 170,000 consumers in the U.S., and that 80% have a favorable or neutral view of Bud Light. And so, while the boycott may have appeared to be significant, a large chunk of the customer base does not appear to have negative feelings toward the brand.
Data from Alphabet's Google Trends also shows that the search term "bud light boycott" peaked in mid-April and that as of mid-August, it was at just a small fraction (approximately 4%) of that peak traffic. That bodes well for the company's future because it suggests that upcoming quarters could be even stronger for Anheuser-Busch if the controversy is in the rearview mirror and Bud Light gets back to generating growth in North America.
Is Anheuser-Busch stock a buy today?
Even despite all the noise surrounding the business, Anheuser-Busch stock is down a relatively modest 6% this year. The stock hasn't been a great buy by any means, but it hasn't been crashing, either. At 18 times earnings, it's a modestly priced investment, as the S&P 500 average is a multiple of 20.
Anheuser-Busch provides investors with some good value along with a decent dividend yield of 1.5%. The beer business can be resilient in the event of a downturn, and if the company proves that it can withstand a boycott of one of its top brands, that's a great sign of its diversity and strength. For long-term investors, this could be an excellent stock to buy and hold.
