Anheuser-Busch InBev (NYSE:BUD) stock is down 14% year to date as the global pandemic closed bars and restaurants, exacerbating the change in consumer preference for alcoholic beverages. No longer are drinkers reaching for one of its Budweiser beers, but rather they're flocking to drinks like hard seltzer.

Yet as the world's largest brewer with hundreds of brands to its name, an investor would be foolish to write off Anheuser-Busch, as it has responded to these challenges to its business and to the trends in the industry.

But it would be just as foolhardy to rush in and buy its stock without getting a sense first for where it's going.

Man cringing next to a pitcher of beer

Image source: Getty Images.

A heavy load

Anheuser-Busch had been on a debt reduction program to reduce its massive debt load before the pandemic struck. 

Mostly acquired by the 2016 acquisition of SABMiller, the brewer began shedding assets to lower the $104 billion debt it held on its balance sheet. Then with the COVID-19 outbreak creating a worldwide calamity, Anheuser-Busch was forced to open the red ink faucet again and draw down the entirety of its $9 billion credit line and to halve -- and then suspend -- its dividend again to preserve cash.

Since then, though, the brewer has been diligently paying down its debt balances. At the end of second quarter it had reduced it to $84.6 billion and by the end of the third, it had reduced it further by another $11.4 billion.

Anheuser-Busch prefers to have its net debt at about twice the level of EBITDA, but it's currently closer to 4.8 times. Still, the brewer intends to continue its deleveraging efforts and will prioritize debt repayment to achieve that goal.

An effervescent opportunity

With its financial situation under control, Anheuser-Busch continues pursuing the hard seltzer trend with a half dozen different brands in its portfolio. Its Bon & Viv is the third largest on the market, but with a 6% share, distantly trails industry leader White Claw from Mark Anthony Brands and Boston Beer's Truly, which have a 58% and 26% share, respectively.

Yet hard seltzer consumption has been growing at triple-digit rates from before the pandemic settled in and has only accelerated since. Molson Coors (NYSE:TAP), which owns the Vizzy Hard Seltzer brand, expects to expand seltzer capacity by 400% by the end of the year, and there are numerous other new seltzers coming to market regularly. 

Coca-Cola, for example, will be joining the frenzy with its own hard seltzer in 2021 and Anheuser-Busch will be launching Michelob Ultra Organic Seltzer in January. 

There's also the potential for international expansion, which would favor multinational giants like Anheuser-Busch, which introduced its Mike's Hard Sparkling Water in China in September. Heineken entered the Mexico and New Zealand markets, while Carlsberg launched in Singapore.

It's a market that's growing rapidly that can support multiple players still.

Still crying in its beer

So where does beer stand? It's definitely lagging. Anheuser-Busch's total volume is down 8.2% over the first nine months of 2020, leading to a 12.5% decline in revenue. Beer volume is down 8.3%, though it did see a 2.6% increase in the third quarter.

Although Anheuser-Busch has long been the mainstream to low-end brewer of choice, it has followed in the premiumization trend occurring across alcoholic beverages, with brands like Michelob Ultra accelerating their gains, and remains the second-highest selling beer by dollars in the U.S. after Bud Light, according to IRI. Still, its mass market brands lost 120 basis points of market share as consumers traded up.

One for the road

The COVID-19 pandemic definitely staggered Anheuser-Busch InBev, if for no other reason than because of its global footprint, which was affected in every market it operates.

That has hurt investors, as they've seen what was once a reliable dividend payer forced to eliminate its payout for the foreseeable future. But the brewer's financials have stabilized and are improving, and it has multiple paths to follow to shore them up even further.

Analysts see Anheuser-Busch growing earnings at 11% annually for the next five years, suggesting the brewer has a route to additional growth going forward. The stock might have more than doubled from its low point in March, but investors should still consider the brewer's stock a buy.

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.