Anheuser-Busch, the owner of Bud Light, is grappling with a significant slump in sales after a controversial celebrity endorsement campaign led to a backlash from conservative consumers. The company’s decision to bring on board transgender influencer Dylan Mulvaney, who boasts over 10 million followers on TikTok, for a promotional campaign proved to be a costly misstep.
The company saw a sharp decline in volumes by over 12% in April, with Bud Light recording a ‘shocking deterioration’ of 21.4%, according to Beer Business Daily. This downturn came after conservative Bud Light fans voiced their displeasure with Mulvaney’s endorsement and instigated a campaign to boycott the beer brand.
Meanwhile, rivals Molson Coors and Constellation Brands have been capitalizing on the controversy, recording respective growth of 7.6% and 3.8% during the same period.
Constellation Brands (STZ)
Constellation Brands appears to be profiting from the aftermath of the Mulvaney endorsement controversy. As the company responsible for bringing top-selling imported brands such as Modelo and Corona to the US, Constellation has witnessed a surge in growth following a misjudgment on the part of Anheuser-Busch.
The Q4 2023 financial report of Constellation illustrated a year-over-year revenue decline of 4.8%, amounting to $2 billion, which was $20 million below the predicted figure. Nonetheless, an EPS of $1.98 surpassed the forecasted $1.84. Looking ahead, Constellation anticipates an EPS for the next year in the region of $11.70-$12.00, which is marginally above the average consensus of $11.80.
In spite of the mixed financial outcomes, Morgan Stanley analyst Dara Mohsenian remains optimistic about the future prospects for Constellation Brands. He has classified STZ as Overweight (Buy) and set a $277 price target, indicating the potential for a 23% return over the next 12 months.
Molson Coors (TAP)
Molson Coors has also benefited from the recent Bud Light controversy, seeing a significant boost in sales for its flagship brands, Coors Light and Miller Lite, which recorded increases of 17.3% and 19.1% respectively in April.
In Q1, Molson Coors reported a 6.3% year-over-year revenue increase to $2.35 billion, outperforming the forecast by $120 million. Furthermore, the company’s adjusted EPS of $0.54 beat analysts’ expectations of $0.26.
While the company’s guidance might disappoint some investors, Roth MKM analyst William Kirk remains optimistic, citing the potential for outstanding P&L leverage given the recent strong volume performance. He maintains a Buy rating on Molson shares, with a $75 price target, indicating potential 12-month gains of 16%.
Both Constellation and Molson Coors are poised to capitalize on the shifting consumer preferences in the beer market. As Anheuser-Busch works to recover from its recent misstep, these companies stand to further solidify their standing among consumers and investors alike.
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