Anheuser-Busch (BUD) Sells 8 Beer & Beverage Brands to Tilray

Anheuser-Busch BUD entered a definitive agreement to sell eight of its beer and beverage brands, including Shock Top, Breckenridge Brewery, Blue Point Brewing Company, 10 Barrel Brewing Company, Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Company, and HiBall Energy, to Tilray TLRY. This deal is expected to help grow Tilray’s Beverage alcohol segment. With this deal, Tilray will emerge as the fifth-largest craft beer company in the United States.

The move comes after Anheuser-Busch’s beer brand became the subject of controversy following its collaboration with trans activist Dylan Mulvaney. This affected sales of the top-selling beer brand and dented BUD’s shares.

The transaction, which is subjected to customary closing conditions, will close by 2023. The deal also includes BUD’s current employees, four production facilities in Portland, OR, Bend, OR, Littleton, CO, and Patchogue, NY, as well as brewpubs in Seattle, WA, Bend, OR, Portland, OR, Boise, ID, Littleton, CO, Breckenridge, CO, and Patchogue, NY.

What’s More?
AB InBev remains focused on growing its Beyond Beer portfolio, including products like ready-to-drink beverages like canned wine and canned cocktails, hard seltzers, cider and flavored malt beverages. The Beyond Beer trend has recently been gaining popularity due to the rise in demand for low-alcoholic or non-alcoholic drinks.

The expansion of its Beyond Beer portfolio has also been aiding the top line. Notably, the Beyond Beer portfolio contributed more than $325 million to the total revenues in first-quarter 2023. The global Beyond Beer business’s revenues improved in the low-single digits in the first quarter. The company witnessed 75% revenue growth in Brazil, as Beats activated demand during the return of Carnival. In the United States’ spirit-based ready-to-drink segment, Cutwater and NUTRL vodka seltzer together delivered revenue growth of more than 50%.

The company’s premiumization strategy bodes well. Its above core portfolio grew revenues in the mid-teens in first-quarter 2023, driven by continued double-digit growth of Michelob ULTRA in the United States and Mexico, and double-digit growth of Original and Spaten in Brazil. The company’s three global brands — Budweiser, Corona and Stella Artois — advanced 15.4% outside their home markets in the first quarter. The Corona brand grew 11.9%, Stella Artois improved 13.3% and Budweiser increased 17.8% outside their respective home markets.

Also, the company has been witnessing acceleration in the B2B platforms, e-commerce and digital marketing trends, which have been aiding growth for the past few months. Its digital transformation initiatives have been on track, with the B2B digital platforms contributing about 62% to its revenues in the first quarter. The company noted that the monthly active user base of BEES reached 3.1 million users as of Mar 31, 2023. Its direct-to-consumer ecosystem, including Ze Delivery, TaDa and PerfectDraft, generated more than $100 million in revenues in first-quarter 2023, reflecting year-over-year low-teen growth.

We note that shares of this Zacks Rank #3 (Hold) company have gained 5.3% in the past three months against the industry’s decline of 2.4%.

While the company is gaining from improving trends in the key markets and continued premiumization in the majority of its markets, commodity cost inflation continues to act as a deterrent. Elevated supply-chain costs and unfavorable changes in taxes remain concerning.

Stocks to Consider
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely TreeHouse Foods THS and Associated British Foods ASBFY.

TreeHouse Foods, a manufacturer of packaged foods and beverages, currently sports a Zacks Rank #1 (Strong Buy). THS has a trailing four-quarter earnings surprise of 49.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for TreeHouse Foods’ current financial year’s sales suggests a decline of 12.4% from the year-ago reported number.

Associated British Foods is a diversified international food, ingredients and retail group, which currently flaunts a Zacks Rank #1. ASBFY’s expected EPS growth rate for three to five years is 7%.

The Zacks Consensus Estimate for Associated British Foods’ current financial-year sales and earnings suggests growth of 30.4% and 4.2%, respectively, from the year-ago reported figures.