Anheuser-Busch InBev, the multinational beverage and brewing company, reported a significant decline in profit for the second quarter. The company's operating profit in North America was heavily impacted by consumer boycotts targeting their popular beer brand, Bud Light.
Challenging Quarter for North America
In North America, Anheuser-Busch InBev saw a 27% decrease in operating profit on a comparable basis, amounting to $1 billion. Revenue also took a hit, declining by 9% to $3.95 billion, while volumes fell by 14%. This decline in sales can be attributed to an incident involving transgender star Dylan Mulvaney, who shared a post on social media about a personalized can of Bud Light. This caused confusion and anger among customers, resulting in a sharp drop in sales.
The company specified that two-thirds of the profit decline was due to market share performance, with the remaining portion attributed to productivity loss, increased sales and marketing investments, and support measures for wholesalers.
Global Performance Overview
Despite the challenges faced in North America, Anheuser-Busch InBev witnessed an overall improvement in worldwide operating profit, which grew by 2%. This positive growth was primarily driven by increasing profits in all other regions, notably South America with an impressive 47% improvement. Global revenue also experienced growth, rising by 7% to $14.79 billion.
However, the reported second-quarter profit decline of 79%, amounting to $339 million, initially seems contradictory. The explanation lies in derivatives: the company recorded a $1.08 billion mark-to-market loss on hedges for its share-based payment programs and shares issued in relation to the combination with Grupo Modelo and SAB.
Anheuser-Busch InBev stated that its underlying earnings per share declined by a penny to 72 cents. Looking ahead, the company anticipates a growth in operating profit between 4% and 8%, with revenue expected to increase at a faster rate throughout the year.
Simon Hales, an analyst at Citi, noted that these results are unlikely to have a significant impact on consensus earnings estimates for FY23. He also mentioned that near-term sentiment will continue to be influenced by debates surrounding Bud Light, particularly as we approach a period of shelf resets in the fall.
Anheuser-Busch InBev's shares witnessed a 2% increase in early Brussels trade. Its U.S.-listed shares, however, experienced a 6% decline throughout the year.