Bud Light's long-running turnaround is still falling flat.
Anheuser-Busch InBev NV, the world's largest brewer by sales, said its best-selling brand in the U.S. lost almost a full percentage point of market share in the three months to June 30--a steeper-than-expected retreat in a long-running, beer guerrilla war usually fought in tenths of a percent.
Budweiser also lost market share--more than a third of a percentage point in the U.S. Those setbacks came, however, as AB InBev made progress consolidating control over SABMiller, which it bought last year for more than $100 billion.
Cost-cutting associated with that integration, as well as higher prices, helped boost global profits for the beer giant in the three months ending in June. The company reported overall growth in volumes around the world for the quarter. Earnings, stripping out one-off gains or losses, beat analysts' expectations. AB InBev shares were up more than 4% in midday Europe trading.
Still, AB InBev's longer-term struggles in the key U.S. market threaten to overshadow those shorter-term gains.
In May, the company said it was launching one of the largest capital investment programs in U.S. brewing history, pouring close to $500 million into its U.S. operations this year and a total of $2 billion through 2020. AB InBev's sales in the U.S. have fallen as American consumers shift away from domestic lagers toward craft beers, Mexican imports, wine and spirits.
That new spending follows previous efforts at turning around Bud Light and Budweiser, AB InBev's namesake beers. Earlier this year, the company launched a fresh Bud Light marketing campaign, "Famous Among Friends."
Pitched as a down-to-earth homage to the large and small moments of friendship, it followed a more over-the-top campaign, "The Bud Light Party," that featured comedians Seth Rogen and Amy Schumer but failed to improve sales.
More recently, Bud Light has sponsored a "Dive Bar Tour" of Lady Gaga performances across the country. It is rolling out more marketing around its "Friends" campaign later this summer and into the fall.
AB InBev said it has seen some improvement from those efforts, but was disappointed in the steep market share decline. Bud Light lost nine-tenths of a percentage point of market share in the second quarter of 2017, a decline that has accelerated sharply from the half percentage point it lost through all of 2016.
In the U.S., "we've seen additional pressure in the premium sector, especially for Bud Light," Chief Financial Officer Felipe Durta said Thursday. Still, he said, "we're moving in the right direction."
Bud Light remains by far America's favorite beer by sales, but the second-quarter drop continues years of declines. Mr. Durta said the company needs to "to balance the equation in terms of share and profitability."
The company also recently rolled out marketing aimed at some key Hispanic markets and is releasing a handful of beers it markets as "craft," to compete with the hundreds of smaller brewers that have popped up across the country in recent years. It said this portfolio gained market share. It didn't provide details.
The Budweiser brand, meanwhile, lost over a third of a percentage point of market share in the quarter despite its own marketing push. Last year, and again this year, it rebranded cans and packaging of Budweiser with a special "America" logo. The move--which first came ahead of last year's presidential campaign--drew controversy, but the company said in May it would do it again this year, through late summer.
Mr. Durta said the company was seeing "positive momentum" behind the campaign.
Overall sales volume in North America fell 1.1% in the quarter from a year ago. Margins in the U.S. increased, however, as the company's portfolio of more-expensive beers, including Michelob Ultra and Stella Artois, performed well.
Outside the U.S., AB InBev had better news. It said overall net profit rose to $1.5 billion in the quarter, from $152 million a year earlier. Adjusted core earnings, which strip out one-time gains or losses, rose 12%, to $5.35 billion as the company benefited from higher prices and additional cost savings from its acquisition of SABMiller.
AB InBev said the integration of SAB "continues to go as planned," with savings of $335 million from the combination in the period. That has led some analysts to suggest the company could wring out more than the overall $2.8 billion in cost savings the company is targeting in the deal.
Gains in Mexico, South Africa and Australia lifted revenue to $14.18 billion, a rise of 5%, excluding the effects of currency swings and acquisitions. Brazil saw core profit decline for a sixth straight quarter as the brewer's second largest market emerges slowly from a prolonged recession.
AB InBev said its full-year expectations of an acceleration of revenue growth remains unchanged despite increased volatility in some key markets.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
July 27, 2017 08:00 ET (12:00 GMT)