A-B'S BUD REWARDS PROGRAM DRAWS SCRUTINY IN CALIFORNIA: PROMOTION MAY RUN AFOUL OF BAN AFFECTING GIVEAWAYS TIED TO ALCOHOL

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Anheuser-Busch is hoping a first-of-its-kind California beer promotion won't get derailed by state regulators.

The California attorney general and Department of Alcoholic Beverage Control are investigating whether a Budweiser continuity program being backed by a $12 million marketing campaign violates a state law that bans giveaways tied to alcoholic beverage sales.

If they find the promotion-in which Bud buyers earn points that can be redeemed for merchandise-violates state law, they could seek a court order stopping it.

INVESTIGATION UNDER WAY

"We have an investigation going," said Ken Byers, chief counsel of the Department of Alcoholic Beverage Control. "We may seek to enjoin it."

"We are currently working with [state regulators] regarding their concerns," said Dan McHugh, Bud brand manager. "It would be inappropriate to discuss this subject while it's under review."

Under the "Buy the Beer, Get the Gear" promotion, consumers who buy Bud, Bud Light or Bud Ice earn points that can be redeemed for merchandise ranging from coasters to foosball tables. It kicked off last month and is slated to run through October.

FIRST OF ITS KIND FOR BEER

This is the first rewards program of its kind for beer, and A-B hoped it would help bolster its California market share. A-B dominates the California market, but its share has been slipping in the 1990s, says Beer Marketer's Insights.

A-B was contemplating expanding the program outside California if it proved successful.

The promotion is being supported by a $12 million marketing effort by DDB Needham Worldwide, Chicago.

Competitors cried foul to state regulators after the program was launched, insiders said.

Mr. Byers declined to comment on whether the state agency received complaints.

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