Anheuser-Busch InBev Faces Setback as Q2 Profit Plummets

Anheuser-Busch InBev, the world’s largest brewer and the parent company of popular brands such as Stella Artois and Budweiser, has reported a significant decline in net profit for the second quarter. Although rises in volumes were observed in certain regions, a sharp fall in U.S. volumes heavily impacted the company’s overall performance.

North America Struggles as Social-Media Boycott Takes Toll

During April, Anheuser-Busch faced a decline in sales within the North American market. The drop can be attributed to a boycott sparked by an Instagram post from Dylan Mulvaney, a transgender social-media influencer, who expressed dissatisfaction with a personalized can of Bud Light she had received as a gift. Sales of Bud Light and other brands dipped due to the subsequent backlash.

Profits Plunge, Missing Market Expectations

Net profit for the quarter suffered a substantial decline, falling to $339 million compared to $1.60 billion during the same period last year. This result fell significantly below the FactSet consensus of $613.35 million, leaving investors disappointed. The decline was primarily driven by the poor performance in North America.

Revenue Rises through Strategic Actions

Despite the negative impact on profits, Anheuser-Busch managed to increase revenue for the quarter. Total revenue reached $15.12 billion, up from $14.79 billion in the previous year. This growth can be attributed to a combination of pricing actions, premiumization strategies, and other revenue-management moves implemented by the company.

Organic Revenue Growth Exceeds Expectations

Impressively, Anheuser-Busch achieved organic revenue growth of 7.2%, surpassing the company-provided market consensus of 6.4%. This success highlights the effectiveness of their strategic approaches and their ability to adapt to changing market conditions.

Anheuser-Busch InBev will need to address the challenges faced in North America to maintain its position as the global leader in the brewing industry. With a focus on innovation and consumer preferences, the company will strive to regain market share and drive future growth.

U.S. Sales Show a Decline, Impacting Bud Light Volumes

Sales to retailers in the U.S. have fallen by 14.0%, underperforming the industry. This decline can primarily be attributed to lower volumes of Bud Light.

Workforce Reductions at U.S. Offices

Just last month, the company made the difficult decision to lay off hundreds of employees at its U.S. offices. This action was taken after experiencing a prolonged period of declining sales for Bud Light. The company has stated that less than 2% of its U.S. workforce, which amounts to approximately 18,000 individuals, will be affected by these layoffs. Importantly, front-line workers such as brewery and warehouse staff will not be impacted.

Normalized Earnings Show a Decrease

Normalized earnings before interest, tax, depreciation, and amortization (EBITDA) fell to $4.91 billion compared to $5.10 billion in the previous period. This decrease is in line with the consensus expectation of $4.845 billion. The company’s preferred metric, EBITDA, captures performance by excluding exceptional and one-off items from the calculation.

Future Outlook Remains Optimistic

AB InBev has reaffirmed its outlook for the future, stating that it expects EBITDA to grow between 4% and 8% in 2023. Additionally, the company anticipates revenue growth to outpace EBITDA through a healthy combination of volume and price.

Heineken Faces Similar Challenges

In a similar vein, Heineken recently adjusted its full-year outlook following a decrease in key earnings during the first half of the year. The decline can be largely attributed to lower volumes in the profitable Asia-Pacific region.

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