Losing Their Share of Mind

Anheuser-Busch’s “100% share of mind” program is legendary. It started ten years ago, when A-B began offering incentives to their distributors so they’d care only about A-B products. Though I assume they never said so — wink, wink — they encouraged distributors to drop non-A-B brands and concentrate on only the important brands. And at that time, such was A-B’s market strength that many distributors did in fact tow the line. But lately as domestic sales have been static or slipping, distributors are adding non-Bud brands to their portfolios to stay at the same level of profitability. The Associated Press had an article last week about this recent phenomenon called Beer Distributors Want More Than One Best Bud.

As the article points out:

For consumers, it means greater choice at their local bars and liquor stores. Wall Street analysts say the movement signals a weakening of the St. Louis brewer’s clout in the marketplace, as small-batch “craft” beers and imports, as well as wine and spirits, wrest market share from mass-market brews like Budweiser.

Many of the 560 nationwide A-B distributors realized that as craft beer is increasingly in demand, that their competitors were having the last laugh, because they were free to pick up whatever brands they wanted and believed they could be successful selling.

While IRI general manager Bump Williams described the program as a “great business model,” not everybody was convinced that it was fair. The DOJ launched an investigation into anti-trust violations, but later abandoned it. Naturally, A-B continues to push the program with such statements as “[w]e want their efforts and focus aligned with ours.” Well, who wouldn’t? But that isn’t how the world works nor is it how it should work. It’s schemes like this one that gave A-B its reputation as a bully. And it appears that they still have that mindset. Again, from the AP article.

Still, Anheuser wasn’t happy with the way it learned of the Tennessee distributors’ decision. “We found out later (in their decision-making process) than we would have liked,” says Mr. Peacock. “When we don’t get early communication, it rubs us wrong.”

Now why would one business be rubbed the wrong way if another, supposedly separate and independent company, didn’t consult with them before making a business decision? The best illustration of this mindset comes from more than a decade ago, with the former head of A-B, August Busch III, sitting around a conference table at their Hawaiian distributor petulantly throwing bottles of craft beer against the wall, smashing them to bits, to show his displeasure with a separate business having the unmitigated gall to sell something he can’t profit from. It’s that arrogance, borne of being the market leader for such a long time, that leads a company to believe that whatever is in their best interest is in everyone else’s best interests, too.

But as the market changes, that’s becoming less and less tenable. Distributors are realizing that to remain successful, they have to stock brands that their customers want, regardless of who makes them. That only makes good business sense. Some industry analysts, like my friend Harry Schuhmacher who runs Beer Business Daily, are surprised that it has taken so long for this to begin happening. As he puts it. “It really hasn’t been a widespread national jailbreak.” But that’s the hold that A-B has traditionally had over its distributors. Now that it’s finally beginning to erode, it will be interesting to see what percentage share of mind Bud is left with.