Discounting on Tap at A-B?

Signs of promotion in supermarkets.

Ever since Anheuser-Busch slashed prices in 2004 to fend off surging Miller Lite, beer industry veterans have wondered if A-B would again turn to pricing to maintain volume and market share.

That question gained urgency last week after A-B reported weak sales trends for its premium Budweiser and superpremium Michelob franchises, as well as a decline in share.

Beer Business Daily on Monday reported that distributors are wondering if A-B will discount deeply this summer.

From the report:

"A-B’s soft numbers last week threw some folks a curve ball, with many asking me if we’re going to see heavy discounting this summer. ... (Speaking to North Carolina wholesalers) I indeed warned that soft domestic premium numbers could be the harbinger of heavy discounting coming down the pike, which is exactly what happened two years ago after Katrina hit."

And, indeed, recent Nielsen beer market analysis suggests that A-B might be engaging in sharper promotional activity in supermarkets.

For the four weeks ended April 21, A-B’s case share in supermarkets was down by two tenths of a percentage point. Its dollar share, however, was down nine tenths of a point.

(Miller Brewing Company’s case share and dollar share performance during the same period is consistent.)

The Nielsen data suggests pricing actions on the Bud family, which comes on top of discounting with their economy brands a year ago. Additionally, the higher-priced Michelob family continues to lose volume.

Whether this trend continues will go a long way toward shaping the pricing environment this summer.

To see Brew Blog coverage of A-B's earnings, go here.

To see the Beer Business Daily report, click here (subscription required).