A-B Earnings Miss Wall Street Expectations

Modelo equity income down.

Anheuser-Busch on Thursday reported fourth quarter earnings that fell short of Wall Street analyst expectations.

A-B reported earnings of 29 cents per diluted share. The Street was expecting 32 cents.

Equity income from A-B’s 50 percent stake in Grupo Modelo has helped boost the company’s earnings in the past. That didn’t happen in the fourth quarter.

Equity income dropped 12 percent, “reflecting reduced Grupo Modelo export volume and increased production costs, partially offset by benefits from Modelo's Crown import joint venture,” according to the release.

According to A-B’s release, the beer industry grew by 1.4 percent in 2007. A-B’s share increased to 48.5 percent from 48.2 percent in 2006.

Costco Ruling Partly Reversed

“Big win for state and distribs.”

In a decision with major implications for the three-tier system, the Ninth Circuit Court of Appeals largely reversed a lower court ruling that deemed unconstitutional many of Washington State’s alcohol-beverage trade laws.

Costco Wholesale Corp. had argued successfully in district court that a range of state laws, including bans on volume discounts and credit, were preempted by the Sherman antitrust act.

The Appeals Court disagreed. From the 47-page ruling:

“We disagree with the district court’s conclusions that the central warehousing ban, the volume discount ban, the delivered pricing requirement, the credit ban, the uniform pricing requirement and the minimum mark-up are hybrid restraints of trade subject to Sherman Act preemption.”

So Will A-B Pull New Bud Spots?

Marketing chief says it will stick to “virtues.”

Anheuser-Busch’s top marketer made remarks in today’s Wall Street Journal that led Brew Blog to wonder whether the company intended to pull ads that tout Budweiser at the expense of crafts and imports.

Responding through a prepared statement in a story about Miller Lite’s upcoming “Dalmatian II” television spot, David Peacock, A-B’s vice president of marketing, said, “We recognize that in an election year there tends to be a lot of negative advertising, and we feel speaking to the quality and virtues of our brands will differentiate us in a cluttered advertising environment.”

Given this stance, will A-B stick with Bud ads that take shots at crafts and imports?

In one, Rob Riggle talks about how Bud has more taste than a light beer but isn’t as heavy as an import. And in another he suggests dark and cloudy beers can hide imperfections.

Or does A-B not consider these “negative advertising”?

Costco to Sell Private Label Beer?

Received label approvals for three crafts.

In what could be a big shift, Costco Wholesale Corp. appears ready to market private-label beer under its Kirkland Signature line.

The big club retailer has received label application approvals from the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau for three craft-style beers: an amber ale, a hefeweizen and a pale ale.

Retailers of all stripes increasingly have emphasized private-label products for their higher margins. And while private label brands once may have been seen as seen as generic or downscale, that's no longer the case. Retailers have done such a good job branding them now that they can compete with premium or above-premium brands.

Costco has been selling Kirkland signature wines for a number of years and over the past year has filed label applications for some private-label spirits, including a single-malt scotch.

Scottish & Newcastle Agrees to Sale

Heineken would pick up U.S. operation.

After months of drama, Heineken NV and Carlsberg A/S are poised to take over Scottish & Newcastle.

Scottish & Newcastle, the brewer of Newcastle Brown Ale, McEwan’s and Strongbow cider, has agreed to a $15.3 all-cash offer, the companies announced Friday.

As noted by Conde Naste’s Portfolio, that price is 10 percent higher than Heineken and Carlsberg’s earlier – rebuffed – offer last fall.

Assuming the deal goes through, Heineken would take over S&N’s operations in the United States and the Americas and in other markets including the United Kingdom and India.

Carlsberg, meanwhile, would gain control of Baltic Beverages Holding and S&N’s French, Greek and Chinese operations.

Miller Lite Brewers Collection Names Ad Agencies

Miller picks two ad shops to work on brand.

Miller Brewing Company has tapped two creative shops on its advertising agency roster to work on Miller Lite Brewers Collection.

Mother, which handles Milwaukee’s Best, and Jacobson Rost, which works on Leinenkugel’s, will create ads for the craft-style light beers.

Miller Lite Brewers Collection next month will go into four test markets -- Baltimore, Charlotte, N.C., Minneapolis and San Diego.

Miller Lite Brewers Collection consists of three craft-style brews -- an amber, a blonde ale and a wheat.

As was the case with Miller Chill, Miller Lite Brewers Collection represents an effort by Miller to bring innovation to the light beer category.

Big A-B Distributor Consolidations in 2008?

“What’s driving it are the fundamentals,” says consultant Joe Thompson.

The biggest Anheuser-Busch distributor in the country was created last year when Silver Eagle Distributors acquired BudCo. The year ended with a bang when south Texas distributor L&F Distrbuting bought Desert Eagle Distributing.

Expect more big -- and little -- A-B wholesaler consolidations in 2008, says consultant Joe Thompson, who handled a number of A-B distributor deals last year.

“What’s driving it are the fundamentals,” he explains. “The problem that the A-B system has is that they are primarily a domestic [beer] system. And the domestics are struggling.”

Bud Light Bowl

A-B to prop up core brands with Super Bowl ads.

As its core brands struggle, Anheuser-Busch is expected to devote its 4 minutes of advertising time during Super Bowl XLII to just two brands: Bud Light and Budweiser, reports say.

A-B is expected to run 6 30-second ads for Bud Light during the game and one 60-second ad for Budweiser.

A-B is changing tack from recent years when it would use the Super Bowl to highlight a variety of brands, such as Bud Select, the New York Times notes:

"The decision to promote only Budweiser and Bud Light would represent a change in strategy. In recent Super Bowls, Anheuser-Busch also ran commercials for smaller brands like Budweiser Select, Michelob Amber Bock and Michelob Ultra Amber; spots called 'Here's to beer,' which celebrated beer as an alternative to other alcoholic beverages; and commercials that encouraged driving responsibly."

A-B is shifting strategy after a weak showing by its core brands. While workhorse Bud Light grew, Budweiser and Bud Select struggled. A-B’s core brands saw sales-to-retailers slide by 0.3 percent in 2007. Shipments of core brands increased by 0.3 percent.

2007 A Good Year for Beer

Industry up estimated 1.4 percent, says Beer Marketer’s Insights.

Beer Marketer’s Insights’ Jan. 14 issue has a roundup of 2007 beer statistics. And it was, in BMI’s words, “another pretty good year for beer.”

Beer shipments increased by 1.4 percent, a solid encore to the 2-plus percent increase in 2006, BMI reported.

Given that spirits growth slipped to the 2 percent to 2.5 percent range, the growth gap between beer and spirits narrowed considerably.

Miller Expanding MGD 64

Broadening Midwest distribution, testing in the West.

Following a successful test, Miller Brewing Company is taking MGD 64 into Midwestern markets starting March 1.

Miller also will be test-marketing the beer in three western markets: San Diego, Sacramento and Arizona.

MGD 64 is a version of Miller Genuine Draft Light with just 64 calories. No beer has a lower calorie count, but it maintains the full taste of the original. MGD 64 will be replacing Miller Genuine Draft Light in the designated markets.

Miller STRs, Revenue Per Barrel Up

Miller Lite STRs up 1.9 percent.

Miller Brewing Company’s sales to retailers and net revenue per barrel increased during the quarter ended December 31, the company’s parent reported on Thursday.

Miller’s third-quarter sales to retailers increased by 1.5 percent during the period, after adjusting for the number of trading days (3.1 percent unadjusted), according to SABMiller.

Miller Lite and worthmore brands drove the increase. Miller Lite STRs (adjusted) increased by 1.9 percent. They are up 2 percent year-to-date.

The worthmore portfolio -- including imports, crafts, Miller Chill and Sparks -- posted strong double-digit growth during the quarter.

Miller’s net revenue per barrel increased by 4.3 percent during the quarter, thanks to strong pricing, strong performance by worthmore brands, and a reduction in promotional activity.

Miller’s STRs (adjusted) for the first three quarters increased by 1.4 percent on an organic basis. Sales to retailers increased by 4.4 percent including Sparks and Steel Reserve.

Corona Extra Mainstream?

“The strategic direction on Corona worries us,” analyst writes.

Will the launch of Corona Extra 12-pack cans undermine the image of the No. 1 import?

That’s the question raised in Tuesday report by Bear Stearns analyst Justin Hott.

Commenting on recent reports that Grupo Modelo would not be taking pricing on Corona, Hott writes:

“However, we are less enthusiastic about the launch of Corona into 12-pack cans, a format that does little to build brand equity. … This move by Modelo may help short term volumes, but we doubt it helps the status of the brand.” 

Bud Takes Shots at Crafts, Lights, Imports

Ads tout Bud as "The Great American Lager."

In recent ads touting Budweiser as “The Great American Lager,” Anheuser-Busch manages to take shots at crafts, imports and light beer -- even though A-B has positions in all those areas.

In one ad, actor-comedian Rob Riggle explains to a woman in a bar that Bud is less heavy than an import yet has more taste than a light beer.

In another, Riggle suggests brewing a lighter beer is more difficult than making a darker beer. That’s a pretty clear shot at crafts.

A-B to Tap Russian Beer Market?

Reportedly in talks to help S&N buy Baltic Beverages Holding.

Is Anheuser-Busch poised to crack into the Russian beer market?

Anheuser-Busch and some private equity groups have met with Scottish & Newcastle to discuss a joint bid to take over Baltic Beverages Holding, the No. 1 Russian brewer, news reports over the weekend said.

BBH is a joint venture between Scottish & Newcastle and Carlsberg. But now that S&N is in the sights of a buyout bid by Carlsberg and Heineken, it is moving to take full control of BBH.

Getting a stake in BBH would enhance A-B’s international presence.

From the UK’s Daily Telegraph:

"S&N's plan would be to finance a bid for BBH by offering a 25 per cent stake to a minority partner.

"Anheuser-Busch has long coveted a place in the rapidly expanding Russian beer market and replacing Carlsberg in a new joint venture with S&N would offer it part ownership of the country's leading brewer."

The Telegraph story can be seen here.

Rolling Rock Red?

A-B preparing new Rolling Rock line extension.

Anheuser-Busch appears poised to roll out a red lager version of Rolling Rock called Rolling Rock Red.

Copy on the back of the bottle reads (according to federal filings): “From the good name of Rolling Rock along with the untraditionally painted green bottle, we created this finely crafted red lager beer. Our toasted caramel malt introduces a rich, robust taste to a remarkably smooth finish. We tender this finely crafted red lager for your continued enjoyment, as a tribute to your good taste.”

While the number 33 has been a traditional part of Rolling Rock iconography, Rolling Rock Red's label has a “3.”

New Miller Chill Ads Hit TV

Miller Chill is cold-weather refreshment, ads say.

Miller Brewing Company this week started airing new TV advertising to maintain momentum for Miller Chill.

The ad, titled “Ice Cave,” drives the message that Miller Chill is an ideal beer for year-round refreshment. “Sometimes even cold weather needs a refreshing twist,” the ad says.

The 15-second ad will air through the end of March on select network sports programs, cable sports events, cable entertainment programs and other outlets.

The TV advertising is complemented by print and out of home advertising. New point of sale materials play on the winter theme, saying “The Forecast Calls for Chill.”

The new programs are part of Miller’s effort to step up support for the brand, a priority executives laid out last fall during distributor meetings.

Miller Chill currently has about 0.3 percent share in supermarkets, according to beer sales statistics from Nielsen.

In a recent interview with Beer Business Daily, Miller CEO said Miller Chill has slowed during the winter -- something that was expected. He added that he expects Miller Chill to reach share ranging from 0.5 percent to 1 percent.

Brew Blog's coverage of Long's interview can be seen here.

Brew Blog's coverage of Miller Chill's seasonality can be seen here.

Coors Starts Advertising Blue Moon

Print and outdoor advertising begin.

Coors Brewing Company has nurtured Blue Moon Belgian White Ale into a hot seller through below-the-radar marketing efforts.

Now it’s taking a more conventional route: advertising.

Advertising Age this week reports that Coors recently has been running Blue Moon ads in local weeklies and national magazines, including Food & Wine and Men’s Fitness.

Outdoor advertising has appeared in some “key markets” as well, Ad Age reports.

The ad is an Impressionist-style Blue Moon product shot that includes a glass with an orange garnish. The tag: Artfully crafted.

Integer created the ads. No TV or radio executions are planned. Spending is estimated at the “mid-six-digit level,” Ad Age reports.

Ad Age suggests Coors is shifting strategies because the brand has reached a size where it needs at least some level of media support.

The story can be seen (scroll to bottom) here.

Constellation Cuts Outlook

Acquisition costs a factor.

Constellation Brands -- which markets brands including Svedka vodka and Robert Mondavi wines and owns a stake in Corona Extra’s importer -- on Tuesday cut its earnings outlook for its fiscal 2008.

Constellation cut its outlook to $1.06 to $1.11 per share. Previously it had forecast earnings of $1.16 to $1.24 per share.

The reduction was largely driven by costs related to its recent acquisition of Fortune Brands Inc.’s wine business.

Constellation reported third quarter earnings of 55 cents per share, in line with Wall Street estimates.

Beer Marketer’s Insights focuses on the performance of Crown Imports, the U.S. marketer of Corona and other Grupo Modelo brands (Crown has a stake in Crown). While sales-to-retailers were up low single digits, third quarter revenues slipped and fourth quarter comps were described as “difficult.”

Can Budweiser Grow?

New A-B marketing chief says it can.

Anheuser-Busch, which saw sales-to-retailers of its core brands slide in 2007, is expected to significantly ramp up its marketing spend in 2008, Advertising Age reports.

Budweiser is one of the brands marked for increased spending.

Which begs the question: Can Budweiser start growing again? It certainly would appear to face long odds: It’s roughly half the size of its peak. Miller Lite has supplanted it as the No. 2 beer in supermarkets. Premium full-calorie domestic beers face headwinds. And Bud has been declining since 1988.

Indeed, many beer industry observers have written off the brand’s prospects for growth.

But Dave Peacock, tapped last year as A-B’s top marketer, believes the brand’s fortunes can be reversed.

A-B Core Brand Sales Fall

Imports drive growth.

Imports kept Anheuser-Busch growing in 2007.

Anheuser-Busch’s sales to retailers grew by 1.3 percent during the year, A-B reported on Monday. But backing out imports -- particularly the InBev European brands -- A-B’s STRs slid by 0.3 percent.

A-B’s shipments increased by 2 percent during the year, but that was largely driven by imports. A-B’s core brand shipments increased by 0.3 percent.

"Anheuser-Busch achieved increased shipments in 2007 due to the success of our initiatives to broaden the company’s beer portfolio, including the addition of InBev European brands,” A-B CEO August Busch IV said in a press release.

Noted Beer Marketer’s Insights Express:

"Including exports, looks like AB shipments edged over 105 mil bbls. Take out Euro brands tho, and AB volume basically the same in 07 as it was in 03."

The A-B press release can be seen here.

The BMI home page is here.

Bitter Times for Arizona Craft Brewers

Closures, changing styles in response to higher hops prices.

The Arizona Republic on Friday takes an up-close look at the impact rising hops and barley prices are having on the state’s craft beer community.

It tells the story of brewers scrambling to find hops, contemplating changing their styles and recipes and, at least in one case, closing down.

From the article:

“A global shortage of hops, combined with a run-up in barley prices, is sending a chill through Arizona's craft-beer industry.

“The hops shortage threatens to boost prices, cut into profits and close down brewpubs. It could change the taste and consistency of treasured local ales.

Big Boxes Boost Busch

24- and 30-packs help drive share gain.

Anheuser-Busch recently improved its share in supermarkets thanks largely to its Busch franchise.

A-B maintained flat share in supermarkets during the four weeks ended December 22, according to beer sales statistics from Nielsen. That was the first time A-B avoided a year-over-year volume share loss since June 30.

The biggest contributor was the Busch franchise, which gained 0.4 points of case share during the period. (Bud Light gained 0.1 points and Michelob Ultra added 0.2 points). The Busch franchise's dollar share increased by half as much, 0.2 points.

Credit big packages for the growth.

Growth Gap Narrowing Between Beer, Spirits

Craft beer a factor?

The Associated Press recently picked up on a story that’s been the talk of the beer press: Spirits is no longer growing dramatically faster than beer.

From the story:

"After years of losing people to mixed drinks, industry experts say the beer industry regained some of its lost luster in 2007, helped by surging interest in craft beers, a slowing economy and the desire of more drinkers to imbibe at home.

"Final year-end data has not yet been released, but Eric Shepard, executive editor of trade magazine Beverage Marketers Insight, said growth in the number of spirits sent to sellers slowed in 2007 while beer shipments remained about the same."

Miller CEO Cites Price Leadership

Miller also looking for new craft opportunities, Long tells BBD.

Miller Brewing Company led beer industry pricing in 2007 as it worked to transform its portfolio, Miller CEO Tom Long told Beer Business Daily in a wide-ranging interview.

Long told BBD in an interview Thursday that “the idea of transforming our portfolio has brought such a big swing in our economics.” Citing Nielsen supermarket data for the year 2007 through December 8, Long said:

"Miller Brewing average pricing was up 4%, including Chill, A-B was up 1.9%, and Coors was up 2.5%. When you take Chill out of the equation, Miller [Brewing] is still up 2.8%. So even without Chill, we are still leading pricing and mix up."

The Jacob Leinenkugel Brewing Company, which is owned by Miller, played a role in Miller’s improved performance in the higher end of the beer business. And while Leinie’s will remain Miller’s man craft play, Long said Miller is keeping its eyes open for other opportunities.

A-B to Push Crafts in C-Stores?

Advertising craft-style brands in trade media.

It’s not news that Anheuser-Busch has been losing share in convenience stores even as crafts gain space in that channel.

Is A-B trying to reclaim some of that space in the channel it dominates with its own craft-style brews?

That would appear to be the case, based on an ad buy in the trade magazine Convenience Store News.

The December 10, 2007 issue of CSN includes a full-page ad for Shock Top Belgian White Ale, a brand A-B appears poised to push as a Blue Moon fighter. (Shock Top began as a seasonal called Spring Heat Spiced Wheat).

The same issue also has a full-page ad for Stone Mill Pale Ale and Wild Hop Lager, two organic brews made by A-B under the Green Valley Brewing Company name.

A-B’s plans remain to be seen. But pushing craft style brews would make sense. A-B has more than 60 percent share in the channel. And crafts are increasingly popular.

Moreover, it’s widely expected that craft brewers will be forced to raise prices in the coming year due to higher commodity costs. That could benefit A-B.

The CSN web site can be seen here.

New Seasonal from A-B

Sun Dog for summer?

Anheuser-Busch appears poised to introduce a new summer craft-style seasonal.

A-B late last month filed a number of label applications for Sun Dog Amber Wheat ale. The brand’s label, which depicts a shorts- and shades-wearing dog clutching a Frisbee, is described as a “limited edition” and a “seasonal brew.”

Given the graphics and name it seems safe to assume the brand is a summer seasonal.

Assuming that’s the case, it’s unclear what the introduction would mean for current summer seasonal Beach Bum Blonde Ale.

A-B is morphing its spring seasonal Spring Heat Spiced Wheat into a year-round brew, Shock Top Belgian White, in an apparent effort to take on Coors Brewing Company’s Blue Moon Belgian White Ale.

UPDATE: In comments, a reader suggests Sun Dog might actually be a spring seasonal replacement for Spring Heat.

Brew Blog first noted Sun Dog here.

The label image can be seen here.

The label application is here.