Anheuser-Busch: Staying Competitive Through Advertising And Innovation

Nov. 30, 2005
Anheuser-Busch moves forward with new products and creative ads amid storm-related losses and a lawsuit.

The Anheuser-Busch Clydesdales have come to symbolize the holiday season as they march their way through snow-covered city streets while the 153-year-old brewer of brands such as Budwiser and Bud Light tips a glass to television viewers and wishes them good tidings.

It's one of several advertisements through the years that have helped St. Louis-based Anheuser-Busch Cos. Inc. -- one of IndustryWeek's IW 50 Best Manufacturing Companies in 2005 -- attract consumers and establish itself as the largest U.S. brewer. In fact, effective beer advertisements are considered such a competitive edge that Anheuser-Busch has tried to block ads by Milwaukee-based Miller Brewing Co. that it claims are misleading.

The Miller Brewing Co. confirmed reports in a statement on Nov. 15 that several cable networks "temporarily" placed Miller ads on hold. The ads in question claim Anheuser-Busch changed the formula of Bud Light and that despite the changes, Miller Light still tastes better. Anheuser-Busch says it hasn't changed the beer's ingredients.

Anheuser-Busch Cos. Inc.
At A Glance

Anheuser-Busch Cos. Inc.
St. Louis, Mo.
Primary Industry: Beverages
Number of employees: 31,435
2004 In Review
Revenue: $14.9 billion
Profit Margin: 15.0%
Sales Turnover: 0.9
Inventory Turnover: 14.1
Revenue Growth: 5.6%
Return On Assets: 15.3%
Return On Equity: 82.6%
The latest controversy comes nearly three months after the company paid $120 million to settle a defamation lawsuit filed by the family of baseball legend Roger Maris. The family sued Anheuser-Busch for falsely accusing the Maris Distributing Co. of improper practices, including repackaging outdated beers, when Anheuser-Busch terminated its contract with the family-owned beer distributorship in 1997.

The lawsuit, coupled with lost sales in states affected by Hurricane Katrina, contributed to a 24% drop in third-quarter profits for 2005. Net sales increased 0.2% vs. the third quarter 2004, driven primarily by an 11% increase in international beer sales and a 13% revenue increase from entertainment operations. Anheuser-Busch subsidiary Busch Entertainment Corp. operates several theme parks including SeaWorld and Busch Gardens.

Company President and CEO Patrick Stokes said despite the disappointing quarter he's encouraged by the company's improvement in its market-share performance at the consumer level.

"Anheuser-Busch has undertaken a number of initiatives in 2005 to enhance beer volume and market-share growth, and in the third quarter the company's market share increased in supermarkets, according to IRI [Information Resources Inc.] data," he said in an Oct. 26 press release. "Although we are confident the company will restore its sales and earnings growth momentum in the future, we now expect 2005 earnings per share excluding one-time items to be 10% to 11% below 2004 results."

Shortly after releasing its third-quarter results, the company introduced a wholly owned subsidiary called Long Tail Libations that is testing a two-part liqueur product called Jekyll & Hyde in Orlando, Fla.; Columbia, Mo.; Denver and Las Vegas, Reuters reported Nov. 7. The product is a combination of two liqueurs that are meant to be served together. The move comes in the midst of sluggish beer sales as consumers are buying more cocktails and wine. "Consumers today are looking for more variety in their alcohol-drinking experience, and this allows us to meet those consumer needs," Mic Zavarella, director of innovation of Long Tail Libations, told Reuters.

In other recent news, the company said it has begun construction on entertainment projects at its three Shamu Stadium facilities for a show production called "Believe". The show features elaborate set pieces, music, choreography and state-of-the-art multimedia.

"This is without a question the most ambitious project we have ever undertaken," said David R. Smith, corporate vice president of entertainment for Busch Entertainment Corp. "While we are building on almost four decades of experience in showcasing killer whales in SeaWorld parks, this show will be unlike anything our guests have ever seen or heard."

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