E-Malt.com News article: United States: AB InBev reviving Budweiser

Leuven, Belgium-based AB InBev controls about 22% of the global market. That makes it the world’s biggest brewer.

However, the company’s share in its second domestic market, the US, is on decline.

According to a recent publication by Daily Markets, InBev CEO Carlos Brito has admitted to missing potential growth in the U.S. beer market. He also admits to missing signs for the current downturn in the U.S. consumption… or the severity of its flagship Budweiser brand’s waning popularity, for that matter.

To combat those shortcomings, the brewing giant has decided to focus on one key area.

“Stabilizing Budweiser is so important to us,” Dave Peacock, president of AB InBev’s U.S. operations, is quoted as saying.

In 1988, the Budweiser beer brand’s share of the U.S. market topped out at about 26%. But those sales then began a steady decline.

22 years ago, the fledgling Bud Light brand was just breaking through the 5% level. Yet by last year, it accounted for 19.3% of the market, according to Beer Marketer’s Insights.

Meanwhile, Budweiser’s market share fell to 9.3%, falling nearly 10% in 2008 alone. So, while the two brands are still the largest selling beers in the U.S., that could change.

Budweiser could easily fall into third place, analysts believe. One of the brand’s rivals, Coors Light, managed to grow its sales slightly last year. It now claims 8.3% of the national beer market. And Miller Light isn’t too much further behind with 7.7%.

In terms of overall beer market share, AB InBev still looks pretty good. It has a 48.9% total share. Even MillerCoors, the joint venture between Molson Coors and SABMiller, only holds 29.5%.

But Budweiser’s waning sales are still wearing down the bigger business, and the company has to stop it, experts said.

Fortunately, BUD investors can be happy about the company’s management at least. The company skillfully handled a $52 billion mega-acquisition on the very eve of the global financial crisis. It also over-delivered on merger synergy savings and whittled away at the $54 billion debt mountain incurred from the acquisition.

InBev executives have also already shown their ability to grow sales and turn around slumping brands. It proved that much with Stella Artois in the UK. Previously, the beer’s high alcohol content gave it a negative image.

But InBev designed a lower alcohol version followed by a slick marketing campaign. That sent sales rocketing up 130%, making it the fastest growing beer in the UK last year. Consequently, the company even has plans to roll out the brand in the U.S.

Reviving Budweiser shouldn’t be nearly as hard, and efforts have already begun, it is reported. For the rest of the World Cup, consumers will see more of its ads than any other beer brand. The company created its “Budweiser United” marketing program just for the occasion.

Taking into account that soccer is well behind football and baseball in terms of popularity in the States, reversing the slide in Budweiser’s sales will take more than that. But AB InBev is working on its core strategy for the turnaround.

It has already stated that certain elements of Bud’s heritage are “non-negotiable.” That includes its unique Beachwood aging process, red color and the Clydesdale horses.

Budweiser has a good shot of becoming what Mr. Peacock calls “a classic turnaround story, like Stella Artois in the UK.”

The iconic brand already has several factors in its favor. For one, it can make huge efficiency gains by streamlining U.S. distribution. Currently, mostly third-party wholesalers control that industry.

Also, AB InBev’s exposure to emerging markets outstrips its peers. Its Brazilian branch, AmBev, has experienced strong growth already. And it has a decent chance of expanding its 50% stake in Grupo Modelo, one of Mexico’s two dominant brewers.


23 June, 2010