2 Beer Guys Blog

Welcome to the 2 Beer Guys Blog! Here, you will be able to read our stories and adventures as we travel through the world of craft beer.

Saturday, February 09, 2008

Is Budweiser losing their grip?

Oh, so I was a little surprised when I read about Budweiser's "100 percent Share of Mind" campaign from the early 90's. Having never stumbled upon this concept, I am shocked to never have seen this information in any of their commercials. The commercials promote the quality ingredients and the refreshing taste, but not controlling the world?. Monopoly, what? Preventing other breweries from selling their goods... Is Budweiser the REAL creator of Pinky and the Brain?

Well, the good news is that they never reached their ultimate goal and their grip is loosening. It's not major change, but dropping from 70% to 60% is a rainbow in the sky. Hopefully, with the increasing popularity of craft beer and changes in the law will decrease this hold even further.

You can decide. We have a choice. Try something different. Support your local craft brewery.


Drink Craft Beer, You've Earned It!!!

Beer distributors want more than Bud

David Kesmodel
The Wall Street Journal
Feb. 6, 2008 11:10 AM

A decade ago, Anheuser-Busch Cos. began dangling financial incentives to get beer distributors to jettison rival brands. The campaign, known as "100 percent Share of Mind," was a big hit, helping the King of Beers tighten its grip on the U.S. market.

But now, some distributors are finding that selling only Anheuser products might not be smart in the fast-changing alcohol-beverage industry.

In the past year, distributors in Texas, Tennessee and elsewhere have decided to eschew Anheuser's incentives and begin selling rival beers such as Yuengling Lager, as well as wine and spirits. Recently, R.H. Barringer Co. became the first Anheuser distributor in North Carolina to start selling other brands, acquiring a rival that sells wine and imported beer. Today, about 60 percent of Anheuser's sales flow through distributors carrying only its brands, down from about 70 percent at its peak.

The shift might help competing alcohol brands gain market share, as distributors divert some of their attention from Anheuser, which accounts for about 48 percent of U.S. beer sales. For consumers, it means greater choice at their local bars and liquor stores. Wall Street analysts say the movement signals a weakening of the St. Louis brewer's clout in the marketplace, as small-batch "craft" beers and imports, as well as wine and spirits, wrest market share from mass-market brews like Budweiser.

Anheuser's exclusive distribution system "was a great business model," but "the consumer environment has changed dramatically," says Bump Williams, general manager of the beer, wine and spirits practice of market-research firm Information Resources Inc.

In recent years, some of Anheuser's 560 independent distributors became frustrated as craft brands such as New Belgium Brewing Co.'s Fat Tire Amber Ale surged in popularity and competing distributors snatched them up. Often, the distributors adding such high-margin brews were the same ones that peddled the beers of Anheuser's top rivals, SABMiller PLC's Miller Brewing and Molson Coors Brewing Co.

Anheuser wholesalers "are realizing that we have made the competition stronger by basically forfeiting these brands to them," says Chris Monroe, vice president of D. Canale Beverages Inc., a Memphis, Tenn., distributor that carried only Anheuser products until last fall.

As profit growth eroded, Anheuser distributors began clamoring for the company to acquire brands with higher profit margins and growth rates. The beer titan has responded over the past two years. It reached a deal to import European beers such as Stella Artois and Beck's from Belgium's InBev SA. And it has expanded agreements to distribute other companies' craft brews, spirits, water and other beverages.

Some distributors began hawking rival products several years ago. Others haven't been able to distribute the InBev products and other new brands from Anheuser because of franchise laws governing beer sales. The laws, which exist in many states, block a distributor from taking over a brand unless the existing distributor agrees to sell it. Ironically, Anheuser distributors often backed the adoption of such laws.

When distributors forgo the incentives Anheuser offers exclusive partners, they are making a bet that they will make up the difference with revenue from the new brands. The incentives include cash payments of two cents a case, access to credit and truck-painting allowances.

Last fall, 11 distributors in Tennessee stopped being exclusive, in part because the state's franchise law kept them from obtaining the InBev lineup. They all began selling brews made by Pennsylvania' s D.G. Yuengling & Son Inc., one of the nation's oldest beer makers, which was entering the Tennessee market.

"We saw a brand with some very strong potential, and we didn't want that brand to fall into competitive hands in the state," says Mr. Monroe of D. Canale in Memphis.

The move may be hurting Anheuser. Yuengling established 3.2 percent market share in terms of volume in food stores in Tennessee in the 13 weeks ended Dec. 30, says Information Resources. In the same period, three of Anheuser's four-top selling brands in the state - Budweiser, Busch and Natural Light - experienced sales declines. Budweiser volume fell 5.4 percent.

"There appears to be some correlation between Yuengling's entry into Tennessee and the softness in some Anheuser brands," says Mr. Williams of Information Resources. He says it is common for Yuengling to grab share from Anheuser when it enters new markets.

Dave Peacock, Anheuser's vice president of marketing, says Yuengling is having a minimal, if any, effect on its Tennessee sales, noting that other brewers experienced similar declines late last year.

Still, Anheuser wasn't happy with the way it learned of the Tennessee distributors' decision. "We found out later (in their decision-making process) than we would have liked," says Mr. Peacock. "When we don't get early communication, it rubs us wrong."

Anheuser continues to champion the exclusivity program, believing it gives distributors the best chance to succeed. "We want their efforts and focus aligned with ours," says August Busch IV, Anheuser's chief executive. The company is open to talking to its distributors about beer brands it could acquire that would help strengthen their businesses, he says.

Mr. Busch's father, August Busch III, ran the company when it began the exclusivity program in 1997. The campaign angered Anheuser's foes, especially craft-beer makers that lost access to some markets. The Justice Department investigated the brewer for possible violations of antitrust law, but eventually dropped the probe. At the time, Anheuser controlled about 45 percent of the beer market, and about 41 percent of its distributors carried only its brands. As more distributors went exclusive, Anheuser's market share rose to 50 percent, a significant feat.

So far, the biggest Anheuser distributor to end exclusivity is Ben E. Keith Co. of Fort Worth, Texas. The distributor, one of the nation's largest, sold only Anheuser beers for about 75 years until last spring. It began selling brews like Trumer Pils, as well as wine and energy drinks that also aren't affiliated with Anheuser. The decision came "after much debate and with the utmost respect" for Anheuser, says Kevin Bartholomew, who runs the company's beer division.

Mr. Bartholomew is among those who believe such a shift ultimately will benefit Anheuser, because individual distributors will have enhanced their long-term business prospects.

Some industry observers are surprised a greater number of distributors haven't flown the coop. "It really hasn't been a widespread national jailbreak," says Harry Schuhmacher, editor of Beer Business Daily, an industry publication. "It will be interesting to see if August continues to hold the party line."

Some analysts say "jailbreak" may not be far off.

Jim LaRose, a Cleveland-area distributor, says he is among those taking a hard look about whether to remain exclusive. He says his sales growth has flattened. "I have to have an outlook toward what it's going to take for me to compete in all tiers of the industry," he says.

Link to Article.


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