Profits Brewing?

Anheuser-Busch InBev (NYSE: BUD) has had a challenging year, as the global pandemic closed bars and restaurants, exacerbating the change in consumer preferences for alcoholic beverages toward hard seltzers. Yet it would be foolish for investors to write off the world’s largest brewer with hundreds of brands to its name.

The company had been working on reducing its massive debt load (largely from its 2016 acquisition of SABMiller) before the pandemic struck, but the COVID-19 outbreak forced it to add more debt and suspend its dividend to preserve cash. It has been diligently paying down its debt, though. And it’s pursuing the hard seltzer trend with various brands in its portfolio, such as Bon & Viv.

AB InBev’s beer business has struggled, but it has followed the premiumization trend in alcoholic beverages. As one example, its Michelob Ultra accelerated its gains and remains the second-highest selling beer (in dollars) in the U.S. after Bud Light. CEO Carlos Brito believes this year’s beer sales will “improve meaningfully” compared to last year’s figures; ditto for earnings.

The big brewer may be down at the moment, but it has a huge international presence and cost advantages from its great scale. The global economy is likely to pick up in the coming year or two as parts of the world put the pandemic behind them, and AB InBev’s future looks promising. (The Motley Fool has recommended Anheuser-Busch InBev NV.)