A choice darling at major sporting events and food and beverage establishments, Anheuser-Busch (BUD) typically benefits from positive public sentiment. As USA Today pointed out, Anheuser’s Bud Light is by far America’s favorite beer. However, the underlying company’s recent endorsement deal with a social media influencer sparked controversy. What’s more, traders appear to be anticipating further downside for BUD stock.
To provide a basic outline for the uproar, the AP reported that Anheuser inked a partnership with social media star Dylan Mulvaney. Generating popularity on TikTok for documenting her gender transition, Mulvaney represents a role model for many members of the LGBTQ community. In 2022, Anheuser rolled out its LGBTQ Pride-themed Bud Light cans in Canada. Notably, the cans featured various pronouns aimed at inclusivity.
However, many right-wing personalities took issue with the strategic pivot. Perhaps most notably, country musician Kid Rock broadcasted his displeasure, posting a video of him wearing a “MAGA” hat while firing a rifle at a stack of Bud Light products. Undergirding the backlash is a broader movement taking aim at so-called “woke” companies.
While it’s always difficult for corporations to navigate contentious issues – balancing the push for social equity without upsetting segments of their consumer base – Anheuser suffers from a particularly challenging task. According to a 2014 article by the Washington Post, Republican voters tend to prefer Bud Light (and other light beers) compared to consumers who vote Democrat.
Adding to the pressure, BUD stock represented a highlight for Barchart’s screener for unusual stock options volume but for rather unpleasant reasons. Following the close of the April 12 session, total volume for BUD reached 29,440 contracts against an open interest reading of 98,261. The delta between the midweek session volume and the one-month average volume came out to 1,425.39%.
Significantly, call volume hit only 4,447 contracts whereas puts reached 24,993. Mathematically, this pairing led to a put/call volume ratio of 5.62, on paper greatly favoring the bears. Still, should investors worry about BUD stock?
Controversy Might Not Last for BUD Stock
While partisan investors might be tempted to dismiss the sudden vitriol against BUD stock as mere noise, it’s important to remember that political backlash presents distracting obstacles for affected corporations. Most conspicuously, Walt Disney (DIS) has been forced to address its criticism – and subsequent response – of Florida’s Parental Rights in Education bill.
Nevertheless, some evidence suggests that BUD stock will be able to ride out the storm. For one thing, Anheuser expertly framed its ideological views as being supportive of inclusivity initiatives. That’s not surprising given that the company won an unprecedented back-to-back Creative Marketer of the Year award by Cannes Lions. In other words, anti-woke advocates will be going up against a well-oiled machine.
Second and more importantly, anger represents a very difficult emotion to sustain for the long haul. Notoriously, Equifax (EFX) suffered a data breach in 2017, compromising the personal data of millions of Americans. While outrage understandably poured out against the credit-monitoring bureau, EFX stock recovered robustly from the crisis. In the trailing five years, shares gained about 69% of market value.
Even though the consequences of the data breach may last for decades, millions of vulnerable Americans shrugged their shoulders and went on with their lives. If the threat of identity theft and the loss of money and time doesn’t sustain anger, it’s almost unimaginable that individuals’ personal life choices will keep unaffected households awake at night.
Plus, BUD stock has been overall resilient throughout the controversy, along with other consumer economy-related headwinds, such as rising energy prices and mass layoffs. That’s not to say that Anheuser is bulletproof – no enterprise is.
But again, I have a hard time believing that the beermaker’s Achilles’ heel is a social media influencer’s gender transitioning journey.
Don’t Forget the Captive Audience
Another reason why investors shouldn’t fret too much about BUD stock over the long run centers on Anheuser’s captive audience. As stated earlier, Bud Light is America’s favorite beer – and by a country mile. Thus, it’s probably not exclusively about the taste but perhaps predominantly the price.
Moreover, because Bud Light generated so much success across decades, Anheuser enjoys the economies of scale to keep pumping out its flagship low-cost brand. Sure, angry customers can always elect a more expensive product. However, with brewing constraints rising against average households, higher-priced products will be less attractive.
So, like it or not, the almighty dollar will speak. And almost certainly, it will speak louder than the present controversy.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
