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ABI’s Free Beer Gambit

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free-beer
USA Today is reporting that Anheuser-Busch InBev‘s plan to reverse slumping sales trends is to give away their beer. Not all of it, of course, but part of a new marketing barrage to begin next Monday includes stepping up sampling significantly, to record levels of free beer giveaways.

According to the article, Latest ad strategy to freshen Budweiser’s image: Free beer, by Bruce Horovitz, ABI is poised to “announce plans to push free beer and a hipper Bud image to younger beer drinkers over the next several weeks” in an effort to reach the under-30 crowd growing up under the influence of the more flavorful and more local craft beer segment.

The new marketing campaign will feature the tagline Grab Some Buds, a phrase ABI has applied to trademark, and starting Monday, Budweiser “will unleash its biggest-ever national free-sample effort in trendy bars and eateries.”

From the USA Today article:

The hype culminates on Sept. 29, when the brand hosts the “Budweiser National Happy Hour,” a bid by Bud to nudge folks to at least try a free brewski. The free samples for those 21 and up range from 6 ounces to 12 ounces, depending on state and local rules.

At issue: a brand that’s lost mojo. Bud unit sales were down 9% last year and are down the same this year, says Beverage Marketing Corp. Beer drinkers have lost loyalty to Bud for the past seven years, research firm Brand Keys reports. Bud’s ranking among national product brands slipped from 16th in 2003 to 220th in 2010.

Here’s their four-prong approach:

  1. Sampling. A-B will hand out 500,000 samples by mid-October.
  2. Facebook. Bud plans to partner with Facebook so folks turning age 22 and up can get a free beer on birthdays.
  3. New ads. Ads air Saturday about anticipating good times with Bud.
  4. Focus. A-B will focus 95% of TV ad time on Bud Sept. 25 to Oct. 3.

The article concludes doubtfully, with “Brand consultant Robert Passikoff [expressing] serious doubts about Budweiser’s effort. ‘They’re in trouble because they don’t know how to talk to consumers,’ he says. ‘They no longer know how to create an emotional bond.'”

Frankly, I think they’re in trouble because they’re not keeping up with what customers want. All their “fixes” for dwindling sales (though to be fair sales are still ginormous) involve the same old tried and true marketing tricks that have seen them through the last half-century. Sampling, new ads and more TV spending are hardly revolutionary, and neither is finally trying to figure out how to use Facebook.

ABI is losing the battle for customers perceiving them as a patriotically American company, however jingoistic and emotional that is. They’ve also taken hits for the way they’ve treated employees — laying off hundreds (is it thousands yet?) — and keeping the remaining ones fearful for the next round of layoffs and working many jobs and too many hours. They’ve also taken a hit for asking suppliers to wait as long as four months to be paid.

ABI could produce beer every bit as flavorful as the best craft beer, but they wouldn’t know how to sell it. It’s not their business model. ABI president Dave Peacock thinks sampling will work, of course. “‘When we get the trial, we find we have a positive result,’ Peacock says.” But I honestly can’t see how sampling will be a positive experience for young people that recognize there are more flavorful alternatives to mass-produced American-style light lagers.

I think the Hans Christian Anderson fairy tale, The Emperor’s New Clothes, provides a useful analogy. If we think of flavor as clothing, sampling young people on Budweiser will only serve to reinforce that indeed the Emperor has no clothes.

ABI Announces Price Hike

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abib
KDAF-TV in Dallas, Texas is reporting that Anheuser-Busch InBev is increasing the price on a number of their products this week due to “slumping sales.” The price increases will be anywhere from 50 cents to $2.00 on packages ranging from six-packs to 30-packs. MillerCoors will also take a similar price increase in October. To me that’s good news for craft beer, too, because it makes the gap between beer from the big breweries and their diminutive rivals smaller.

Is A-B Eyeing The Craft Brewers Alliance?

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abib craft-brewers-alliance
In a provocative article today, the business-oriented website, TheStreet.com, which describes itself as the “leading digital financial media company,” pondered whether Anheuser-Busch InBev might possibly be considering buying the Craft Brewers Alliance (CBA). The piece, by Miriam Reimer, entitled Anheuser-Busch Takeover Target: Craft Brewers Alliance?, certainly had the wags wagging on the blogosphere today.

There’s a great reminder of just how insignificant craft beer is to the business world in the opening paragraph, which refers to the CBA as that “little-known craft beer maker.” Compared to the big two, that’s understandable, but given that the brands in CBA are some of craft’s biggest players, it’s also pretty funny and humbling. But it’s good to remember that what many of us take so seriously is just a very small sliver of a much bigger pie.

At any rate, the idea of ABI buying the CBA was floated by Washington Street Investments president Bryce Peterson. Despite stating that “such speculation is premature,” he had no problem engaging in it himself. The thinking is, apparently, that ABI “might think it’s smart to buy a strong brand in the craft area and use its incredible distribution and marketing strengths to grow the acquired business.” Which sounds good on paper, but that’s exactly the reason that Anheuser-Busch earlier invested in the CBA brands individually, before their merger in 2008. When craft beer was beginning it’s latest growth trend, A-B distributors started wanting to carry some, too, and that drove A-B to partner with RedHook and Widmer to satisfy that demand. As a result, I’m not sure what buying the remaining 64.4% of CBA that ABI does not own would accomplish. The bulk of the article is given over to share prices, quarterly sales, and other business analysis. It’s interesting, up to a point, but all the numbers don’t seem to manage to answer the basic question of what advantage there would be for ABI. Plus, isn’t ABI still trying to trim the fat to pay for buying Anheuser-Busch?

The article concludes with a poll, asking readers to answer the question posed by the title: “Yes — Anheuser-Busch sees long-term potential in Craft’s growing corner of the market” or “No — Anheuser-Busch wouldn’t bother with such a small-time player.” What’s surprising is that as of this evening better than 17% thought “no.” They obviously are oblivious to A-B’s history. I’ve never seen a niche market too small for them try to own or destroy … ever. And InBev is even more ruthless than A-B was, so it’s hard to imagine them not going after craft beer in some fashion. Whether it will be by buying the CBA, at least at this point, is still an open question.

UPDATE 8.26: Author Miriam Reimer did a follow-up article to this one, Anheuser-Busch Thirsty for Craft Brewers, Poll Says, focusing on the poll at the end of it. She contacted me about the piece, and we spoke on the phone for a good half-hour, quoting me briefly in the article on page 2.

EU Rules ABI Cannot Trademark Budweiser

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budvar bud-crown
Reuters is reporting that the EU equivalent of Europe’s supreme court ruled today that Anheuser-Busch InBev (ABI) “may not register ‘Budweiser’ as a trademark in the bloc, ending a 14-year legal battle over the name with a Czech brewer.” The battle over the naming rights from the town in the Czech Republic has been raging for more than a hundred years and may now finally be over. ABI’s response, predictable from a multi-national company used to getting its own way, “said the ruling would have no effect on its business,” and continued to refer to the trademark as one they “continue to believe [is] rightfully [theirs].”

Two Possible Buyers Emerge In Bass Sale

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bass
The UK’s Publican recently included a report from the Scotsman regarding the emergence of the two likeliest candidates to buy Bass from ABI.

A North American brewing giant and small regional UK brewer have emerged as the front-runners to buy beer brand Bass in this country .It is believed brewing major Molson Coors and Well’s & Young’s, based in Bedford in England, are favourites to land Bass as current owner Anheuser-Busch Inbev is understood to be considering a sale to want to focus instead on its premium lager portfolio, which includes Stella Artois, Beck’s and Budweiser. It declined to comment on what it called “market speculation” about a potential sale.

Let’s see how this plays out.

A-B InBev To Sell Off British Beer Brands

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abib
The Times of London is reporting that Anheuser-Busch InBev is looking for buyers to sell off some of its most iconic British beer brands, including Bass, Boddington’s and Flowers. In the article, Buyer Sought for Beer That Britain Forgot, it appears the asking price for Bass is £10-15 million ($15-21 million in dollars), though that apparently “excludes both the trademark and international rights.”

bass

But it doesn’t look good, overall. From the Times article:

Despite its fame and longevity, Bass is now a minuscule part of the world’s biggest brewer, with volumes equating to a tiny fraction of the amount sold in its heyday in the 1980s. The brand, now brewed under contract by Marston’s, a rival brewer, which owns Pedigree ale, has suffered from a combination of lack of marketing investment and falling consumer demand as its multinational owner has focused increasingly on its global lager brands.

Boddingtons, too, has declined under AB InBev’s hands. The brand was once a leading part of the old Whitbread Beer Company, but its fortunes have dwindled since the closure in 2005 of the Strangeways brewery in Manchester, where it had been brewed since the late 18th century.

Despite the long history of the brands that AB InBev is looking to sell, finding a buyer could prove tricky. Obvious suitors including Marston’s, Wells & Young’s, Molson Coors and C&C Group are understood to have ruled themselves out.

ABI To Buy Modelo This Year

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grupo-modelo
Grupo Modelo is the largest beer company in Mexico, and their most popular beer, of course, is Corona. For many years, Anheuser-Busch has owned a non-controlling 50% share of the company, but after the InBev merger they own 50.2% but only 49.3% voting. And I think they’ve been coveting control for a long, long time and now they may finally get it.

Yesterday, Reuters had an item, AB InBev to Buy Modelo This Year, suggesting it’s likely a deal will go through, and will be completed later this year. The price tag looks to be about $10.8 billion. Earlier this year, Heineken bought FEMSA, Mexico’s second largest beer company. So if ABI buys Modelo, the majority of the country’s beer market will be owned by foreign companies, just like in the U.S.

ABIB Restructures The Marketing Departments

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abib
For those of you following the transformation of Anheuser-Busch into Anheuser-Busch InBev, today’s St. Louis Post-Dispatch had an interesting article about a “shake-up in its marketing department.” Essentially, it “divides responsibility for beer brands along consumer-segment lines and places greater importance on developing new products and reaching multi-cultural consumers.” A few more of the proposed 450 lay-offs will come out of this reorganization of its marketing efforts, but no specifics were disclosed.

Ouch, ABIB Begans New Round Of Layoffs

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abib
Ouch, according to St. Louis Today, Anheuser Busch InBev has announced layoffs of 90 key people, including four vice-presidents. Some of the people let go “included workers responsible for handling every facet of the brewer’s national sales.” Though the layoffs were spread among 25 states, HQ in Missouri lost the most — 17 — and California lost 12, the second highest number by state. An inside source told the St. Louis newspaper they believe about 450 U.S. jobs will be cut over the next few months. Current President, Dave Peacock, told reporters that the cuts were designed to make ABIB “optimally organized and as efficient as possible,” as meaningless a bit of gobbledygook business-speak as I’ve heard in quite some time. Wasn’t this exactly what InBev said they would not do when they were courting the sale? But cost-cutting is classic InBev behavior, as we saw before the sale and have continued to see afterward, too. It comes as no surprise to anyone who’s been paying attention to their actions, and not their homilies, for the last several years. Now, with more cuts coming, you have a workforce that’s scared for their own jobs, not exactly the work environment anyone would enjoy. Maybe it will make some perform better, work harder, to save their livelihoods but in the end all it does is breed resentment and will likely be ABIB’s ultimate undoing, at least until the next bigger corporation swoops in and buys them.

Beer To Flow Again In Belgium

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belgium
I’ve been avoiding this story over the last few weeks, mostly because I’ve been busy with other work and it’s a complicated one. I’ve sure you’ve seen it and pieces of it, though. It’s even gone mainstream, with Time magazine wading into it, mostly because of the big business angle. In a nutshell, Anheuser-Busch InBev announced more layoffs despite having also recently announced just over $1.5 billion in profit for Q3 2009. The latest proposed layoffs, about 800 jobs at ABIB’s European breweries included about a third in Belgium. But unlike here in the U.S., labor unions still have a bit of actual power in the EU. And they decided to fight back. At several breweries in Belgium — Stella Artois, Jupiler and Hoegaarden — workers have barricaded the breweries, and even took management hostage overnight at one plant.

After two weeks, supplies of Stella Artois and other beer brands owned by ABIB were running low, though most headlines seemed to suggest that beer itself was almost out in the nation. Obviously, with hundreds of breweries still open there was hardly a shortage of beer, just a shortage of a few popular ones, but none that true beer-loving Belgians would even miss. But on Friday, the union agreed to stand down and enter into negotiations, for the time being “they struck a deal that postpones the brewer’s plans to reduce 303 jobs in Belgium — some 10 per cent of its work force there. It says it will also create 40 call centre sales positions, bringing net job losses to 263.” According to the AFP, “‘After the blockade is lifted, the unions and management will start from scratch with meetings of the works council that will deal with problems site by site,’ union representative Tangui Cornu told AFP.” Reuters also had an update.