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Anheuser-Busch InBev — the biggest brewer in the world and maker of the ubiquitous Budweiser — is in a really funky place.
The company reported a quarterly-earnings miss on Thursday, showing weakness both in the United States and also in emerging markets where it is hoping to take market share, especially China and Brazil.
In a call with reporters after the report, CFO Felipe Dutra acknowledged that this was "not where we want to be."
The company, to be more specific, is in a kind of investor purgatory. Macroeconomic headwinds and softness in Budweiser sales mean growth is anemic. Full-year sales volume declined by 0.6% in 2015, and the company's cost of sales increased by 3.9%. You can thank currency volatility for that.
What's more, this is a company sitting on $42.2 billion of debt.
But providing hope (at least for the bulls) that things will get better is AB InBev's $110 billion merger with SABMiller. Together, they'll make one out of three beers in the market. InBevraised $46 billion in debt in January to get the deal done.
AB InBev's play with the merger was to move more aggressively into emerging markets, and investors expect serious cost savings.
That is in part because of the company's reputation.
AB InBev, after all, is known for its commitment to "synergies" and cost cutting. Jorge Lemann, a board member at InBev who was one of the billionaire finance wizards behind the SABMiller deal, once said he would love to look at Coca-Cola.
"We could run it with 200 people," he said.
Indeed, right before AB InBev announced that it would acquire SABMiller on October 13, SABMiller shut down the only brewer in South Sudan.
BUD stock chartYahoo FinanceAB InBev year-to-date.
During Thursday's earnings call, though, it seemed as if the company was acknowledging that it would have to spend money to make money. Big beer is a marketing business, and as the beer drinkers start picking up craft beers, getting Amy Schumer to appear in a television ad is one of the edges big beer companies still have.
And Amy costs money.
The AB InBev-SAB transformation is not expected to be complete until the end of 2016. That's when we'll start to know whether we're really going to get the $1.4 billion in cost savings that investors are expecting.
Macroeconomic headwinds, though, aren't going anywhere. Neither are changing tastes toward smaller brewers. Debt is piling up, and investors are feeling negative about stocks. AB InBev's stock is up less than half a percent since the SABMiller deal was announced, and it's down 10% year-to-date.
Wall Street will wait to see whether this deal delivers, but Wall Street is not known for waiting politely.