Bud Select cannibalizes sales of sibling brands

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People are buying Anheuser-Busch's new brew Budweiser Select. Unfortunately for the country's biggest brewer, they're buying it instead of other A-B products.

Select grabbed a 1.3% share of supermarket beer sales for the four weeks ended March 20, according to Information Resources Inc. But overall the brewer lost nearly a share point in supermarkets, prompting experts to suggest that Bud Select is eating its own.

"While Bud Select has grabbed a 1.3% share ... it appears to be almost entirely cannibalistic of other A-B brands," Morgan Stanley analyst William Pecoriello wrote in a report last week. Supermarkets represent about 20% of beer volume.

A-B introduced Bud Select, a low-carb beer with no aftertaste that's positioned as an upscale, white-collar brew, Feb. 21. It was launched to fight the resurgent Miller Lite. But if Select eats into other A-B brands too much-as some observers anticipate-it could prove a big miscalculation.


"For Bud Select to be successful, the Bud family has to grow," said Benj Seinman, editor and publisher of industry newsletter Beer Marketer's Insights.

Bob Lachky, VP-brand management and director of global brand creative, said cannibalization was expected: "With nearly 50% market share of the U.S. beer industry, some cannibalization of our beer brands is inevitable. The cannibalization we have seen is within acceptable levels and what we anticipated prior to the brand's launch."

It's too early to write off the brand. But faced with mounting competition from wine and spirits as well as aggressive Miller Brewing Co., A-B can't afford mistakes right now. It reported last week that first-quarter volume was below expectations and lowered its earnings outlook.

A-B "has stepped up its new-product, packaging and marketing efforts, but it will take time for these new initiatives to gain traction," A-B President-CEO Patrick T. Stokes said in a release.

While A-B is optimistic about Bud Select's chances-and has been backing it with significant marketing support including a spot on the Super Bowl-successful product launches are few and far between in the beer industry. A spate of launches in the 1990s were either outright failures (Miller Clear, anyone?) or never amounted to much.

A-B had success a couple years ago with low-carb Michelob Ultra-but that introduction gave Miller Brewing Co. an opening to resurrect long-slumping Lite with a low-carb positioning.

A-B has already made at least one misstep with Bud Select. A Select ad from Omnicom Group's DDB Worldwide, Chicago, that ran on the Super Bowl declared "kiss your aftertaste goodbye"-a line that sparked a furor among wholesalers who argued it denigrated other beers. A-B ditched the line.

So far, the brewer maintains the launch is going according to plan and says distribution has been strong.

The latest IRI numbers raised concerns among analysts. Despite Select's showing, Mr. Pecoriello noted that A-B share was down 0.8 points during the latest period. Bud Light, the country's best-selling brew, gained just 0.1 share point after adding nearly a full point in the period before the launch.

Bud and Michelob Ultra trends also weakened since the launch.

The danger: Upscale brew could stunt growth of other A-B brands

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