Bill Gates, the seventh-richest person in the world according to the Forbes 2023 list, has been losing money on one of his latest investment bets.
Gates, who amassed his wealth by cofounding and leading Microsoft Corp. for decades before retiring in 2008, has since focused on investing in private corporations and publicly traded companies.
In the fiscal second quarter of 2023, Gates purchased over 1.7 million shares of Anheuser-Busch InBev (NYSE:BUD), maker of popular beer brands including Bud Light and Corona. Headquartered in Brussels, Anheuser-Busch InBev is the world’s largest brewer and one of the largest alcohol companies globally.
But Anheuser-Busch InBev has been stirring up controversy over the past couple of months after it hired transgender influencer and social media personality Dylan Mulvaney to promote Bud Light on Instagram. This caused the Belgian brewery’s popularity in the U.S. to deteriorate, with many prominent personalities calling for a boycott of its signature Bud Light beer.Anheuser-Busch InBev’s Performance So Far In 2023
In the second quarter that ended June 30, AB InBev’s U.S. revenue plummeted by 10.5%, primarily because of Bud Light’s declining sales volume. The company’s core profit fell by 28.2%, while total global sales volume fell 1.4% year over year in the last reported quarter. However, the company’s strong global presence allowed it to offset losses from the U.S., as its total revenue rose 7.2% year over year.
While AB InBev’s normalized earnings before interest, taxes, depreciation and amortization (EBITDA) rose by 5% year over year in the same period, its net profits and earnings per share (EPS) declined compared to the second quarter of 2022.
Constellation Brands Inc.’s Modelo became the top-selling beer in the United States in May during the height of the Bud Light controversy, as AB InBev’s sales plunged by nearly 25%.
AB InBev aimed to distance itself from Mulvaney’s social media post following the controversy, which was also off-putting to many progressives. The world’s largest brewer essentially “managed to alienate both conservatives and progressives in one fell swoop,” according to Zak Stambor, a senior analyst at Insider Intelligence.
AB InBev’s Pivoting Strategy To Regain Momentum
“In the U.S., we are listening and actively engaging with our consumers,” AB InBev CEO Michel Doukeris said during a quarterly earnings call. “They want to enjoy their beer without a debate, they want us to focus and concentrate on platforms that all consumers love.”
To this end, the company surveyed Bud Light consumers through a third party and found that approximately 80% of the 170,000 respondents remained neutral or favorable.
AB InBev also determined through engagement with its U.S. customers that they want “their beer without a debate” and “Bud Light to focus on beer.”
The company’s efforts to put the controversy behind it are expected to be fruitful in the near term, as analysts expect AB InBev’s revenue and EPS to improve sequentially in the about-to-be-reported third quarter. The consensus revenue estimate of $15.71 billion for the third quarter ended Sept. 30 indicates a 2.2% improvement quarter-over-quarter. In addition, analysts estimate AB InBev’s EPS to amount to $0.83 in the last quarter, up from $0.68 generated in the second quarter.
Gates’ Portfolio: YTD Performance
Gates acquired 1,703,000 million shares of AB InBev in the second quarter for nearly $100 million through the Bill & Melinda Gates Foundation Trust. However, with AB InBev’s share price falling because of the recent controversy and declining sales in the U.S., Gates has lost over $6 million on his investment in the beer company.
While Gates’s recent investment is in the red, his other investments, notably in Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK), have surged by over 9% year to date. As of June 30, Gates owns nearly 25.14 million shares of Berkshire Hathaway, which accounts for 20.4% of his portfolio.