A-B Slashes Radio Spending

In Blow to Medium, Brewer Scales Back $38 Million Budget as It Faces Takeover Bid

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CHICAGO (AdAge.com) -- One of the marketing industry's biggest proponents of radio advertising, Anheuser-Busch, is significantly slashing spending in the medium for the second half of this year as it embraces cost cuts to fend off a hostile takeover bid.

According to people familiar with the matter, A-B has begun to inform major station groups that it is cutting -- and in some cases completely eliminating -- its spot-radio buys for the remainder of this year in many markets.

The cuts have affected major broadcasters such as Clear Channel and Emmis. They represent a significant blow to the radio industry, and not just because A-B is a big spender, shelling out $38 million on radio ads last year from its total measured media outlay of $475 million.

It's also stinging for radio because A-B -- specifically due to the much-celebrated and much-awarded "Real Men of Genius" campaign from DDB, Chicago -- stands as one of the medium's most lauded creative forces. A-B's top media executive, Tony Ponturo, has been a regular presence at radio-industry events, where he has extolled the virtues of the medium and its impact on sales and awareness at sporting events. Any move by A-B that suggests the medium is somehow expendable would be, at best, psychologically damaging for the industry.

Large cancellations
The cuts have already affected Clear Channel stations in multiple markets, which took large cancellations for the second half, according to an executive familiar with the situation. The executive said it's unlikely local spending by wholesalers would be able to pick up the slack.

But the executive said he's hopeful the move will be short-lived. "In many cases when we see this, a draconian move is followed by lower sales, and then they come back," he said.

Cutbacks have also hit Emmis Communications' two Chicago stations, which combined saw spending of about $1 million a year from A-B. Emmis' market manager, Marv Nyren, said the marketer cut all its remaining spot buys for 2007 but did not cut its sponsorships of events and concerts, which account for about 35% of its spending with the stations.

"They're a top-10 advertiser for us for sure," Mr. Nyren said. "But it is a great opportunity for Miller or Coors or Corona to pick up some market share."

Cost-cutting agenda
The cuts come as A-B is promising a broad cost-cutting agenda to shareholders weighing an unsolicited takeover bid from Belgium-based, Brazilian-run InBev. Last week, A-B executives outlined a billion-dollar cost-cutting plan they said would create comparable value to InBev's $46 billion offer, a price more than 30% ahead of where A-B shares had been trading in the months before news of the offer leaked.

A-B CEO August Busch IV said last week, however, that those cuts did not involve media spending and that A-B was sticking to a plan to boost spending it announced earlier this year. "No. 1, we're not cutting our marketing investment," Mr. Busch said. "As you know, we've ramped up significantly lately, and we've redeployed significant marketing resources."

That jibes with what one East Coast distributor who inquired with A-B about the radio cuts said he was told: "They're moving dollars around, not cutting them."

Support for other Bud brands
A-B's chief marketing officer, Dave Peacock, said the money saved from cutting radio spot buys would go toward fourth-quarter national TV support for newly launched Bud Light Lime, as well as for a forthcoming Budweiser brand extension called Budweiser American Ale. (A-B is currently conducting a review among its roster shops for the latter assignment.)

Mr. Peacock stressed that A-B would remain active in radio for the duration of the year through its myriad sports and event sponsorships, which are not affected by the cuts.

The changes, he said, were unrelated to InBev's takeover attempt. "It had nothing to do with that," he said.
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