April 25 (Bloomberg) -- Anheuser-Busch Cos. said first- quarter profit rose 3.7 percent, less than analysts estimated, on increased advertising for Bud Light and imported beers.

Shares fell 2.8 percent, the biggest drop since July 2005.

Marketing and administration costs rose 8.1 percent as the brewer spent more to keep drinkers from switching to Miller Lite. Anheuser-Busch also advertised InBev NV's European brands Bass and Beck's after it took over U.S. distribution in February.

``There are some big costs for getting these InBev brands on board before the key holiday selling season,'' said Mariann Montagne, an analyst with Minneapolis-based Thrivent Asset Management. U.S. Memorial Day on May 28 marks the start of the season, she said.

Net income increased to $517.5 million, or 67 cents a share, from $499.2 million, or 64 cents, a year earlier, the world's second-largest brewer said today in a release. Profit trailed analysts' estimates by 2 cents.

Shares of St. Louis-based Anheuser-Busch fell $1.45 to $50.90 at 4:02 p.m. in New York Stock Exchange composite trading, the biggest drop since July 27, 2005. They've gained 19 percent in the past year, compared with a 41 percent gain for InBev NV, the world's biggest brewer by sales.

Missed Analysts' Estimates

Sales increased 2.7 percent to $3.86 billion for the quarter, from $3.76 billion a year earlier. Revenue missed the average estimate of $3.93 billion estimated by 8 analysts surveyed by Bloomberg.

Marketing and administrative costs exceeded the $615.7 million anticipated by Morgan Stanley analyst Bill Pecoriello. These costs totaled $665.7 million, according to the brewer.

Anheuser-Busch's domestic beer volume rose less than 1 percent after some wholesalers cut inventory levels to lower their costs, which caused U.S. profit before income taxes to fall 1.6 percent to $762.1 million.

Shipments to retailers have dropped 3 percent so far in April, Chief Financial Officer Randy Baker said today on a conference call with investors.

``Beer is weak in the U.S. right now, and they're struggling with that,'' said Montagne, whose company has $70 billion in assets including Anheuser-Busch stock.

Revenue per barrel rose 2.3 percent, missing the 3 percent estimated by Goldman, Sachs & Co. analyst Judy Hong.

Losing Market Share

Excluding acquisitions of brands such as Rolling Rock, domestic beer shipments to retailers dropped 1.6 percent, Pecoriello said today in a research note. Beer volume ``remains a concern,'' he wrote.

Market share in the U.S. slipped to 50.2 percent from 50.9 a year earlier, said the 147-year-old company whose origins trace back to a Bavarian brewery.

``The biggest problem facing these guys is they control the lion's share of a very competitive market that's not growing much,'' said Jack White, director of research at Todd Investment Advisors in Louisville, Kentucky. The firm has $3.5 billion in assets including Anheuser-Busch shares.

Anheuser-Busch boosted spending on marketing to win back drinkers, including one spot in which two men play a rock-paper- scissors hand game to determine who gets the last Bud Light. One man makes a signal, while the other man throws an actual rock to knock out his opponent and win the beer.

Rival SABMiller Plc has run ads saying its Miller Lite tastes better than Bud Light, and the London-based brewer plans additional commercials later this year.

International Sales

Outside the U.S., Anheuser-Busch said volume rose 8.7 percent on gains in China and Canada.

Equity income from Anheuser's stake in Grupo Modelo SA and China's Tsingtao Brewery Co. rose 30 percent to $159.4 million.

Anheuser's wholesalers have taken over about 60 percent of InBev's European volume for beers including Beck's and Stella, Baker said during the call. There have been ``some disruptions'' such as brands being out-of-stock at stores and insufficient reordering when inventories are low, he said.

Anheuser-Busch's long-term target is to boost earnings per share by 7 percent to 10 percent a year. The company doesn't give quarterly forecasts.

The company repurchased more than 9 million shares during the first quarter, the company said today.

Of the 17 analysts who follow the brewer of Michelob and O'Doul's, seven rate it a ``buy,'' eight say ``hold'' and two recommend selling.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

Last Updated: April 25, 2007 17:46 EDT