Anheuser-Busch to focus on domestic brands this year

In a beer market that is basically flat and where domestic volumes can only be maintained with the help of price promotions, Anheuser-Busch plans to use line extensions of core brands, different advertising, and cost cuts to revive its core beer sales and profitability.

At the February conference of the Consumer Analyst Group of New York hosted in Florida, Anheuser-Busch’ Chief Executive Officer August Busch reported that for the first six weeks of 2008 its total sales from wholesalers to retailers rose 1.9 percent, with its core brands up 0.6 percent. That is an improvement from 2007, when sales to retailers rose 1.3 percent in total, but fell 0.3 percent for the core brands.

Whether this trend already qualifies as a silver lining remains to be seen. In the past, Anheuser-Busch has always proved itself to be an astute marketer of its beers. So let’s wait and see if Anheuser-Busch’s new products and different commercials can really do the trick.

Perhaps Anheuser-Busch is to benefit from SABMiller and Molson Coors Brewing having fallen into a bit of a limbo as they wait to receive regulatory approval to combine their U.S. operations into a joint venture that would have about 30 percent of the U.S. market.

Mr Busch reportedly said there was a sense of urgency about the domestic market, but the time it takes Miller and Molson Coors to integrate their operations could be an opportunity for Anheuser-Busch.

The company reiterated its long-term objective to grow annual earnings by 7 percent to 10 percent, which is decidedly above the target announced by the Coca-Cola Company (see above). Mr Busch said the brewer’s current cost-cutting program may yield more than the USD 300 million to USD 400 million in savings it had originally forecast.

Mr Busch also said there were more opportunities to raise prices, following one price increase in the autumn and another this year, but he cautioned against raising them too much. What Mr Busch did not say, though, was that his company purposefully undercut its own price hikes by laying on one price promotion after the other in the weeks before Christmas last year.

In the past few years, Anheuser-Busch has tried to offset weak sales of domestic brews with ownership and distribution deals for energy drinks, bottled waters and foreign beers.

This year Anheuser-Busch is trying to boost sales of its core brands, with line extensions like Bud Light Chelada and Bud Light Lime.

The Chelada drinks, which mix the company’s signature lager beers with a clam-flavoured tomato juice, were first tested in cities with large Hispanic populations and are now rolling out nationwide. Bud Light Lime will be launched nationwide in May.

Anheuser-Busch calls them ¡La Combinación Perfecta! Some may disagree. Budweiser & Clamato Chelada and Bud Light & Clamata Chelada.

The company is also trying to market its brands to people other than “men between 21 and 40 who like sports”, or what Busch called its “loyalists” with new commercials. To lure them, the company is running an advertisement that calls Budweiser the “Great American Lager” and highlights the complexities of brewing, it was reported.

Anheuser-Busch Companies (U.S. dollar)

Having wiped 12 percent off its shares in one month only, Anheuser-Busch has to seek salvation in its domestic brands. Source: Reuters.com