Anheuser-Busch (NYSE: BUD) stock experienced a more than 7% decline over the course of July. As of Thursday, AB InBev was trading at $69 per share. Mainstream media has been quick to blame hard seltzer for the alcohol beverage company’s lackluster performance. However, Anheuser-Busch’s Q2 earnings, which were reported yesterday, tell a very different story.

Uncertainty for the future of hard seltzer took center stage last week after the Boston Beer Company (NYSE: SAM) reported missing its top and bottom line during its own earnings report. The company’s hard seltzer brand, Truly, underperformed, contributing to SAM’s poor numbers. The performance prompted a 20% nosedive in after hours trading and the media had a field day as speculations regarding the decline of the seltzer market flew.

Boston Beer’s misstep seems to have significantly more to do with underestimating Truly’s ever growing competition in the oversaturated market and far less to do with overestimating the growth of the market. Based on the Q2 performances of Boston Beer’s powerhouse competition such as Anheuser-Busch, Molson Coors (NYSE: TAP) and Diageo (NYSE: DEO), hard seltzers and RTD beverages are here to stay.

AB InBev’s Beyond Beer category enjoyed an impressive 45% increase in revenue this quarter thanks to the beverage titan’s portfolio of hard seltzers and ready-to-drink canned cocktails. Even though the company’s earnings were lower than expected, the brewer still managed to push its revenues beyond pre-pandemic levels. Anheuser-Busch experienced improved top and bottom lines year-over-year, reporting a profit of $1.86 billion and revenue of $13.54 billion in Q2. Despite a 7% decline this month, the stock has risen 20% in the past year.

Anheuser-Busch’s Beyond Beer offerings led the way this quarter. Cutwater Spirits, AB InBev’s line of RTD canned cocktails featuring real spirits is “growing triple digits and is growing ahead of a segment now,” according to the company’s newly appointed CEO, Michel Doukeris. Anheuser-Busch acquired Cutwater Spirits in 2019 just as the RTD market was beginning to explode.

The brand now offers 25 varieties of canned cocktails made with real vodka, tequila, rum and whiskey including Cutwater’s Whiskey Mule which won the Best of Class Award in the Pre-Mixed Cocktail category at this year’s San Francisco World Spirits Competition. Cutwater Spirits also produces a wide range of bottled spirits, frozen boozy pops and mixers.

Michelob Ultra Organic Seltzer

AB InBev’s Beyond Beer category is performing impressively on a global level. Michelob Ultra Organic Seltzer was launched in the US in January of this year. It was later released in Mexico and has immediately become a fan favorite and a leader in its segment.

In Thursday’s earnings call Doukeris stated, “Michelob ULTRA Seltzer, for example, was [in Mexico] less than two months and is now leading the seltzer segment in Mexico and is a meaningful size of the beyond beer [category] in Mexico, more than 10% already is seltzer.”

Michelob Ultra Organic Seltzer’s Signature Flavor Collection includes Spicy Pineapple, Cucumber Lime and Peach Pear. All flavors come in 12 ounce cans and contain 80 calories, no carbs, no sugar and an ABV of 4%. The brand’s Classic Collection contains real fruit juice and includes flavors such as Citrus, Mixed Berry and Mango Apricot. All flavors contain 90 calories, no sugar, 2 grams of carbs and an ABV of 4% per 12 ounce can.

Mike’s Hard International

The Mike’s Hard brand also offered a global win for Doukeris and company. The CEO said, “We are also expanding the Mike’s Hard brand family into new markets to further strengthen our global beyond beer portfolio. The Mike’s Hard Lemonade and Mike’s Hard Seltzer variants will be available in more than 20 markets by the end of the year.”

Mike’s Hard Seltzer is available in Raspberry, Lime and Black Cherry flavors. All flavors contain 100 calories, 2 grams of sugar and an ABV of 5% per 12 ounce can.

Michel Doukeris

July 1st was Michel Doukeris’ first official day as CEO of Anheuser-Busch. Doukeris took over for Carlos Brito, who left the company after 32 years, 15 of which he was CEO.

The incoming leader has been with the company for 25 years and was most recently president of Anheuser-Busch North America. Doukeris has been a champion of Beyond Beer since the category was in its infancy. The beverage company credits him with “captur[ing] more than $1B in revenue in the Beyond Beer category” while in his former position.

It looks like Doukeris will remain committed to Beyond Beer in his new position. In an introduction posted on LinkedIn, Doukeris identified 6 key priorities for his time as CEO. The list included “Adding profitable growth in Beyond Beer globally.” Based on his success in the North American market, investors and fans alike are eager to see his plans for the category unfold.

Other Public Companies Reporting This Week

AB InBev was not the only major alcohol beverage company to receive good news on Thursday. Molson Coors and Diageo, who both have a major stake in hard seltzer and the RTD category, had strong second quarters. Molson Coors beat its top and bottom line estimates, reporting $1.58 per share in quarterly earnings. Zacks Consensus Estimate for the company was $1.38 per share. Molson reported $2.94 billion in revenue for the quarter, beating the Zacks Consensus Estimate by 2.31%.

The company is home to many successful RTD brands such as Vizzy Hard Seltzer, Proof Point canned cocktails, and Topo Chico Hard Seltzer, which it distributes as part of an agreement with the Coca-Cola Company. Topo Chico Ranch Water is also reportedly in the works.

Diageo’s net sales increased by 8.3% this quarter as well as its operating profit, which increased a whopping 74.6%. The company reported noteworthy organic growth of 20% in North America and insists that it is “well positioned for the future.”

Diageo recently acquired Loyal 9 Cocktails, a line of RTD canned cocktails, and Far West Spirits, a hard seltzer brand based in Texas. The company also owns Smirnoff, Tanqueray, Captain Morgan, Kettle One and Crown Royal, all of which offer RTD products.

We are excited to see what the third quarter brings for Anheuser-Busch, Molson Coors and Diageo as the beverage companies continue to expand and explore their Beyond Beer offerings.

Shirani Jayasuriya
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