Anheuser-Busch InBev reported that its global revenue growth of 2.7% for the third quarter of the year, driven by an increase of 3% in revenue per hectoliter due to premiumization and strong growth in Mexico, South Africa and Colombia.

Volumes worldwide decreased 0.5%; AB InBev’s own beer volumes were down slightly more with a 0.9% decrease. However, non-beer product volumes grew 4%. Year-to-date, total volumes have grown 1%, a combination of its own beer brands up 0.7% and non-beer volumes up 3.6%.

CEO Carlos Brito was not impressed.

“Overall, the third quarter was challenging due to some material headwinds we faced and we’re not satisfied with these results,” he said at the start of the third-quarter earnings call with investors and analysts.

Still, the world’s largest beer manufacturer recorded revenues of more than $13.1 billion for the quarter and $38.9 billion for the first nine months of the year.

In the U.S., both shipments (sales-to-wholesalers) and depletions (sales-to-retailers) were down. Shipments were down 3.1% for the quarter and 2.2% for the year; depletions were down 3.5% for the quarter and 3.1% for the year.

Brito did not discuss the company’s craft beer portfolio on the call, but its related press release said that its regional brands — which include Oregon’s 10 Barrel Brewing, North Carolina’s Wicked Weed Brewing, California’s Golden Road Brewing and Washington’s Elysian Brewing — “grew by double digits in 3Q19, gaining share within the craft segment.”

Coming in Early 2020: Bud Light Seltzer

To combat these decreases, Brito announced that AB InBev plans to release another entry into a category that’s on fire in the U.S.: hard seltzer. Bud Light Seltzer will join AB InBev’s Bon & Viv and Natural Light Hard Seltzer early next year.

“We believe that as the category evolves, consumers will demand more choices, and a portfolio approach is key to success,” Brito said and explained that Bon & Viv and Natty Light Hard Seltzer occupy opposite ends of the price spectrum.

AB InBev acquired SpikedSeltzer in 2016 and rebranded it as Bon & Viv, but it has failed to keep pace with category leaders Mark Anthony Brands’ White Claw and Boston Beer Company’s Truly Hard Seltzer. Since AB InBev’s launch of Natty Light Hard Seltzer in August, the company has nearly doubled its share in the space, Brito said.

Bud Light Seltzer, which will presumably fall between the two in price, will have 100 calories and 5% alcohol by volume.

“We are under-indexed, but we think the way to win, like we did with the craft segment, is with a portfolio game,” Brito said when an analyst asked his opinion on how seltzer will evolve and grow.

Brito added that he saw stark differences between the two products in the U.S. as seltzer succeeds with large brands on the national level, but many national craft beer brands are losing share.

“I see seltzer as more, at least so far, as being a game of big brands, national brands,” he said. “I think that’s much more of a game that people like us are equipped to play, so scale matters.”

Michelob Ultra is Still Running Strong

When asked if hard seltzer had nibbled at Michelob Ultra, one of the brightest spots in AB InBev’s portfolio, Brito said no. Michelob Ultra “continues to grow very healthily,” grew in share in all 50 markets this quarter, and is the second-biggest share gainer in Hispanic accounts, he said.

Michelob Ultra still has room to grow in California, Brito said, where it’s growing at three times its national growth rate, but has half the market share there compared to its share in the rest of the country.

Michelob Ultra Pure Gold Organic saw volume growth of more than 80% and Michelob Ultra Infusions grew more than 50%, according to the press release that detailed third-quarter earnings.

AB InBev estimated that its new products — Michelob Ultra Infusions, Naturdays and Natty Light Seltzer — contributed to half of the industry’s total innovation growth for the year.

Innovations aside, AB InBev’s global brands still lead its business worldwide. These three brands — Budweiser, Stella Artois and Corona (outside of the U.S.) — grew 4.1% globally and 5.2% outside their home markets, sales of Budweiser and Stella Artois “decelerated this quarter into flattish performance,” Brito said. Still, these three brands continued to grow faster than AB InBev’s total business.

Corona’s Global Growth Inspires Localized Brewing

Corona leads the super premium category in China, had double-digit volume growth in the United Kingdom and helped AB InBev’s premium portfolio grow double digits in Brazil. Brito announced that AB InBev has begun brewing it at its breweries across the globe, rather than shipping it all from Mexico.

“Every brewery that produces Corona will maintain brand heritage by following the exact same brew process used in Mexico for more than 90 years,” he said. “Brewing Corona locally allows us to increase availability in the market, better serve our consumers and reduce our carbon footprint by more streamlined logistics.”