Investing

History Shows Investors Shouldn't Overreact to Anheuser-Busch 'Brew-haha'

Joshua Enomoto

Published: April 14, 2023 10:48 pm

On paper, the political uproar over multinational brewery giant Anheuser-Busch (US:BUD) appears a worrying distraction. Recently, Bud Light – a brand of light beer that falls under the Anheuser-Busch umbrella – courted criticism earlier this month from conservative media personalities when it announced a partnership with Dylan Mulvaney, a transgender TikTok star and social media influencer.

Specifically, Mulvaney represents a role model to many members of the LGBTQ+ community for sharing her gender transition journey on social media. However, after she posted a video drinking a custom can of Bud Light with her picture on it, right-wing commentators – perhaps most notably country musician Kid Rock – took umbrage at the partnership between Bud Light and Mulvaney, going so far as to film a video with him shooting a rifle at packs of the beer brand, according to Reuters.

Notably, BUD stock declined by a hair over 3% in the trailing five sessions through the close of April 13. The loss of $5 billion-plus in market value prompted business news outlets to ponder the impact that the conservative backlash may impose on Anheuser-Busch.

According to Fintel’s screener for unusual options activity, BUD stock recently printed a put/call ratio of 1.88. That metric reflects the total number of disclosed open put option positions divided by the number of open call options. Since puts are generally a bearish bet and calls are a bullish bet, put/call ratios greater than 1 indicate a bearish sentiment, and ratios less than one indicate a bullish sentiment.

Sporting Controversy

To be sure, while the brewer faces boycott calls, as The Wall Street Journal highlights today, research shows that recent social-media calls to boycott brands such as Goya Foods and Spotify Technology SA (US:SPOT) “haven’t meaningfully hurt sales and at times briefly had the opposite effect.”

While initially worrying, investors should also be aware that other publicly traded enterprises sparked arguably far worse controversies yet have come out of the fire stronger.

Most notably, athletic apparel and equipment manufacturing icon Nike (US:NKE) waded into a political firestorm when it released a full video ad featuring former NFL quarterback Colin Kaepernick. A few years ago, Kaepernick aroused myriad emotions when he protested police brutality against people of color by kneeling during performances of the national anthem during football games.

Despite the glaring optics and the enormous risks Nike took regarding consumer alienation by siding so strongly with Kaepernick, NKE stock has been no worse for wear in the long run. In the past five years, NKE has gained over 91% of equity value.

On another note, credit reporting agency Equifax (US:EFX) rightfully came under enormous pressure and scrutiny for its data breach that compromised the personal identification numbers of millions of Americans. Yet the company that caused grief to so many households also recovered. In the past 60 months, EFX moved up nearly 67%.

Possible Positives

To be fair, Anheuser-Busch needs to tread carefully. According to a 2014 article by The Washington Post, consumers who vote Republican favor Bud Light and other light beer brands more so than their Democratic counterparts. Nevertheless, generating political controversy in and of itself doesn’t necessarily spell doom.

But as the WSJ reported, the brand’s decision to engage Mulvaney could stoke new interest among young consumers. It was only a few years ago that LGBTQ+ activists took aim at rival brand Coors concerning allegations that the Colorado beer maker’s management was antigay.

Citi analyst Simon Hales said the controvery is much ado about nothing and could represent a buying opportunity for BUD stock. “We view the weakness as providing another attractive entry point for investors,” he told clients in a note, “although brand volumes in some states may see short-term headwinds, we do not believe these will be material nor long lasting.”

This article originally appeared on Fintel