a focus on Premium as the industry contracts

Posted on May 9, 2012



Earlier in the year I looked at Anheuser-Busch InBev’s U.S. strategy after Coors Light replaced Budweiser as the number two beer in the country, in volume. In this news I saw the colorings of AB InBev’s strategy of focusing on profit. At the time, volume and sales numbers were not available from AB InBev, in March these were released.

Overall last year was a good year for AB InBev with revenue growth of 4.6%. The situation in the U.S. as not as good, the volume of shipments declined 3.2% and sales declined 3.0%; however, the revenue per hectoliter increased by 3.1%. Meaning, that while volume and sales declined, AB InBev made more money per ounce of beer sold. This likely reflects their focus on operational efficiency (from working with distributors to cut cutting) and premiumisation (from focusing on Budweiser and Stella to developing new products and packaging). Simply put, premiumisation is when people want fancier beer and/or companies position their beer as fancy. And while a craft beer drinker might find Budweiser to be fancy, if one uses prices as the barometer, it is more expensive than Natural Ice (aka Natty Ice) or Pabst Blue Ribbon.* AB InBev’s goal for (premium) Budweiser is to be “the first truly global beer brand”, and for (super-premium) Stella Artois to be “the global beer defining ‘sophistication’ ”. The premiumisation is witnessed in the increase in price as well as more sophisticated positiong, the latter of which can be seen witnessed in the advertising using chalices (Stella Artois) and Clydesdales instead of men yelling “Whassup?” (Budweiser).

When looking at these sales, volume, and revenue numbers, it is important to keep in mind that the total beer market industry shrunk, the Brewers Associations suggested the industry shrink at 1% while AB InBev estimated the shrink at 1.8%. Perhaps AB InBev does not want to be fighting for market share in a contracting area of the industry, but wants to dominate in the valuable ones.

AB InBev Press Release, Brussels, 8 March 2012 – 1/25 http://www.anheuser-busch.com/s/index.php/anheuser-busch-inbev-reports-full-year-and-fourth-quarter-2011-results/
Brewers Association, “Beer Sales”, retrieved 9 May 2012 http://www.brewersassociation.org/pages/business-tools/craft-brewing-statistics/beer-sales

* To be honest, I find the sub-premium, premium, and super-premium categories to be confusing and inconsistent.
While the industry as a whole shrunk, the craft beer segment grew 13% by volume and 15% by retail dollars;  however, the craft beer segment still only represents 5.7% of the total market


Posted in: Beer Industry