Anheuser-Busch InBev BUD, aka AB InBev, is ready to brew Pabst Beer, as it inks a brewing contract with Pabst Brewing Company. This marks a significant shift after Pabst’s 20-year partnership with Molson Coors Beverage Company TAP ended in December 2024.

Starting in the first quarter of 2025, Pabst’s iconic brands, including Pabst Blue Ribbon, Old Style and Old Milwaukee, will be brewed at several AB InBev facilities.

This transition represents a pivotal moment for Pabst, which has relied on third-party brewing since closing its Milwaukee brewery in 1996. The partnership with AB InBev provides enhanced supply capacity and opportunities for portfolio expansion as consumer preferences evolve.

Notably, Pabst had prepared for the end of its Molson Coors contract by securing a separate long-term agreement with City Brewing in 2019. City Brewing, with facilities in Wisconsin, Tennessee, California and Pennsylvania, will continue to produce a significant volume of Pabst’s products under a deal extending through 2040.

For AB InBev, this collaboration integrates a former competitor into its supply chain. Despite recent facility closures, the beer giant invested $2 billion into its U.S. operations over the last five years. Production of Pabst’s Lone Star brand is slated to begin at AB InBev’s Houston brewery in early 2025, solidifying this landmark partnership.

AB InBev’s shares did not react much to the news. However, shares of this Zacks Rank #4 (Sell) company have lost 24.4% in the past three months compared with the industry’s 17.1% decline.

BUD Stock 3-Month Performance

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More Insights on BUD

One of the key reasons for AB InBev’s dismal stock trend is elevated costs stemming from a high commodity cost environment and investments to support its long-term growth initiatives. In the third quarter of 2024, the cost of sales declined on a reported basis but increased organically. This organic increase was primarily driven by commodity cost inflation and elevated supply-chain expenses in certain markets, partially offset by the company's improved pricing strategies.

Despite challenges, AB InBev is strategically positioned, thanks to its pricing actions, continued premiumization and other revenue-management initiatives that have supported revenue growth. Strong business momentum, driven by relentless execution, brand investments and accelerated digital transformation, has bolstered its top-line performance.

Premiumization of the beer industry has been a key growth opportunity for AB InBev. The company has been investing to develop a diverse portfolio of global, international, and crafts and specialty premium brands in its markets. AB InBev continues to expand its Beyond Beer portfolio, which includes ready-to-drink beverages such as canned wine, canned cocktails, hard seltzers, cider and flavored malt beverages. This portfolio aligns with the growing demand for low-alcohol and non-alcoholic drinks, contributing positively to the company's top line.

AB InBev has been investing in new capabilities to enhance its connection with customers and consumers, with a strong focus on growing its digital platform. The company has seen an acceleration in B2B sales, e-commerce and digital marketing trends, which should bolster growth.

Don’t Miss These Solid Bets

We highlighted some better-ranked stocks from the Beverages - Alcohol space, namely Constellation Brands STZ and The Boston Beer Company SAM.

Constellation Brands produces and markets beer, wine and spirits. It is the third-largest beer company and a leading, high-end wine company in the United States. It currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Constellation Brands’ fiscal 2025 sales and earnings implies growth of 4.1% and 13.8%, respectively, from the year-ago reported number. STZ delivered an earnings surprise of 5.3% in the last reported quarter.

Boston Beer is one of the largest craft brewers in the United States. It produces beer, malt beverages and cider products at company-owned breweries and under contract. The company currently has a Zacks Rank of 2.

The Zacks Consensus Estimate for Boston Beer’s 2025 sales and earnings suggests growth of 2.6% and 31%, respectively, from the year-ago reported figures. SAM has a trailing four-quarter earnings surprise of 154.6%, on average.

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Molson Coors Beverage Company (TAP) : Free Stock Analysis Report

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Anheuser-Busch InBev SA/NV (BUD) : Free Stock Analysis Report

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