Anheuser Busch has a long storied history in the tale of American breweries.

Since the first one opened over 150 years ago in St Louis, AB has added eleven more nationally and fifteen internationally. From 2005-2006 AB increased its sales, gross profit, net income, stock price and dividends paid. And since 1999, its international net income has increased and average of 20% per year. International operations now account for 32% of AB⼌s net income. They are also a leader and innovator in vertical integration, founding subsidiaries that produce everything from raw materials to packaging to entertainment. Industry The beer industry is a $91.6 billion market in the United States, it accounts for 52% of total alcohol beverage sales and 85% of the consumption. T he industry has seen an extended period of relatively flat consumption, with the only steady growth occurring in the niche brands produced by microbreweries and imports. This flat consumption can be explained by a few factors, the industry itself has reach ed maturity due to the maturity of the products within it, and over 80% of the market is comprised of AB, SABMiller and Coors which have dominated the market for years. This highly developed consolidation is also the result of intense government regulation s and a relatively high tax rate. Alcohol awareness campaigns and an aging population also play a role. However, there is some hope, in the last two years, total barrels sold has increased 2.1%, the biggest jump since 1990. Anheuser Busch enjoys a 48.4% market share; Miller has 29% and Coors 10%. SABMiller and MolsonCoors are currently attempting a joint venture that will combine the Miller and Coors operations. This merger will create a stronger competitor for AB as they improve efficiency, distribution an d effectively â¼ gang-upâ¼ on AB. Customer The information search in the beer industry is a short one once the need has been perceived because the beer industry enjoys a high degree of brand loyalty; many people will only drink their brand. They may even go so far as to outright refuse other brands and not drink them at all, under any circumstance. Granted, this is an extreme position, but people are pretty serious when it comes to their beer. Social factors contribute to more products sold: â¼ Give me a r ound of Buds!â¼ most people will take the Bud even if they prefer Coors, maybe they like it better. Ideally, the post -purchase behavior should be enjoyable⼦for some more than others, so you associate that good feeling with a particular brand. According the â¼ Beer consumer demographic profileâ¼ (progressivegrocer.com), the average beer consumer is male, younger, moderately educated, blue collar, with a moderate income. The core consumers are 21-27 year old males. Bud Light has the added distinction of i ncreasing market share with virtually all genders, ages and demographic groups. Marketing Mix Strategy Anheuser Busch is made up many different subsidiaries and the one that produces beer offers a variety of different families or lines. The focus of this analysis will be on the Budweiser family and geared specifically towards Budweiser (Bud) and Bud Light. Product â¼ Budweiser was introduced in 1876 when company founder Adolphus Busch set out to create the United States⼌ first truly national beer brand â¼ ³ brewed to be universally popular and transcend regional tastesâ¼ (Fact Sheet, www.anheuserbusch.com). That vision is still Bud⼌s focus,

⼠TheGreat American Lager⼠as it is referred to now, a true classic. It is a premium beer that uses only the highest quality ingredients and stresses freshness above all else. The commitment to freshness is so serious that AB implemented a new strategy called the ⼠Born on Date⼠which stamps the date when the beer was made and urges drinking it within 110 days fo r maximum freshness. Though it is no different than an expiration date, the customer feels as though s/he is getting a superior product. Bud Light maintains the same quality but focuses on a more refreshing beer that still tastes good but won⼌tfill you up. Both products attempt to portray themselves as something that is necessary to any social gathering, whether it is the bar, restaurant, party, football game or opera. Pricing The beer industry is competitive; therefore customers enjoy competitive pricing for the mainstream beers. As companies strive to be efficient, they lower inventory and costs which can be passed on to the consumer in the form of lower prices as the company tries to gain new customers and increase market share. Other companies want to hold on to their share or increase so they lower prices or keep them competitive at least. Contrary to this recent trend, AB announced in its letter to shareholders that it would be increasing the price in select markets and regions. They feel they can do this because of their strong brand loyalty and superior product. Place Bud and Bud Light are available to consumers nationwide wherever alcohol is served. One would be hard pressed to find a liquor store or bar that didn⼌t stock either, a more likely sce nario is that they have depleted their own inventory and are awaiting a new delivery. The beer industry uses a highly regulated three tier system that separates the producer, distributor and retailer. The manufacturer, first tier, may sell only to the second tier, authorized distributors, who sell only to licensed retailers and bars, etc., the third tier. The 21st Amendment implemented this system and granted the states their customarily broad powers in working out the details; hence, there are some major d ifferences between each state. The system works well for states; the regulations make the significant tax revenue from alcohol easier to collect. It also simplifies the role of the authorities that monitor the legal sale of alcohol by putting that responsibility solely on the third tier. Recently there has been debate about removing the wholesaler from the equation, and sometimes even the third tier. These concerns are raised by small vineyards and microbreweries who may find it more efficient to ship direc t; the internet has rapidly expanded this practice. Anheuser Busch has been able to profit from and reduce some of the costs associated with this middle man system by expanding its role. By functioning as an importer, it is able to make money selling to the second tier even though it isn⼌t fulfilling its true role as a ⼠manufacturer⼠of these beers. AB also owns St Louis Refrigerated Car Co and Manufacturers Railway which transport goods from the breweries to distributors which reduces transportation costs. Promotion The promotional mix of Bud and Bud Light are the same as they are different, the communication tools are composed mainly of advertising, sponsorship and public relations. The public relations are company rhetoric and where we see the similarities. AB is always striving to be the epitome of a responsible social corporate citizen. They work to help the environment through water conservation efforts, wildlife preservation, using renewable energy and operating one of the largest aluminum recycl ing facilities in the world. They own and operate their own charitable organization, promote a diversified workplace and

have been preaching moderation and responsibility since the early 1900⼌s. It seems as though either Bud or Bud Light is the official beer of every sporting event and professional team in the United States. This is a gross overstatement, but the brand is shown and served at these events and the culture of the two go hand in hand. The differences appear in the advertising, though both are successful. Bud is marketed as the traditional, classic, great American Lager; America itself in a can, it⼌s even red white and blue. The brand has an ability to create characters that are unforgettable: Frank and Louie, the frogs and lizards, and the ⼠Whassup⼠commercials that won the Grand Prix award in 2001. These symbols have pop culture appeal and people will actually pay money to wear a shirt with them and the Budweiser logo on it. They also employ classic American icons that have become their own, like the Clydesdale horses. Bud Light is in a class of its own when it comes to advertising. They mainly employ humor to get the message out and it works, a new Bud Light commercial is always an appropriate topic of conversation, which always brings up discussions of past commercials. One campaign in particular, ⼠Real men of Genius⼠has won over a hundred awards and the coveted Grand Prix in 2006. Their Super Bowl commercials are also widely successful, taking 5 out of the 10 top spots in USA Today ⼌s ⼠AdMeter⼠poll last year. Any commercial is supposed to get you thinking about a product, but Bud Light has managed to procure added value by making them a source of entertainment and something to look forward to. SWOT Analysis A SWOT analysis is an assessment of a company⼌s internal Strengths and Weaknesses, and of external Opportunities and Threats. It is the first step in the planning phase of a firm⼌s strategic marketing process. It is how the company determines its marketing mix strategy t o reach its target markets. Strengths The strongest part of Anheuser Busch is its market share, 48.4% is almost half the market. They accomplished that by producing more than 60 beers, flavored malt beverages, and non ⼳alcoholic blends at 12 breweries in the U.S. They have been able the leverage this presence into taking close to 75% of the industry⼌s operating profits. They are able to do this through economies of scale in management efficiency and through the operations of their subsidiaries. Anheuser Bush Agricultural is in the business of providing raw materials for their brews, saving money like the aforementioned transportation companies. Some supporting firms turn a profit themselves while simultaneously providing for AB, these include the aluminu m can, packaging, glass bottle and label manufacturers. AB is even in the entertainment business with Busch Gardens; and Busch Properties owns and manages resorts as well as residential and commercial real estate. The environmental and community efforts of the company are also a definite source of strength. The market share is what allows AB to function in this manner, and that share is comprised mainly of its two most successful, core beers: Bud and Bud Light. Bud outsells all other domestic premium beers combined and Bud Light is the world⼌s best selling beer; it has 53% of the premium-light share, more than the next two combined. Most of this success can be contributed to AB⼌s commitment to quality and freshness as well as a marketing plan that stays on the cutting edge. A focus on maintaining this dominance is essential to a successful future. Weaknesses It is quite difficult to find weaknesses within the organization or with the products themselves.

Budweiser and Bud Light have recently seen sales st agnate in some markets and even lose some market share in a few places, though they have been mitigated by gains elsewhere. This may be a cause for concern considering the importance of these two core brands. This lack of focus on Bud and Bud Light may be related to all the new products AB is pushing lately. They have really been concentrating on new flavored malt beverages and experimenting with brews other than their traditional lager, going so far as to even introduce heavier brews geared to the holidays . This may not be such a weakness since this niche market is growing and consumers are willing to pay a little more, but it is a weakness if it is taking customers from the core brands. Another possible weakness is that as market tastes lend themselves to more flavorful beers Bud and Bud Light could see themselves losing customers. Maybe it is time to find a beer that can be marketed as a mainstream ⼠microbrew⼠. It⼌s possible that all the money spent on these award winning commercials might be better spent finding an award winning beer. Opportunities The best opportunities for AB lie in the international and import markets. There may also be an opening in the expanding market for specialty beers. AB has established distribution channels that can be used to funnel products to retailers and consumers effectively. They have successful marketers and obviously capable management that could do well in the growing import market as well. They are already in an advantageous spot, owning 50% of GroupoModelo who manufactures Corona, already a top import. They also own 27% of TsingTao, China⼌s leading brewer. Bud is also already the leading premium beer in the world⼌s fastest growing beer market, with 14 breweries already operating and a 15th in production. It is imperative that they capitalize on their early su ccess and continue to find new ways to increase market share abroad, the plan which has worked so well in the U.S. Threats Anheuser Busch is facing the same problems as all domestic brewers: flat consumption. Alcohol awareness and an aging population are t he main contributors. Though it is not possible to control how much beer people drink, they can try to control market share, which is under attack more now than ever. The proposed merger of MillerCoors may pose a serious threat in the near future. They wil l have a stronger brand portfolio, they will be able to invest more efficiently as well. The combined operations will generate product synergies, and improve productivity through existing brewery networks and reduced shipping times. The managing and market ing functions will be streamlined as they eliminate duplicitous processes. Miller has already started a ferocious comparative ad campaign. All of these factors combined with the sheer size of the new operation will lead to a much stronger competitor for Anheuser Busch, one they have to be ready for. Recommendations 1. It is imperative that Anheuser Busch stay focused on holding and increasing their market share in the U.S. They must do this by continuing to do what got them there in the first place, sell Bu d and Bud Light. Due to the increased competition soon to come it is time for AB to be proactive and devise a new strategy. Bud and Bud Light are already great products, it would be disastrous to try and change anything but the packaging. The price is not something that can be adjusted significantly due to the competitive nature of this mature industry. The promotion is excellent, award winning even, so the change has to happen with the place. The three - tier distribution system is inefficient for AB when you view their operation as a whole. They have subsidiaries that perform all the functions necessary to keep

the business running without hiring outside the firm, except in distribution, Granted, they have an extensive network and probably a relationship in good standing but they are not making the profit in that aspect. And because distribution is a variable cost, they could be saving money on every can and bottle. If we use the rest of the corporation as a model, we can assume they would take it to the nex t step and get into distributing soft drinks or something else. The only problem is that it is currently against the law. But the Beer Institute is a strong lobby and AB has large cash assets on its balance sheet that could be used effectively. If this worked, AB would stand to benefit the most because of it⼌s dominant market share, they sell the most, so they would save the most. 2. AB must also maximize its potential in the foreign markets. This should be a combination of imports, exports and direct entry into foreign markets like it is currently pursuing in China. It already has a decent foothold by owning half of GroupoModelo, but it can⼌t stop there. Because of the risk involved with introducing too many products, too fast, it should concentrate its management techniques and marketing expertise on advancing Corona, Becks, Stella Artois and especially the Tiger brand. Tiger has been the number one beer in Singapore for some time, it is a leader in Malaysia, Cambodia and Thailand as well. It has also had success as the number one Asian import into the U.K. and Ireland. Considering the infrastructure already in China (14 breweries), AB should direct their efforts to making Tiger an Asian leader. The beer has international appeal already and AB will be ma rketing and distributing Bud and Tsingtao as it is. So the additional costs associated with this move would be much less than if it was undertaken alone. Also, since it is an Asian beer, the actual cost of importing shouldn⼌t be as much. Another measure that should be considered is gaining a foothold for Bud Light in China, mainly for the same reason as Tiger, but additional ones as well. If Bud is already gaining acceptance and becoming a leader it seems foolish not to introduce it⼌s little brother. Th e tastes between cultures is obviously different but Bud and Bud Light are not all that different. Research would have to be done to ensure that ⼠light⼠beer would be accepted as a viable alternative to the regular, it might be perceived as less manly or watery. Another option in line with the international expansion would be to offer the malternative style drinks, they are relatively new still and the novelty might work in China. The summation of this recommendation is that if sales continue to idle in the U.S. for Bud, Bud Light and domestics in general, AB must have a contingency plan implemented or at least ready to launch. 3. The third and final recommendation is that AB needs to truly enter the specialty market of the beer industry. They have done everything possible to advance Bud and Bud Light to its current standing, which is quite remarkable. But if they don⼌t pay it the attention it deserves they could risk losing that position permanently now that MillerCoors is a joint venture. What will di stract them are all the new specialty beers they are trying to brew themselves: the porters, ales, and fruity beers. The consumer who enjoys these types of beers is looking for something different and original. Unfortunately, AB no longer holds that perception; they are a giant, multinational corporation and the specialty consumer is not going to buy Michelob Porter when Sam Adams Honey Porter or the like is available. Therefore, they should reallocate those assets into acquiring smaller microbreweries with a reputation. This way AB could maximize its strengths of solid leadership while at the same time eliminating one of it⼌s weaknesses. The acquisitions they make should already be producing a product that has had some success, it doesn⼌t have to be a star, just one with some potential. They can charge a higher price for these specialty beers, consumers have proved they are willing to spend more for what they consider to be a better product. It is for this reason that AB should allow the company to conti nue to oversee the day-to

day brewing, but take control at the managerial and higher levels. Once again, we return to the distribution channels, they are already in place. AB has 12 breweries nationwide, they could incorporate the microbreweries into the facility or use them as hubs to distribute the product. Trains and trucks are already loading up and transporting the product from there as it is. And the promotion strategies used have already proved to be very successful as well. AB has a history of effic iently managing subsidiaries and making them profitable. If they do pursue a more aggressive international plan, they will have even more products to market abroad. And finally, the increased market share gained by this move will maintain a more comfortabl e cushion between AB and MillerCoors. Consequently, Anheuser Busch will continue to dominate the beer industry.