Anheuser-Busch on new-beer bender

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Hoping to whet interest in beer, Anheuser-Busch is opening the new-product spigot wider than it has in years.

A-B is preparing to roll out Michelob VVV, which has higher alcoholic content than most domestic beers, as well as a line of beers called 9th Street Market. These launches follow the announcement of "B to the E" caffeinated beer and the test marketing of low-carb Budweiser Select.

A-B executives declined to comment.

Increased marketing investment, including promotion and new product launches, is expected to dampen earnings growth in 2005.

But wholesalers said the introductions-and more are expected-mark the biggest new-product push by A-B since the mid-1990s, when the country's largest brewer poured a torrent of new products ranging from Bud Ice to Red Wolf.

Back then, A-B and the other brewers were trying to find the next big thing. Now, it's inventing new suds as part of a broader effort to push back spirits marketers such as Diageo while still fighting back against archrival Miller Brewing Co., resuscitated under the new ownership of London-based SABMiller.

The St. Louis brewer, which controls more than half of the U.S. market, "is dealing with a more competitive situation than they had just a few years ago," said industry consultant Manny Goldman.

The King of Beers isn't having it easy. Most new products-wildly successful low-carb Michelob Ultra aside-fail. And because A-B is undertaking a broad set of initiatives in the coming year, it risks losing focus.

Still, wholesalers and observers said it makes sense for A-B to introduce new products in order to inject excitement into a beer category losing market share to spirits in bars, clubs and restaurants. According to a recent report by investment bank Morgan Stanley, spirits saw 10% growth in dollar sales in that "on-premise" channel. Beer grew by 6% but declined in bars and clubs.

all in the package

"We're losing our share of stomach," said one East Coast wholesaler. "They have to [take on Diageo] because that's who we're losing to."

Just as spirits marketers have emphasized the shape of bottles as a marketing tactic-for instance, Frank Gehry designed the bottle for Wyborowa Polish vodka-A-B is planning packaging innovations, such as aluminum bottles. It's also eyeing special glassware for its brews, a tactic that has worked well for InBev's Belgian imported brew Stella Artois.

Michelob VVV will have 5.5% alcohol by volume, relatively high for a domestic beer, and 5 grams of carbohydrates, wholesalers said. Details were sketchy on 9th St. Market, but the Morgan Stanley report said it would be a line of flavored beers.

Agencies could not be learned for the new products beyond Bud Select, handled by Omnicom Group's DDB Worldwide, Chicago, and TBWA/Chiat/Day, Playa del Rey, Calif.

"While it's too early to predict the sales potential of any of these products, they could serve to revive consumer interest," said Morgan Stanley analyst William Pecoriello in a report.

But he added, "We believe the brewers may be able to narrow, but not overcome, the image advantages currently enjoyed by the spirits category among on-premise consumers."

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