Market Share or Profit, or Both

Posted on January 13, 2012

0


In a culture where corporate growth is the assumed goal, it is easy to presume that growing a company’s market share would increase its profits. Why else would a company want a bigger piece of the consumer-pie if not for more money? Bigger is better because more is better, right? Luckily there is, and always has been, a diversity of opinions on this.

Earlier this week it was reported that Coors Light has overtaken Budweiser, in volume†:

“MillerCoors’ Coors Light has displaced Budweiser as the No. 2 beer in America, marking the first time in almost 20 years that Anheuser-Busch has not controlled the nation’s top two beer brands, trade publication Beer Marketer’s Insights is reporting. […].
A-B has not yet released its own sales figures for the year. “We’re committed to — and on track with — our strategy to stabilize Budweiser,” a company spokesman said. […]
Meanwhile, A-B global parent Anheuser-Busch InBev has made a concerted effort to grow Bud globally, launching it in markets such as Russia and Brazil.” 1

This recalls an article from November 2011, on the three-year anniversary of the Anheuser-Busch InBev merger:

“[…] the corporate culture of the old A-B — tradition-bound, perfectionist, focused more on dominating the beer market than making money — has given way to an aggressive austerity.
The extensive cost-cutting has squeezed more profits out of A-B, but questions remain over whether the company’s new bosses can grow brands and sell more beer. […]
Talk of “a culture of excellence” filled hallways. Workers were closely evaluated. Managers looked not just to sell more beer but to make more money.  […]
The new A-B is run by “very good financial engineers,” the executive said. They slashed costs. They ramped up cash flow, in part by vastly extending the time it takes to pay vendors and suppliers. The leadership, he said, seems to be forcing a choice between cutting costs and investing in people and brands.  […]
But in the U.S. market — A-B InBev’s largest — the company is selling less beer and losing market share. Yet earnings and profit margins have risen steadily with regular beer price increases. […]” 2

Where the old Anheuser-Busch was primarily concerned with market share, the new Anheuser-Busch InBev is focusing on profit. With this perspective, losing the #2 spot to Coors Light is less of a concern, especially since they hold the #1 spot with Bud Light. And we are still talking about the two biggest brewers in the country, Anheuser-Busch InBev  and MillerCoors. It is also interesting that while the craft beer market is growing, the #1 and #2 beers in the country are light beers.

Notes:
“[…]” denotes my edits to the original articles.

†This only refers to volume, Anheuser-Busch will release their 2011 sales figures in March.

1 Chicago Business, “Coors Light knocks Bud from No. 2 beer spot” 10 January 10 2012
http://www.chicagobusiness.com/article/20120110/NEWS07/120119999/millercoors-knocks-bud-from-no-2-beer-spot
2 STLtoday, “3 years after InBev deal, a new Anheuser-Busch” Todd Frankel, 18 November 2011 http://www.stltoday.com/business/local/years-after-inbev-deal-a-new-anheuser-busch/article_a655cea7-89e0-5800-bf6a-b717f10662ae.html

Advertisements
Posted in: Beer Industry