What happened

Shares of Anheuser-Busch InBev (NYSE:BUD) fell 39.7% over the first six months of 2020, according to data from S&P Global Market Intelligence, versus a 3% loss for the S&P 500 index. 

Although alcohol stocks are often seen as recession-resistant on the theory that people tend to drink more during bad times, the pandemic-induced downturn was different.

Bartender pouring beer from a tap.

Image source: Getty Images.

So what

Part of Anheuser-Busch's problem is that beer consumption remains on the decline in the U.S. Consumer preferences overseas aren't shifting so dramatically, but the domestic market is the company's largest. 

While the brewer is participating in the hard seltzer trend — one of the fastest-growing segments in alcohol — it trails far behind the category's leaders, like Mark Anthony Brands' White Claw and Boston Beer's Truly. And there are many, many more wannabes entering the market regularly.

The biggest problem for Anheuser-Busch in the first half of 2020 was that restaurants and bars worldwide were shut down. On-premise sales make up a large portion of its business, and while many restaurants were still taking takeout orders, people weren't ordering drinks to-go.

Sales volumes fell 9% in the first quarter ending in March and then plummeted 32% in April. The second-quarter earnings results released at the end of this month will probably be equally devastating.

Now what

Off-premise sales at package stores, convenience stores, and other locations were something of a safety net under the brewer. Still, they weren't enough to prevent Anheuser-Busch from slashing its dividend 50% to conserve cash. Cutting its payout twice in two years did nothing to endear it to income-seeking investors, and it points to ongoing challenges for the beer maker to overcome.