In light of the COVID-19 pandemic, Anheuser-Busch InBev is examining discretionary spending, halting new product launches and promotions and upping its investment in e-commerce, CEO Carlos Brito said during A-B’s first quarter earnings call today.
“We’re taking a hard look at sales and marketing,” Brito said and added that the company is “trying to put the money in channels and products that consumers are demanding more, so trying to put more money behind e-commerce initiatives, direct-to-consumer initiatives, more money for sure in the off-trade, more money behind bigger packs, trying to promote less, because today there’s no need that, trying to phase out some new product introductions, innovation, because at this point, it doesn’t make sense to do introductions.”
As expected, the first quarter of 2020 was challenging for A-B, with the COVID-19 pandemic shutting down the on-premise channel across the globe.
The world’s largest beer manufacturer’s global volumes declined 9.3%, and revenue declined 5.8% to $11 billion in the quarter. Last year, on-premise sales accounted for 1/3 of the company’s global volume, so the global shutdown of that channel is sure to be painful as it continues.
March has proven to be the month when everything changed for A-B, as its global volumes in January and February increased 1.9% with the exclusion of China, where the COVID-19 shutdowns began earlier. Including March, global volumes (sans China) declined 3.6%.
In fact, Brito noted that the company expects Q2 to be “materially worse” than Q1, as April volumes have declined 32% due to on-premise shutdowns and will be compounded by production shutdowns at the company’s breweries in Mexico, South Africa and Peru. If there’s a bright spot to be found, it’s that April volumes in China were down 17%, compared to a 46.5% decline there in Q1.
In the U.S., A-B’s total market share decreased 50 bps, which the company attributed to its place in the pack in the hard seltzer category. A-B’s beer portfolio declined 30 bps, which the company said was “partially driven by the fact that we cycled the impact of shipment phasing ahead of a price increase in 2Q19.”
The company’s U.S. volume was flattish, with depletions (sales-to-retailers) declining 0.7%, and shipments (sales-to-wholesalers) declining 1%. By A-B’s estimate, the rest of the U.S. beer market’s depletions increased 0.3%.
A-B saw “meaningful dollar growth” from Michelob Ultra, Bud Light Seltzer Variety Pack and Busch Light. Busch Light, one of the company’s economy brands, saw its dollar sales increase 16.8% in the same period.
Michelob Ultra’s dollar sales increased 20.9% year-to-date for the week ending April 19th, according to IRI. To capitalize on consumers staying home and gyms being closed, Michelob Ultra leaned into its wellness angle and offered virtual fitness classes.
Bud Light Seltzer launched in January with a 12-pack variety pack and 6-packs of its four flavors. The launch boosted A-B’s hard seltzer portfolio by 600%. Prior to Bud Light Seltzer, the company’s hard seltzer offerings included Bon & Viv Spiked Seltzer and Natural Light Hard Seltzer, as well as a few hard seltzers from its craft arm, the Brewers Collective.
Since its launch, Bud Light Seltzer has earned $66.1 million, according to market research firm IRI, which tracks off-premise sales in grocery and convenience stores. By comparison, category leader Mark Anthony Brands’ White Claw brand family earned $41.2 million in the week that ended April 26th, according to IRI.
A-B has felt the same consumer trends toward bigger packs and older, more established brands, but whether these trends continue has yet to be seen, Brito said.
“It’s too early to know if this trend will demonstrate a longer-term shift in consumer behavior,” he said.