Anheuser-Busch InBev (BUD, Financial) stock fell 1.96% on Monday, ending the day at $107.79 a share. The company's stock is down 4.85% since Jan. 3 and is the victim of trade war escalation on Monday. The Trump administration's battle with China is partly to blame for the company's stock falling.
China and the U.S. are engaged in a tariff war, which has sent the broader stock market crashing.
Wall Street saw its gains in 2018 wiped out as fears led to a tech selloff. The Dow fell to the lowest point in 2018 while the S&P 500 and Nasdaq suffered their largest losses since Feb. 8. Steel and aluminum tariffs are being countered with up to a 25% increase on 128 U.S. products.
The tariffs will increase the prices of a wide range of goods, including wine, nuts, fruits and frozen pork.
Tariff increases will be imposed on up to $3 billion in goods, with many economists expecting further tariffs in the future. The Ministry of Commerce has also decided to suspend their World Trade Organization obligation to reduce tariffs on 120 U.S. products. Products that are part of the obligation will have their tariffs raised an additional 15%.
Anheuser-Busch InBev is expected to be impacted from the rise in steel and aluminum prices, as brewers chose to go to aluminum as glass prices increased. Aluminum is also better at protecting the beer from air and light, which impacts the beer's taste.
Can prices may rise as a result of tariffs, which will narrow margins for Anheuser-Busch InBev and push out many smaller brewing companies in the process. Bottle caps, placed on the glass bottles that these companies offer, are also made from aluminum, further impacting prices for consumers.
Anheuser-Busch prices were stabilized on the news that the alcohol company is launching a revolutionary incentive-based sponsorship model. Sports sponsorships have been a primary driver for the company, which has a 45% market share in the U.S.
U.S. sponsorships by the company were estimated at $350 million in 2016, surpassing Coca-Cola sponsorships of $265 million.
"Those are legacy [sponsorship] models that were created on a consumer behavior that is no longer there," said Joao Chueiri, vice president of Consumer Connections at Anheuser-Busch InBev. "We need to evolve the model, and as the leaders in the industry, we are pushing for that evolution."
The new sponsorship model will be incentive-based, relying on the athletes' performances. Anheuser-Busch InBev will offer a base sponsorship to players with incentives for making it to the playoffs, where the brand will receive increased exposure. The company will work with teams and leagues to help develop and choose metrics on a case-by-case basis.
Deals up for renewal will start using the new sponsorship money, which is expected to save the company money and encourage sponsors to perform better.
Anheuser-Busch InBev is under increasing pressure from craft beer sales, which rose by 8% in 2017.
The company's stock is down 2.66% in the last year through April 2 and up 10.44% over the last five years ending on April 2.
Disclosure: Author does not own any stake in the listed equities.
