Fox News published an article on Tuesday discussing Florida Governor Ron DeSantis encouraging people to boycott Anheuser-Busch’s (BUD) Bud Light beer because the brand used transgender personality Dylan Mulvaney in a company promotion.
Conservatives everywhere are upset about “woke companies” trying to change America into something it’s not. DeSantis stated while appearing on the Benny Johnson Show, “[Woke companies] trying to change our country, trying to change policy, [and] trying to change [the] culture,” Fox News reported.
“Why would you want to drink Bud Light? I mean like honestly, that’s like them rubbing our faces in it, and it’s like these companies that do this, if they never have any response, they are just gonna keep doing it,” DeSantis told Johnson.
Interestingly, Fox News quotes the New York Post -- another of Rupert Murdoch’s many assets owned through News Corp. (NWSA, NWS) -- that BUD stock has lost more than $5 billion since the controversy blew up on March 31.
Does DeSantis’ opinion of the Bud Light boycott make BUD stock a sell? Hardly. That said, it doesn’t necessarily make it a buy, either. Here’s why.
Bud Light Is an Awful Beer
DeSantis got one thing right in his comments about Bud Light. It’s a terrible beer. It’s like drinking bad-tasting water. But, frankly, if I’m parched, I’ll drink plain old H2O, thank you very much.
Online food and beverage magazine Delish published an article in May 2018 about why you should never drink light beer. Contributor Lauren Mayashiro said that light beer tastes gross. I couldn’t agree more.
“They essentially taste like beer-flavored water. By cutting the calories, you're significantly reducing (or eliminating) things like hops or yeast, thus leading to the loss of a very key element: flavor!,” Miyashiro wrote. “I'm not saying that everyone needs to be drinking IPAs — I understand that some people genuinely prefer lighter, crisper tasting beers. All I'm asking is for you to consider ales, lagers, or pilsners, instead of a Bud Light.”
Like I said above, if you’re thirsty, water’s just fine. But, unfortunately, Bud Light is neither water nor beer. Well, not really.
And the thing is, Anheuser-Busch produces a lot of terrible beer. Budweiser included. In 2022, it produced a record 595 million hectoliters of beer, making it the world’s largest beer maker.
BUD’s 2022 Results Were Good
The company reported full-year results on March 2. They were excellent.
On the top line, revenues increased 11.2% to $57.8 billion, from $54.3 billion a year earlier, with volume 2.3% higher than a year earlier. Of course, a 2.3% gain in volume isn’t significant if you’re a small craft brewer, but when you produce as much beer as it does, a small number moves the needle a lot.
As a result of the revenue growth in 2022, its normalized EBITDA (earnings before interest, taxes, depreciation and amortization) rose 7.2% to $19.8 billion. That’s a normalized EBITDA margin of 35.4%, 126 basis points less than 2021.
Overall, that’s healthy growth, which suggests its run between March 2 and March 31, had more to do with profit-taking than investors worrying that Ron DeSantis disapproved of their beer investment.
As Barron’s recently pointed out, investors don’t care about the Bud Light controversy. Further, if conservatives think they will make a dent in Bud Light’s position as North America’s top-selling beer, they’re sadly mistaken.
“‘We think the recent backlash in some parts of the U.S. to Bud Light’s new advertising campaign with Dylan Mulvaney is overdone.’ writes Citigroup analyst Simon Hales. He argues that ‘recent share price weakness provides an attractive buying opportunity’ given factors from China’s reopening to improving sales trends,” Barron’s reported on April 17.
The question for investors isn’t whether Anheuser-Busch is a good or bad stock to own but if it’s the best alcohol-related stock to own.
Some Very Successful Peers
One of the largest liquor companies in the world is LVMH (LVMUY), a company I wrote about for Barchart.com twice in 2022. I can’t say enough good things about its business.
The best thing about LVMH is that its liquor business is a small part of what it does to be the most prominent global purveyor of luxury goods. In 2022, its Wine and Spirits segment generated a 19% increase in revenue to 7.1 billion Euros ($7.78 billion) with a 2.16 billion Euro ($2.37 billion) profit and a 31% margin.
The other name to mention is Diageo (DEO), the maker of spirits, wine, and Guinness beer, Ron DeSantis’ favorite.
“‘My wife and I, whenever we just go out for a beer, we actually like the stout, Guinness,’ he explained, sharing the couple has "always been a fan" since they visited Dublin, Ireland,” Fox News reported his comments with Benny Johnson.
Over the past five years, DEO stock is up nearly 34%, 72 percentage points greater than Anheuser-Busch, but nowhere near LVMH’s standout return of 182%.
The Bud Light boycott won’t hurt Anheuser-Busch because they don’t gain traction with most people like most politically-bent boycotts. They’ve got more important things to worry about, like paying the bills.
Is BUD stock a sell? Not necessarily. However, compared to either Diageo or LVMH, it comes third in a three-horse race.
On the date of publication, Will Ashworth 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.
