Bill Gates’ Recent Investment Dilemma: The Bud Light Gamble

Bill Gates, the seventh-richest individual globally, as per Forbes 2023 rankings, is encountering financial setbacks due to one of his latest investment ventures. While Gates initially accumulated his wealth through his pivotal role in co-founding and leading Microsoft Corp. for several decades before retiring in 2008, he has since redirected his focus towards investments in both private and publicly traded companies.

Gates’ Investment in Anheuser-Busch InBev

In the second quarter of the fiscal year 2023, Gates made a notable move by purchasing over 1.7 million shares of Anheuser-Busch InBev (NYSE:BUD), a company renowned for its popular beer brands, including Bud Light and Corona. Anheuser-Busch InBev, headquartered in Brussels, holds the distinction of being the world’s largest brewer and one of the leading alcohol companies globally.

The Bud Light Controversy

However, Anheuser-Busch InBev has recently been embroiled in controversy. The brewing giant hired Dylan Mulvaney, a transgender influencer and social media personality, to promote Bud Light on Instagram. This decision triggered a backlash and caused the company’s popularity, particularly for Bud Light in the U.S., to decline significantly. Prominent figures have even called for a boycott of the signature Bud Light beer.

Performance of Anheuser-Busch InBev in 2023

During the second quarter that concluded on June 30, AB InBev faced a substantial 10.5% drop in U.S. revenue, primarily attributed to the declining sales volume of Bud Light. The company’s core profit also declined by 28.2%, and its total global sales volume fell by 1.4% year-over-year in the most recently reported quarter. Nonetheless, the company’s robust global presence enabled it to offset U.S. losses, resulting in a 7.2% increase in total revenue year-over-year.

While AB InBev’s normalized earnings before interest, taxes, depreciation, and amortization (EBITDA) demonstrated a 5% year-over-year growth in the same period, its net profits and earnings per share (EPS) saw a decrease compared to the second quarter of 2022. Notably, Constellation Brands Inc.’s Modelo became the top-selling beer in the United States during the peak of the Bud Light controversy, with AB InBev’s sales plunging by nearly 25%.

AB InBev’s Efforts to Rebound

In response to the controversy, AB InBev adopted a pivoting strategy aimed at regaining momentum in the U.S. market. AB InBev CEO Michel Doukeris emphasized their commitment to listening and actively engaging with consumers in the United States. Consumers expressed their desire to enjoy beer without getting entangled in debates, urging Bud Light to focus on delivering quality beer. AB InBev conducted surveys among Bud Light consumers through a third party, revealing that around 80% of the 170,000 respondents remained neutral or had a favorable view.

Prospects for AB InBev’s Future

The company’s efforts to put the controversy behind it are anticipated to yield positive results in the short term. Analysts expect a sequential improvement in AB InBev’s revenue and EPS in the upcoming third quarter. The consensus revenue estimate for the third quarter ending on Sept. 30 indicates a 2.2% increase quarter-over-quarter, reaching $15.71 billion. Additionally, analysts project AB InBev’s EPS to amount to $0.83 in the last quarter, up from $0.68 generated in the second quarter.

Bill Gates’ Portfolio: Year-to-Date Performance

Gates made a significant investment of 1,703,000 million shares in AB InBev during the second quarter, allocating nearly $100 million through the Bill & Melinda Gates Foundation Trust. However, due to the recent controversy and declining sales in the U.S., Gates has faced a loss of over $6 million on his investment in the beer company. While Gates’ recent investment in AB InBev is facing challenges, his other investments, particularly in Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK), have seen impressive growth, surging by over 9% year-to-date. As of June 30, Gates holds nearly 25.14 million shares of Berkshire Hathaway, constituting 20.4% of his portfolio.