Anheuser-Busch InBev Posts 17% Declines in Volume and Revenue in Q2 2020

The COVID-19 pandemic cut into Anheuser-Busch InBev’s worldwide volumes and revenue during the second quarter of 2020.

The world’s largest beer maker reported that its total volume in Q2 declined 17.1% — as beer volume declined 17.2% and non-beer volume declined 15.5% — while revenue declined 17.7%.

Halfway through 2020, A-B reported declines in total volume (-13.4%) and revenue (-12%).

The second quarter was a rough one for A-B’s global brands. Worldwide revenues of Budweiser, Stella Artois and Corona (outside of the U.S.) were collectively down 16.6% worldwide during the quarter and are down 14.1% through the midway point of 2020.

Although A-B reported being “materially impacted by the COVID-19 pandemic” during the second quarter, the world’s largest beer manufacturer said it “saw considerable improvement” in volumes as the quarter progressed.

Anheuser-Busch InBev CEO Carlos Brito pointed to month-over-month volume improvement from April to June. After declining 32.4% in April, which Brito attributed to the shutdown of beer operations in markets such as Mexico and South Africa and Peru, volumes improved to -21.4% in May. This improvement was driven by a return to positive volume growth in China, its beer business in Brazil and gradual reopening of on-premise establishments in Europe, and off-premise performance. In June, the company returned to volume growth (+0.7%).

“The trajectory of the business throughout the second quarter reinforced our confidence in the resilience of the beer category, particularly in the off-premise channel, where we saw healthy growth in both developed and developing markets,” Brito added in a press release. “The continued reopening of the on-premise channel around the world also contributed to an improved performance, especially in May and June. We are excited about the return of these consumption occasions, while remaining cautious as we are now seeing renewed on-premise restrictions in certain markets.”

Nevertheless, the view from the U.S. was slightly better than globally, despite the pandemic shutting down the on-premise channel across most of the U.S. from mid-March through June. A-B reported sales-to-retailers (depletions) were “flattish” during the quarter, while sales-to-wholesalers (shipments) declined 6.1%. Revenues declined 5.9% during the quarter.

Six months into 2020, A-B’s sales-to-retailers declined 0.4%, while sales-to-wholesalers declined 3.7%. Revenue is down 2.3%

Nevertheless, A-B reported its “estimated market share was stable” during the quarter. During a call with analysts, Anheuser-Busch InBev CEO Carlos Brito credited the company’s commercial strategy for its market share performance thus far in 2020. He cited three drivers for the flat share performance:

  • Improved sales trends of mainstream brands Budweiser, Bud Light, Natural Light and Busch during the pandemic as consumers stocked up on larger packs and familiar brands.
  • Michelob Ultra driving A-B’s core-plus business and growing 23% compared to last year, making it the top share gaining product in the beer category, excluding hard seltzers.
  • Bud Light Seltzer leading A-B’s hard seltzer portfolio growth to +600% during Q2 and outpacing the 300% growth of the segment.

Diving deeper into Michelob Ultra’s trend, Brito, citing data from market research firm IRI, said the active lifestyle beer brand is now the second best selling beer by dollar sales year-to-date, trailing just Bud Light.

Year-to-date through July 12, off-premise dollar sales of Michelob Ultra increased 24.4%, to $1.4 billion. For comparison, Bud Light sales are up 3.3%, to nearly 2.8 billion in multi-outlet and convenience retailers tracked by IRI.

Brito said A-B’s hard seltzer portfolio had doubled its share of the segment during the quarter compared to last year.

“Our variety packs of Bud Light Seltzer have the same rate of sales as the two leading brands in the seltzer category … for the variety pack,” Brito said, referring to segment leaders White Claw and Truly Hard Seltzer. “That is rate of sales that increased from first quarter to second quarter.”

After launching earlier this year, Bud Light Seltzer has grown into the 23rd largest beer category brand family, according to IRI. Year-to-date Through July 12, the Bud Light Seltzer brand family has posted $172.6 million in sales. The Bud Light Seltzer variety pack has racked up $125.5 million in sales through mid-July.

Asked about international expansion for A-B’s hard seltzer brands, Brito said the company has begun piloting them in developed markets.

“Given our global footprint and scale and route to markets, and consumer insights in those markets, we should have a big opportunity there as well,” he said.

As far as mainstream brands, the company said its core, core light and value brands lost an estimated 90 bps of market share. However, “this improvement versus recent trends is largely due to the uplift of beer sales in the off-premise channel, which disproportionately benefits established brands and larger packs.” The company estimated its mainstream portfolio lost about 15 bps of market share.

Brito also addressed out of stock issues that have plagued many brewers. Although he reported that A-B’s customers have said the company’s service levels “is better than some others,” he admitted that A-B’s supply chain “is also stretched, like everybody else” and could be challenged through Labor Day.

“We’re going to be stretched as well, but maybe from what customers are telling us, we’re more organized,” he said. “We’ll see.”

Brito cited the strengths of A-B’s business moving forward as reasons for optimism, including “a clear commercial strategy, diverse geographic footprint, the world’s most valuable portfolio of beer brands, industry-leading profitability, a strong team and an incredibly deep talent pool.”

Also coming out of today’s earnings call, A-B conducted an impairment review of its business due to the uncertainties created by the COVID-19 pandemic. The company identified a worst case scenario that exposed its business units in South Africa and the rest of Africa to risk. As such, the company recognized a $2.5 billion non-cash goodwill impairment charge with the chance of a 30% probability of the worst case scenario coming to fruition.

A-B stock (BUD) was trading at around $57, as of press time.

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