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E-Malt.com News article: 3237

USA: Anheuser-Busch announced on September 8, 2004 that it is enjoying another year of strong growth in earnings per share, cash flow and return on capital. This represents the sixth straight year of solid growth, company executives told investors at the Prudential Consumer Conference today. Despite the general slowdown in spending for consumer products this summer, Anheuser-Busch's earnings per share for the full year are expected to grow approximately 11 percent. 1/ This includes dilution from the company's acquisition of Harbin and excludes the benefit of the commodity hedge gain in the first quarter.

August A. Busch IV, president of Anheuser-Busch, Inc., also announced a series of new initiatives aimed at increasing beer sales volume and market share growth.

In October, Anheuser-Busch will add another flavor to the Bacardi Silver family with the introduction of its newest offering, low-carb Bacardi Silver Green Apple.

In addition, the company is developing a variety of other new products it intends to test in the coming months, featuring unique flavors and varying degrees of carbohydrates, calories and alcohol content, in order to capture incremental volume opportunities. The company will also continue to step up innovation with new packaging.

Anheuser-Busch has been rolling out new Bud Light applied plastic label bottles, which will be available nationwide over the next six to nine months. “Our new Bud Light applied plastic label bottle enhances the sophistication and image of the nation's number one beer brand,” Busch said.

Next week, Anheuser-Busch will introduce a new 16-ounce aluminum bottle for Michelob, Michelob Light and Anheuser World Select, Busch said. This unique, high-end aluminum bottle will be offered in bars, clubs and convenience stores.

Busch also indicated that the Budweiser family is leveraging its freshness advantage by expanding communication of the fact that “Fresh Beer Tastes Better” through a new campaign that combines advertising, on-premise promotions and public relations initiatives. Three million on-premise consumers are expected to sample the freshest Budweiser and Bud Light available as a part of this program.

He also told investors that the domestic beer pricing environment remains very favorable. “Beer is an image-driven product and consumers are continuing to trade up,” he said. Consistent with the company's practice of implementing moderate annual price increases in two phases, Anheuser-Busch will be initiating selective pricing actions in the fourth quarter of this year and first quarter of 2005.

Busch reported that, for the first half of this year, domestic beer industry shipments were on track for a solid recovery after a soft 2003. “From mid-June through August, however, consumer demand for beer slowed, as it did for many other consumer product categories,” continued Busch. Abnormally cool or wet weather in some key markets has played a part, and higher gas prices have also dampened sales.

Although sales over the important Labor Day holiday were positive versus the comparable period last year, Anheuser-Busch's sales-to-retailers in the third quarter to date have declined 1.2 percent. Year-to-date, sales-to-retailers are up 0.8 percent. The company now expects its sales-to-wholesalers to increase approximately 1 percent for the full year.

W. Randolph Baker, vice president and chief financial officer, told investors at the conference about Anheuser-Busch's international strategy and emphasized the company's expanded participation in the Chinese beer market.

“China is the world's largest beer market in terms of volume and growth. Over the past five years, the Chinese beer industry has grown more than 5 percent annually. The country's relatively low per capita rate of consumption has been increasing and is supported by an expanding economy and rising disposable income,” Baker reported.

Anheuser-Busch entered the Chinese beer market in 1995 with the purchase of a brewery in Wuhan for brewing and packaging the Budweiser brand. Baker commented that, unlike most foreign brewers' brands, the sales of the company's flagship brand in China have developed into a very profitable business.

“To expand our participation in this major growth market, we have made investments in two leading Chinese brewers,” Baker continued. In 2002, Anheuser-Busch formed a strategic alliance with Tsingtao, the leading brewer in China with a 13 percent share. Anheuser-Busch will ultimately gain a 27 percent ownership interest in Tsingtao. In recent months, Anheuser-Busch has acquired ownership of Harbin Brewery Group, China's fourth largest brewer with a 5 percent share of the Chinese beer market. “With its strong market position in Northeast China, Harbin is a good complement to our successful Budweiser operations and Tsingtao partnership,” Baker added.

Mexico is also an excellent market for Anheuser-Busch. It is the world's second largest beer market in operating profits, behind only the United States, and has experienced strong volume growth over the past five years, growing an average of 2 ˝ percent per year, Baker said. Anheuser-Busch has a 50 percent stake in Modelo, which has a 56 percent share of the Mexican beer market and its Corona brand is the No. 1 import in the United States.

“Our international beer segment is making a significant contribution to Anheuser-Busch's earnings growth, and we are strategically well positioned for long-term growth with our expanded position in China and our 50 percent ownership of Modelo,” observed Baker. “We remain confident in our ability to achieve double-digit earnings per share growth over the long-term, along with continued improvements in return on capital,” concluded Baker.

10 September, 2004

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