Anheuser-Busch InBev (NYSE:BUD), the world's largest brewer, sells 630 brands of beers worldwide, including Budweiser, Michelob, Stella Artois, Cass, Corona, and Hoegaarden. It also owns popular craft beer brands like Karbach, Goose Island, Blue Point, Elysian, and Golden Road.

AB InBev was born from the mergers of American brewer Anheuser-Busch, Belgium's Interbrew, Brazil's AmBev, and British brewer SABMiller, which subsequently sold its Miller brands to Molson Coors (NYSE:TAP).

A bottle of beer being opened.

Image source: Getty Images.

AB InBev's massive portfolio of beer brands seemingly made it a sound investment for conservative income investors. However, competition from craft and local brands, a shift from beers toward spirits among Millennial drinkers, and the impact of COVID-19 on restaurants and nightlife are all throttling its global shipments.

AB InBev has also significantly reduced its semi-annual dividends since 2018, and the recent failures at Kraft Heinz (NASDAQ:KHC) -- another company merged by AB InBev's major shareholder 3G Capital -- sparked fears about its long-term growth. Can AB InBev overcome these challenges over the next five years, or is it doomed to underperform the broader market?

Can AB InBev keep growing?

AB InBev's main strategy is to "premiumize" its brands and sell them at higher prices to offset slower shipment volumes. That's why its volumes rose 1.1% in 2019, but its revenue per hectoliter grew 3.1% and boosted its total revenue 4.3%.

Three friends clink their glasses of beer.

Image source: Getty Images.

Its top brands throughout the year included Budweiser, which generated 3.3% revenue growth outside the U.S. with robust demand in Brazil, India, and Europe; Stella Artois, which generated 6.5% growth globally; and Corona, which continued expanding with 21% growth outside of Mexico.

That top-line growth looks stable, but AB InBev's adjusted EBITDA margin contracted 65 basis points annually to 40.3% last year. It attributed that decline to the "highest annual increase in commodity and transactional currency costs in the past decade," which was exacerbated by "challenging macroeconomic environments in many of our relevant markets."

AB InBev partly cushioned that blow with its listing of Budweiser APAC in Hong Kong last September and the divestment of its Australian operations. Its adjusted EBITDA grew 2.7% for the year, but its dividend payments were also 35% lower in 2019 -- presumably because it wanted to conserve more cash to acquire new brands while reducing its high leverage ratio of 4.0.

What will the next five years be like for AB InBev?

AB InBev didn't offer any clear guidance for 2020, but analysts anticipate a 15% revenue decline (mainly due to its divestments) with a 57% drop in its reported earnings.

But in 2021, its revenue and earnings are expected to rise 9% and 81%, respectively, as its business stabilizes and it faces easier year-over-year comparisons.

Unlike Kraft Heinz, which sacrificed its margins to boost sales, AB InBev plans to continue "premiumizing" brands and launching new variations -- like low-calorie Michelob Ultra and non-alcoholic beers -- to attract new customers. This strategy, which mirrors Coca-Cola's (NYSE:KO) expansion of its beverage portfolio beyond its classic sodas, could generate fresh cash for making new acquisitions and reducing its long-term debt of $95.5 billion.

Investors should always take long-term forecasts with a grain of salt, but analysts still expect AB InBev's earnings to grow at an average rate of 11% annually over the next five years. That stable growth rate suggests AB InBev can counter its headwinds with its premiumization and expansion strategies.

Still a stable investment... as long as people drink beer

AB InBev faces slower growth as it runs out of brands to gobble up, but it will likely remain a solid long-term investment as long as people still drink beer. Millennials might be developing a taste for spirits, but that doesn't mean they'll abruptly abandon top beer brands like Budweiser, Corona, and Stella Artois.

AB InBev's stock has been cut in half over the past five years as its slowing growth, high debt, and dividend cuts spooked investors, but it could rebound over the next five years as its business stabilizes.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.