Hard Seltzers Help Bud Brewer Regain Some Sparkle -- Update
February 25 2021 - 8:09AM
Dow Jones News
By Saabira Chaudhuri
Americans drinking more hard seltzer through the pandemic helped
beer giant Anheuser-Busch InBev SA partly offset a continuing slump
in sales of Budweiser and Bud Light.
Hard seltzers -- essentially flavored alcoholic sparkling water
-- have emerged as one of the hottest parts of the booze market in
recent years, tempting more health-conscious drinkers away from
beer. In response, AB InBev launched Bud Light Seltzer early last
year, has since invested in several new flavors of the brand and
recently rolled out Michelob Ultra Hard Seltzer.
On Thursday, the world's biggest brewer said those efforts were
paying off, as sales at its "beyond beer" unit, which includes hard
seltzer, ready-to-drink cocktails and other products, grew double
digits to top over $1 billion.
That helped AB InBev report overall fourth-quarter sales growth
on an organic basis -- which strips out currency moves and
acquisitions and divestitures -- of 4.5%. Revenue on a reported
basis dropped to $12.77 billion from $13.33 billion a year earlier.
Net profit jumped to $2.27 billion from $114 million a year
earlier, when results were hit by higher finance costs.
AB InBev was late to jump on the seltzer wagon, originally
driven mainly by White Claw, owned by Mike's Hard Lemonade Co., and
Truly Spiked & Sparkling, made by Boston Beer Co. Now, though,
the drinks giant sees seltzers as a priority and key way to win
back defecting beer drinkers. It said Thursday that its hard
seltzer brands grew at double the rate of the industry last year,
helped by the launch of Bud Light Seltzer.
The company plans to take a multipronged strategy to developing
its seltzer business, said Chief Financial Officer Fernando
Tennenbaum, rolling out products at various prices to cater to
different demographics. The new Michelob Ultra seltzer, for
instance, is low-calorie, premium and aimed at people who like
buying organic products, while the Bud Light seltzer is more
mainstream, he said. The company is also partnering with rapper
Travis Scott to roll out a new agave-based spiked seltzer in the
U.S. called Cacti, and has other seltzer products in the pipeline,
Mr. Tennenbaum added.
Hard seltzers tend to be low in calories and carbohydrates,
attracting young drinkers focused on health and wellness, women
and, perhaps most significantly, wine and cocktail drinkers. Beer
has lost share to spirits in particular in recent years, a trend
that accelerated through the pandemic.
Expanding in hard seltzers, which are often sold in single-serve
cans and distributed like beer, has been a way for brewers to win
back market share from their spirits rivals, although the latter
are also investing in their own hard seltzers.
Smirnoff owner Diageo PLC in January, for instance, reported a
47% jump in organic net sales for its ready-to-drink unit in North
America in the last six months of 2020. The spirits giant launched
a new seltzer under its Ketel One vodka brand late last year and
said it plans to participate in the category in a bigger way in
coming years.
Globally, industry tracker IWSR forecasts sales by volume of
ready-to-drink products -- like hard seltzer and premixed cocktails
-- will grow 21.8% a year between 2019 and 2024, taking share
mainly from beer. It said ready-to-drink products jumped 43%
globally last year, driven by growth in the U.S.
AB InBev has moved to defend its foothold in the seltzer
category, earlier this month filing a lawsuit against rival
Constellation Brands Inc. for selling Corona Hard Seltzer. AB InBev
has licensed the Corona brand to Constellation for the sale of beer
in the U.S. but says it never agreed that Corona could be used for
hard seltzer. Constellation has denied that it has broken its
agreement with AB InBev and said it would defend its rights.
Overall, AB InBev reported its North America volumes edged down
0.7% on an organic basis in the fourth quarter. It said its
mainstream portfolio -- which includes Bud and Bud Light -- lost
1.2 percentage point of market share. World-wide volumes rose 1.6%,
helped by Central and South America.
The company said it expects global sales and profits to improve
meaningfully this year from last as pandemic-related restrictions
ease. But it warned its margins would be pressured by higher costs,
including from unfavorable foreign-exchange rates and commodity
prices.
AB InBev continues to be saddled with a huge pile of debt
following its $100 billion-plus acquisition of SABMiller, the
world's no. 2 brewer, in 2016. On Thursday, it said its net debt to
normalized earnings before interest, tax, depreciation and
amortization ratio was 4.8 times at the end of last year, which is
over two times its goal.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
February 25, 2021 07:54 ET (12:54 GMT)
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