Bud Light parent Anheuser-Busch's latest union issues may complicate its 2024 plans

Anheuser-Busch InBev (BUD) won't be able to kick this can down the road.

While external battles have been brewing all year, Bud Light's parent company is now facing internal conflict with its workforce.

Last weekend, Teamsters at its 12 US breweries voted to authorize a strike, where 99% of its 5,000 members agreed to walk out if the company does not offer a "strong new contract" by the time the current agreement expires on Feb. 29, 2024.

Teamsters are asking for improved wages, job protection, and healthcare and retirement benefits.

"Anheuser-Busch is aware of the Teamsters' strike authorization vote, which is common during labor negotiations," an Anheuser-Busch spokesperson told Yahoo Finance over email. "We are committed to negotiating in good faith with the union to reach an agreement that recognizes and rewards the talent, commitment, and drive of our employees."

The Teamsters, who are part of the International Brotherhood of Teamsters, said there are currently no dates set for negotiations and they have recently rallied in New Hampshire, California, and Florida with "more actions" set to take place soon across the country.

An authorization to strike often does not end up in a walkout if two sides can find common ground. Bernstein analyst Trevor Stirling said he wasn't fazed by the recent developments.

"It's normal that unions are making aggressive noises ahead of negotiations," he told Yahoo Finance over the phone.

Since 2008, Anheuser-Busch has been owned by Brussels, Belgium-based multinational beer conglomerate Anheuser-Busch InBev. Its portfolio spans beer brands from China and South Korea to South Africa and Brazil.

AB Inbev’s international reach may help insulate it from effects of a potential strike. "[It’s] not existential in the sense that the US is by far the biggest market in the world, but it's not the only one", said Stirling.

Though a strike would affect operations at all of Anheuser-Busch’s US breweries, it has 19,000 US employees, according to its website, leaving nearly three quarters of its workforce outside of the Teamster union.

Given Teamsters’ contract ends in February, the company also has time to sort it out.

"Sales in March and April are relatively light, it's really when you get into the Memorial Day weekend that beer demand really starts to pick up," Stirling said.

A murky outlook for 2024

Anheuser-Busch’s labor issues come at a time when the company is facing declining sales and popularity.

Last quarter, its North America volumes dropped 17.1% year over year, largely due to a marketing campaign with transgender influencer Dylan Mulvaney that sparked a widespread boycott of Bud Light.

In July, Anheuser-Busch laid off less than 2% of its US workforce, though it said at the time it did not affect the brewery workers.

The Teamsters have taken issue with the company’s recent $1 billion stock buyback, announced following its Q3 results. The union said the company was providing more for “wealthy investors as it simultaneously ignores the need to protect good jobs.”

While Anheuser-Busch shares are up 7% on the year, it falls far short of rival Molson Coors’s (TAP) 25% gain.

On the upside, the decline in Bud Light sales was “most pronounced” in May and has since stabilized, Vivien Azer, managing director at Cowen, told Yahoo Finance.

She added that a shift in consumer preference to canned cocktails and premium Mexican import beers is something to watch next year.

AB InBev owns the international rights to Corona and Modelo, while Constellation Brands (STZ) owns the rights to those brands in the US.

But Stirling expects the hit on volume will be somewhat "permanent" to Bud Light, putting "pressure on profitability" at a time when its labor costs are likely to rise. After authorizing a strike at UPS, Teamsters ratified a new contract in August that offered wage increases across the board. The union claimed that the deal "will keep UPS Teamsters the highest-paid delivery drivers in the nation."

David Madland, senior fellow at Center for American Progress, thinks we could see "a similar scenario playing out" for Anheuser-Busch. In addition to the raises, UPS's last-minute deal, which averted a strike, got rid of a two-tier contract and added "some protections against sort of invasive technology monitoring."

"There's a long record of pretty decent labor relations at both UPS and Anheuser-Busch ... while there might be concerns right now about a contract and escalating fights, there is a track record to rely on that they could fall back on and hopefully reach an agreement before there's a strike," Madland told Yahoo Finance Live.

Stirling said investors could see a situation where Teamsters endorse a voluntary layoff program that is sufficient for ABInBev to adjust its cost base, but cautioned there are many moving parts to the situation.

Either way, the company is not giving up on Bud Light. It’s heading into 2024 with a renewed focus on sports, with a partnership between Bud Light and UFC set to begin in January.

"They're trying to find some new people and I think the UFC provides them the opportunity to do so," Anjali Bal, associate professor of marketing at Babson College, told Yahoo Finance.

Its Michelob Ultra line also recently announced that Lionel Messi will join as a brand ambassador, as part of a larger partnership that makes Michelob the beer sponsor of Official Copa América USA 2024.

Based on its latest financial results, AB InBev expects EBITDA to grow "in line with our medium-term outlook of between 4-8% and our revenue to grow ahead of EBITDA from a healthy combination of volume and price" to end fiscal 2023.

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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].

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