In this “shallow dive” we will dive into Anheuser-Busch $BUD, the world’s leading beer producer. Anheuser-Busch produces almost 1/3rd of all beer globally. They have relied on its portfolio of brands and its cost advantages to build its moat.

$BUD has participated in accretive acquisitions to build its portfolio of brands. They add value through cost advantages and improved operational efficiency. $BUD will slow acquisitions as they focus on lowering debt levels, but they already have an impressive portfolio of brands.

Anheuser-Busch brands include Budweiser “The King of Beers”, Bud Light “Dilly Dilly”, and Corona “Find Your Beach”. Each brand has a well-known catchphrase and a massive advertising budget. Drinking is a social event and people want to bring branded products to drink.

Advertising is also a fixed cost and is able to spread the costs across their scale. Other costs such as distribution, raw materials, and packaging are more localized. Anheuser Busch has an industry-leading 39% market share in the US giving them significant cost advantages.

Also, $BUD has dominant market shares in South America and Africa where it has 62% economic interest in AmBev. They can exercise cost advantages and expand margins here as well. In many countries, they have >60% market share like Brazil and Argentina.

Anheuser-Busch does face threats from localized breweries. Many individuals like craft beers, produced by smaller producers. They have consistently taken market share from larger brewers like Anheuser-Busch.

Beer is also losing market share to other types of alcoholic drinks such as seltzers and spirits. IWSR projects spirits will overtake beer as the most popular drink choice by 2030. Many beer companies are innovating bracing for this trend.

$BUD is innovating in the non-alcoholic beer space. In 2021, one of Anheuser-Busch’s brands, Stella Artois, released its first non-alcoholic beer. The parent company had double-digit revenue growth in the non-alcoholic segment.

Would love to hear what others think about Anheuser-Busch!