Anheuser-Busch (NYSE:BUD) stock is down 32% this year, yet the company is poised to benefit from relatively resilient beer consumption and popular seltzer beverages.
Moreover, over the long term, the company looks well-positioned to benefit tremendously from a powerful rebound of spectator sports, bars, concerts and nightclubs.
Overall Beer Consumption Has Been Resilient
In the 16 weeks that ended in June, total beverage alcohol sales surged 26% year-over-year, Seeking Alpha quoted Nielsen as reporting. Beer slightly underperformed the total alcoholic beverage category , but beer sales still jumped 21.4% during the period.
In 2020, the revenue from beer sold off-premises (i.e. outside of bars, restaurants, and live events) has risen 16%.
Since Anheuser-Busch has historically generated 30% of worldwide beer sales, expect the company to benefit meaningfully from this resiliency.
I expect beer sales to remain strong as long as hundreds of millions of people are avoiding many activities and staying at home, while large portions of the economy continue to struggle.
It’s well-known that alcohol consumption tends to jump when people are feeling bored and depressed. And long-lasting partial shutdowns, along with economic problems and high levels of unemployment, certainly lead to boredom and depression.
After all, there’s a reason why almost every state considered alcohol stores to be essential in March, April and May.
Further, European beer giant Carlsberg (OTC:CABGY) reported that its sales in China rebounded strongly in the second quarter, while “sales in western Europe also improved toward the end of the quarter as economies began to reopen.”
Even though the company’s second-quarter revenue slid 15% overall, the rebound seen towards the end of the quarter in China and Europe certainly bodes very well for Anheuser-Busch and BUD stock.
Seltzer Will Be a Growth Category for Anheuser-Busch
Sales of seltzer with alcohol came in at $1.5 billion in 2019, and they are growing quickly. Young, wealthy people of both genders are buying it, CNN quoted a Nielsen executive as saying.
The fact that wealthy people like spiked seltzer bodes well for the near- to medium-term outlook of the category since many wealthy people in sectors like tech and government are retaining their jobs and income during the current downturn.
As of February, Anheuser-Busch’s Bud Light Seltzer was the No. 3 spiked seltzer drink in the U.S. Further, “Anheuser Busch now sells three of the top five spiked seltzer brands: Natural Light Seltzer sits in fourth and its original spiked seltzer, Bon & Viv, is in fifth place,” CNN noted. And as of the end of last year, the beer maker was planning to invest a substantial $100 million in spiked seltzer.
A Rebound of Spectator Sports, Bars and Nightclubs
With a vaccine looking very likely to be introduced by the end of the year, bars, nightclubs, concerts and live spectator sports are likely to come roaring back within five or six months due to pent-up demand. Many million cans and bottles of Bud beer and Bud Light seltzer will be consumed at those events.
I believe that those who buy BUD stock now will benefit a great deal from the strong snapback of beer consumption in the wake of the launch of a vaccine.
The Bottom Line on BUD Stock
Anheuser-Busch is likely benefiting from resilient sales of its beer and rapidly growing sales of its spiked seltzer now. Over the longer term , the company’s results will be boosted by pent-up demand for live events following the launch of a vaccine.
With the stock still trading around 50% below its 52-week high, now is a very good time for longer-term investors to buy BUD stock.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been Roku, solar stocks, and Snap. You can reach him on StockTwits at @larryramer. As of this writing, he did not hold a position in any of the aforementioned securities.