Bud Brewer AB InBev Beer Sales Dragged by Weaker China Demand, Boycott Fallout — 2nd Update

By Michael Susin

Budweiser brewer Anheuser-Busch InBev said it sold less beer in the second quarter, dragged by weaker demand in China and the continuing fallout from a boycott of its Bud Light brand in the U.S.

The world's largest brewer on Thursday reported second-quarter underlying earnings that came in ahead of analysts' forecasts thanks to higher profitability, but revenue growth missed expectations mostly due to weakness in China and Argentina.

AB InBev said the industry had a weak start to the year in China, the latest sign of how economic uncertainty in the world's second-largest economy is hurting Western businesses. Companies ranging from automakers to luxury-goods firms have warned of a challenging environment in China in recent weeks and Dutch brewer Heineken on Monday reported weaker-than-expected earnings for the second quarter and wrote down the value of a big investment in the country.

The company singled out tough conditions in Argentina as well, with beer consumption there under pressure from galloping inflation.

Overall, sales volumes dropped 0.8% on an organic basis from the same period last year, a steeper fall than analysts' expectations of a 0.6% decline, based on consensus estimates provided by the company. This was the company's fifth consecutive quarter of organic volume decline. Organic revenue growth of 2.7% missed consensus expectations of a 3.5% rise.

Volumes in China declined 10% due to weaker demand and adverse weather during the period, the maker of Stella Artois, Michelob Ultra and Busch Light said. This led to a 7.6% drop in Asia-Pacific, while the company reported a 3.2% fall in North America.

The brewer's share of the U.S. beer market was flattish in the second quarter. It has lost out to competitors following a Bud Light boycott that began in April 2023 after transgender influencer Dylan Mulvaney posted an Instagram video about a personalized beer can the brand had sent her as a gift.

Bud Light has since lost its place as the U.S.'s top-selling beer and now trails Modelo Especial and Michelob Ultra, even after a surprise endorsement from former president Donald Trump, according to recent industry data.

While the Bud Light boycott turned the U.S. beer industry upside down, brewers are dealing with other headwinds. Many consumers in the U.S. and other markets are shifting to wine and spirits from beer or dropping alcohol altogether for health reasons. In response, AB InBev has pushed into more premium products in recent years and looked beyond beer.

AB InBev has also sought to tighten cost controls, which helped it become more profitable and report a 10% jump in normalized earnings before interest, taxes, depreciation and amortization--which strips out exceptional and other one-off items--to $5.30 billion. Analysts expected the metric to rise 8.3%.

Shares in AB InBev traded 2.2% higher in European morning trade.

The company said it continues to expect 2024 earnings before interest, taxes, depreciation and amortization to grow in line with its medium-term outlook of between 4% and 8%.

AB InBev's net profit jumped to $1.47 billion from $339 million, as the company booked lower finance costs thanks to reduced losses on derivative contracts. Revenue rose to $15.33 billion from $15.12 billion.

Write to Michael Susin at michael.susin@wsj.com

(END) Dow Jones Newswires

August 01, 2024 04:57 ET (08:57 GMT)

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