ANHEUSER-BUSCH CREATES NEW UNIT FOR SPIRITS

As Beer Sales Decline, Brewer Appears to be Joining Liquor Marketers

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CHICAGO (AdAge.com) -- Struggling to find ways to grow as beer loses share to spirits, Anheuser-Busch is test marketing two shooter drinks and has created a unit to develop and test spirits products.

“They’re trying to get a piece of the growth,” said Matt Reilly, an analyst who follows the brewer for Morningstar. “They’re testing the waters right now.”

Unable to beat spirits marketers, A-B now appears to be joining them. A unit of A-B called Long Tail Libations is testing a shooter product for bars and clubs called Jekyll & Hyde, according to an A-B wholesaler. Jekyll is a red drink that tastes like berries; Hyde is black and has a licorice taste. When mixed, Hyde rises to the top. The bottles are curved so they fit together. Jekyll & Hyde is now in test in a handful of markets.

An A-B spokesman didn’t return a call for comment.

Looking for a niche
But the brewer is trying to figure out how the spirits marketplace works and where it could find a niche as opposed to making a big plunge, Mr. Reilly said. While A-B has been testing a flurry of malt-based beverages, new spirit introductions are expected at a slower pace. The A-B wholesaler was not familiar with any other spirits products in the pipeline.

Though beer is the dominant alcoholic beverage in the U.S., spirits have steadily gained share in recent years. As the country’s No. 1 brewer with just shy of 50% market share, A-B is disproportionately hurt by beer’s declining popularity.

To fight back, the King of Beers has stepped up promotions at bars and clubs where spirits are gaining traction and rolled out fruity tasting malt-based products -- Tilt and B to the E among them -- that are theoretically appealing to mixed-drink sippers.

In February, August Busch IV, president of the U.S. brewery, made comments at an industry conference saying brewery executives had discussed making an acquisition to go outside the beer business. Nothing has come of that. He also said the brewer would explore marketing beverages with higher alcohol content than beer.

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