Bud Light: Cause of drop goes beyond reaction to influencer – 08/07/2023 – Market

At the Sawyer Ice House bar near downtown Houston, Texas, on Thursday night, a crowd arrived after work to watch the local Astros baseball team take on the New York Yankees. As the home team struggled to eventually lose 3-4, mugs of Miller Lite and Shiner Bock flowed freely, but the Bud Light faucet was left untouched.

“We don’t actually sell it anymore,” said Will, the bartender. “People just aren’t buying it.”

In the United States, sales of Bud Light have plummeted since April, following an angry conservative backlash to the brand’s collaboration with trans TikTok influencer Dylan Mulvaney. Kid Rock, the rap-rock star, filmed himself shooting beer crates. Ron DeSantis, the Republican presidential nominee, told patrons at a bar at a Veterans of Foreign Wars outpost in Nevada that he would “serve anything but Bud Light. I can’t do that.”

On Thursday (3), the controller Anheuser-Busch InBev revealed the financial loss: the group based in Belgium said that its revenues in the United States fell 10.5% in the second quarter.

But the culture war bouts not only rocked AB InBev, they changed the fortunes of rivals and accelerated trends that are reshaping the $115 billion US beer industry. The popularity of craft beers, imported beers and other beverages was already eroding Bud’s dominance at a time of sluggish beer sales in overall volume.

Chicago-based Molson Coors said this week that its US sales rose 8.7% in the second quarter, with its Coors Light and Miller Lite brands outperforming Bud Light by 50%. The Mexican beer Modelo Especial, distributed in the United States by Constellation Brands, knocked Bud Light from its position as the country’s best-selling beer in May.

“We believed that in the next two or three years we would have surpassed Bud Light,” said Jim Sabia, Constellation’s executive vice president who oversees the beer. “It happened faster than we thought.”

Modelo Especial didn’t eclipse Bud Light because its customers were switching to Modelo, he added; instead, the company benefited from the promotional and retail space that Bud Light left empty.

Bud Light’s “marketing issue” has accelerated an existing decline of mass-market domestic beers, analysts heard this week from Dan Fisher, chief executive of Ball Corporation, which makes cans for AB InBev and other brewers.

The 8.5% hit to US can sales in the last quarter was part of a broader story of decline as craft, imported and other beverages encroached on the supremacy of big brands.

While US beer sales volume shrank 3% last year, craft beers held steady and imports grew 2.8%, according to the Brewers Association, which represents independent and craft breweries.

In Ball’s latest quarter, sales rose 11% for imported beer and 41% for ready-to-drink drinks. Spirits have been gaining market share for 13 years and overtook beer in 2022, according to the US Distilled Spirits Council.

“The industry [de cerveja] in 2023 was weaker than expected,” Gavin Hattersley, chief executive of Molson Coors, told analysts. While other factors, including unfavorable weather, played a role, “we believe that some of the biggest drivers of these trends are lifestyle choices and some shoppers moving to other categories”.

Reporting interim results this week, the world’s second-largest brewer Heineken said the volume of beer it sold in the Americas was down 1.5% year-on-year due to the “soft” market in the US and Mexico, while in Europe volumes fell 4.7%, which, according to the brewery, was a result of price increases.

Bud Light has faced another challenge: It lags behind both Corona and Modelo among the beers preferred by Gen Z consumers, Cowen research revealed last year. The promotion with Mulvaney followed a decision by marketers that, after spending decades advertising her to attract young men, her appeal needed to be broadened.

Bud Light vice president of marketing Alissa Heinerscheid, who has taken a leave of absence since the controversy erupted, made the case for more “truly inclusive” marketing in a podcast in March. She said the brand had been in decline “for a long time”, its campaigns were known for “weak and off-key humor”, and if it failed to attract young drinkers, “there would be no future for Bud Light”.

Since then, Bud Light has launched a new advertising campaign for the summer, touting the beer as “easy to enjoy.”

“They’re spending a lot of money on Bud Light, but the tone of the advertising is still very average American; they’re not trying to radically reposition the brand,” said Trevor Stirling, an analyst at Bernstein.

Analysts are doubtful that the drinkers that AB InBev alienated with the Mulvaney partnership will ever return. Bernstein’s research estimated that approximately 50% of the Bud Light share loss and 50% of the Coors Light and Miller Lite share gain will be permanent.

“ABI is really stuck between a rock and a hard place,” they wrote. While consumers on the right are frustrated by the brewery’s lack of apology, those on the left complain that it does not support Mulvaney against the abusive public comments.

This week, AB InBev Chief Executive Michel Doukeris assured analysts and investors that support for the company’s key brand is still solid. He surveyed 170,000 US consumers and found that 80% had a “favorable or neutral” view of Bud Light, he said.

“They simply point out that they want to enjoy their beer without a debate,” Doukeris told the FT. “They want our brands to focus on what we do best – which is beer – and for Bud Light to engage with topics that are relevant to all consumers, like music and sport.”

As part of AB InBev’s efforts to put that debate behind them, a Bud Light promotional team recently visited the Sawyer Ice House in Houston to hand out free beers, recalls the bartender. Customers rushed to grab the freebies — but none of them wanted to take a photo.

Translated by Luiz Roberto M. Gonçalves