Anheuser-Busch's Lesson: Spend Less on Ads, Sell More

Brewer's New Media Push to Manage Brand Portfolio is Paying Off

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After an ad-spending bender yielded weak results for Anheuser-Busch Cos. last year, a more restrained, and less media-centric approach appears to be boosting sales.

The No. 1 U.S. brewer spent $1.56 billion in advertising and promotional costs during 2005, according to filings with the Securities and Exchange Commission.

That spree-a 17% increase from the previous year-bought the company a nearly 2% falloff in shipments and a drop in overall market share, to 48.6% from 49.4%, according to Beer Marketer's Insights.

A-B vowed to make changes, saying it would scale back spending growth and shift its media mix. Early returns indicate the strategy is working, as distributors, industry watchers and Wall Street analysts expect the company to show volume growth between 2% and 3% when it announces first-quarter earnings this week. That's in stark contrast to a 2.7% decrease a year ago.

"The act is getting together on marketing," said John Matesich, CEO of Matesich Distributing Co., an A-B wholesaler serving southeastern Ohio. "The [media] mix is better, and there's more discipline to how we approach each brand."

A-B's new media approach for warhorse brands such as Budweiser and Bud Light is to boost local, ethnic, Internet and cable marketing at the expense of network and prime-time TV. A multitude of newer brands won't get any media support at all.

"We're acknowledging it's a new world," said Marlene V. Coulis, the brewer's VP-brand management. "We're trying to be more nimble, to respond more quickly, and to manage a lot more brands."

The brewer is hardly eschewing 30-second spots, but it's embracing new media to what, for A-B, anyhow, is an unprecedented degree. In recent weeks, Bud announced a deal to advertise on cellphones via MobiTV, as well as a partnership with buzz-rich known for political spoofs-that will show Bud Light's ads starring "Bud Light Daredevil" Ted Ferguson and its "Real Men of Genius" on the site.

Sports marketing remains a priority at A-B, which sponsors 90% of U.S. professional sports teams and recently entered a long-term Super Bowl sponsorship pact and secured the naming rights to the renovated bleachers at Chicago's Wrigley Field.

A year after spending about $80 million to start up Budweiser Select, the brewer has at least eight products set to launch this year with virtually no media support. The brands include Michelob Ultra Amber and a fruit-flavored malt called Peels aimed at women. Ms. Coulis noted that while Peels won't have any media spending, it will be sampled at spas and salons.

"We're not even looking at the traditional beer model," Ms. Coulis said. "We're looking at how progressive brands market themselves."

According to UBS alcohol-industry analyst Caroline S. Levy, the ad-free approach to the launches may be an attempt to imitate rivals Coors Brewing Co. and InBev, which launched brands like Blue Moon and Stella Artois, respectively, without media. "We believe A-B is pursuing a 'see what sticks' strategy," she wrote in a recent research note.
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