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Archives for May 2007

Mainstream Beer Still Suffering

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According to yet another business article in Forbes, the reason for Anheuser-Busch‘s sales declines are the result of a lack of focus on their core brands, principably Budweiser and Bud Light. And while wine, spirits and craft beer’s rise has been credited with A-B’s decline, this AP article also claims Molson Coors — the #3 American brewer — has also gained ground against their nemesis, largely because they’ve continue to push their core brands. A-B has already suggested they’ll be increasing marketing by at least 8% and the details of this and a renewed focus on their flagships are expected to be revealed at A-B’s bi-annual Investor Day this Tuesday.

Goldman Sachs analyst Judy Hong further advised that what A-B needs to do to remain competitive is “either purchase a large craft brewer or work with distiller Fortune Brands Inc. to buy the Swedish state-owned liquor group that makes Absolut vodka, V&S Vin & Spirit AB, to gain access to the growing spirits market.” On the other hand, William Pecoriello, an analyst at Morgan Stanley, thinks A-B is on the right track, spending more marketing dollars on their core brands. In a memo to clients, he stated “[i]t seems unlikely that Anheuser-Busch can overcome the challenges for its core brands without significant increases in marketing, distribution and administrative spending.”

The troubling pronouncement in of all of this is Hong’s suggestion that A-B “purchase a large craft brewer.” It’s not like they haven’t been trying to do just that for some time now, but when Wall Street raises the spectre of it as a worthwhile idea, people tend to sit up and take notice.

Bud Sales Still Slipping

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With August Busch IV poised to deliver his first big “State of the Company” address to investors next week, he may have to do a little dancing to satisfy the concerns of shareholders and the financial analysts. According to Wall Street, profits from beer over the past two years have fallen an average of 1%, while Anheuser-Busch‘s profits have dipped around 12% during the same period.

Despite efforts to get the numbers on core brands up, sales did not rebound as hoped, with revenue up only 5%. Goldman Sachs analyst Judy Hong laid the blame on imports and craft beers, though recent reports have indicated that import sales are suffering the same declines and slowing as mainstream beer, leaving the craft segment as the only shining star in an otherwise dismal beer industry snapshot.

Hong also said that “Anheuser-Busch largely sat on the sidelines as the global brewing industry underwent a massive consolidation, and prospects of capturing significant growth abroad appear limited,” which seems strange since they appointed Bob Lachky last fall to specifically manage their international business and snapped up new import brands for their portfolio — including beers from international brewing giant InBev — yet a Forbes article echoed similar worries, suggesting that “the company has focused on operations abroad, though the chance to gain real exposure to international beer markets may have passed.”

A separate Forbes article, meanwhile, placed the blame for A-B’s woes on a “shift in consumer tastes to wine, spirits and microbrews” — there’s the craft beer segment again figuring heavily in business analysis. Staff writer Tom Van Riper also indicated A-B was struggling to overcome its “passé image” by spending wildly to reach a younger customer, presumably on such projects as Here’s to Beer, Bud.TV and Mingle Now.

Wisconsin Wants More Beer Taxes

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Another state is looking to enhance their revenue by tapping brewers on the shoulder. According to a report in yesterday’s Milwaukee Journal Sentinel, “[t]wo Democratic legislators vowed Monday to try to tap the state’s beer drinkers by seeking approval of a fivefold increase in Wisconsin’s $2-a-barrel beer tax, which has not been raised in 38 years.” Berceau wants to raise the tax to $10 per barrel supposedly to fund programs to “fight drunken driving and treat alcohol addiction and mental illness.” As recent studies have indicated though, such raises rarely result in the goals intended. I’ll never understand why responsible drinkers and brewers who contribute positively to the economy are routinely targeted for this kind of punishment because of a few bad apples. We don’t tax sugar makers and soda companies to fund health centers to treat obesity. We don’t ask people who can enjoy one piece of chocolate cake to foot the bill for over-eaters and the health costs they add to society, nor should we. Berceau wants the tax on a six-pack to be 18 cents, up from its previous level of 3.6 cents, which would add as much as $48 million to the amount people would have to spend to buy the same amount of beer.

“Wisconsin’s beer tax hasn’t been raised since ‘man walked on the moon,’ said Berceau, whose efforts to raise the tax have failed in the past,” suggesting she’s been in bed with her sponsors for some time. Those sponsors, some of whom presumably have made campaign contributions, include “the Wisconsin Prevention Network; the American Society of Addiction Medicine; Mothers Against Drunk Driving; the Mental Health Association of Wisconsin; and the National Association for the Mentally Ill of Wisconsin.”

According to the national Beer Institute, Wisconsin ranked sixth in beer consumption in 2006, with an average of 38.2 gallons consumed for every person 21 and older. Wisconsin’s $2-a-barrel tax is third lowest in the nation, behind the 59-cent levy in Wyoming and the $1.86 tax in Missouri.

Beer Is Healthy Food

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I’m not exactly sure who PS Prakasa Rao is. The best I can figure is he’s a scientist or doctor from India who frequently writes for his local newspaper. At any rate, he’s got an editorial piece titled “Beer Is Healthy Food” in today’s Central Chronicle from India.

In today’s editorial, he goes against conventional thinking and outlines how beneficial beer can be, stating that he believes beer to be “better than Milk.”

From the article:

Unless we have a tendency towards abuse, believe it or not, taken in moderation, Beer is actually a very healthy food. It’s full of vitamins and minerals that are good for nerve production, help you concentrate, increase blood circulation, and stimulate the metabolism. The hops, low alcohol content, and carbonation help relax the body.

He goes on to outline additional health benefits and, naturally, caution against binge drinking, along with a list of certain types of people who probably shouldn’t drink. I certainly prefer that to the neo-prohibitionist agenda that if one person can’t handle alcohol, no one else should be allowed to either. Way to go, Doc.

Raley Field Brewfest

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The first Raley Field Brewfest was put on by the Northern California Brewer’s Guild in an effort to raise funds for the fledgling organization. It was a good first fest at a great setting with perfect weather, especially for Sacramento. Because it was a festival by brewers for their own benefit, attendance was better than usual for a first-time event, and there were several breweries who rarely make an appearance at festivals, which made it more interesting than ones with only the usual suspects.

Brian Ford, who returns to the brewing community June 1, when his Auburn Alehouse Brewery & Restaurant is exected to open, with Glynn Phillips, owner of Rubicon and the festival organizer.

Melissa Myers, brewer at Drake’s, serving festival-goers.

Peter Hoey, from Sacramento Brewing, and Steve Altimari, from Valley Brewing.

For many more photos from the Raley Field Brewfest, visit the photo gallery.