Anheuser-Busch brews battle with SABMiller

Modern Brewery Age, May 31, 2004

AP--For years, Anheuser-Busch Cos. has been the undeniable King of Beers. But now, faced with rising competition from both a better-funded Miller Brewing Co. and a cocktail craze that is shifting sales to spirits, St. Louis-based Anheuser-Busch is launching an aggressive attack on Miller, its distant No. 2 competitor.

Anheuser's effort is expected to include an advertising campaign that draws on a sense of patriotism. In addition, the company unveiled a multifaceted program to its wholesalers Thursday that refocuses the sales force on Bud Light and Budweiser this summer.

In the past year, the success of Michelob Ultra, the brewer's low-carbohydrate beer, has distracted Anheuser from Bud Light and Bud, its largest brands.

Anheuser spokesman Bill Etling wouldn't discuss details of the wholesaler program unveiled last week, just in time for the upcoming Memorial Day holiday and the company's peak summer selling season.

"We believe this program will provide further support to our sales force as we aggressively build on our leadership position in the U.S. beer market," Anheuser said.

A full-page print ad in Thursday's USA Today shows a glimpse of what is to come. Anheuser labels Miller "South African owned," a reference to the South African roots of Miller's current owner, SABMiller, and notes Budweiser has been brewed in the United States since 1876.

SABMiller, of London, was formed two years ago after South African Breweries acquired Miller from Philip Morris Cos., of New York. Philip Morris, now known as Altria Group Inc., still owns a stake in the business.

Anheuser's ad also jabs at the popularity of Miller Lite with carb-counting consumers by dubbing it "The Queen of Carbs."

"We'll let Miller Lite spend all of their time talking about carbs. At Budweiser, we'll continue to spend all our effort making great beer," Anheuser-Busch said in the ad. This theme is likely to be echoed in future ads and in-store displays.

In an apparent response, Miller offered up its own dueling full-page advertisement in Thursday editions of The Wall Street Journal, the New York Times and key regional daily newspapers. Labeling itself "American Born" and "American Brewed," Miller steals a line from an earlier Bud Light campaign by thanking America for choosing on taste.

"We knew we wanted to thank American beer drinkers on the day of our results and we knew that A-B would come out swinging in reaction to our results," said Mollie Reilly, a Miller spokeswoman.

Miller is planning to stick with its current strategy, but will tailor it to react to what is to come, Reilly said.

"It's always good when the dominant player is responding to your actions," she added.

Brands at Miller had been in a 15-year decline before South African Breweries' acquisition, but SABMiller's latest financial results, released earlier Thursday, show the label is turning around.

"The company reported a decided acceleration in shipment trends, with U.S. shipment-to-retailers up 2 percent year-on-year in the second half compared with down 1.5 percent for the full fiscal year," said Legg Mason analyst Mark Swartzberg, in a research note.

According to Goldman Sachs analyst Marc Cohen, Miller Lite benefits from the low-carb frenzy and its "challenger" positioning in its marketing has "arguably weakened performance" for Anheuser's Budweiser brand family.

"This has forced A-B into a defensive position for the first time in a long while, and it could be several months before the payoff to A-B's complicated marketing response can be accurately assessed," Cohen said in a research note.

During a conference call earlier last week, Miller President and Chief Executive Norman Adami said its competitor's reaction has been good for Miller. The dominant brand is now "engaging in a choice conversation" with a smaller brand and that's good for Miller, Adami said.

A-B purchase of Harbin stake nears completion

Anheuser-Busch Cos. Inc. is reportedly close to completing its purchase of 29 percent of China's Harbin Brewery Group, paying 3.70 Hong Kong dollars per share for the stake.

Dow Jones reported that the deal may close in the next few days. Once the purchase of the stake is complete, A-B may make a counter-offer to buy all other shares of Harbin.

Harbin is facing a takeover bid by SABMiller, which already owns 29% of the brewery.