It's a frigid February night. But the 200 or so revelers inside the Fox and Hound in Schaumburg, Ill., don't seem to notice that the wind chill in the Chicago suburb is nearing zero. One group happily plays a life-size, Bud Light-branded version of the puzzle game Jenga, while another table talks animatedly with an Anheuser-Busch (BUD) brewmaster about making beer at home. Local distributors pass around free bottles of Bud Light packaged that morning at the St. Louis brewery. But don't mistake the jovial atmosphere. This is war.
Anheuser and other beermakers had neglected this type of on-premise sampling in bars and restaurants in recent years, allowing wine and spirit companies to belly up to the bar. But now Anheuser is taking a barstool, aggressively going after consumers where they make the purchases.
It's part of a broader strategy at Anheuser that includes a cooler-full of new products and makeovers for its older ones -- moves that the St. Louis brewer hopes will not only keep archrival Miller Brewing at bay but also the likes of Absolut, Bacardi, and Cuervo. "Growing share in our industry is our No. 1 priority," says Michael Owens, Anheuser's vice-president for sales and marketing. "But we also recognize that we're competing in a broader world of consumer choice."
MIGRAINE TIME. In many ways, Miller's revival is a headache Anheuser just doesn't need. As the industry leader in the U.S., Anheuser has to worry about both the drainage from its core beer market and also the growing sales of liquor and wine. Beer represented around 60% of the alcohol business in 1995, according to industry publication Beer Marketer's Insights. But that share has fallen to 56% today, while wine and spirits have been steadily increasing their piece.
All of that is giving Anheuser a migraine. In 2004, it sold 103 million barrels of beer in the U.S., up only slightly from 102.6 million in the previous year. And for the first time in nearly a decade, Anheuser failed to increase its share of the U.S. beer market. "They're trying to fight a war on three fronts -- wine and spirits, imports, and Miller," says Marc Cohen, a beverage analyst at Goldman, Sachs & Co. "It's a pretty tough job."
One part of Anheuser's focus will be on-premise promotions like the one in Schaumburg. It's bringing back a Bacchanalian-like spirit to such efforts. Management upped its 2005 on-premise marketing budget for sampling in bars by $30 million. It has also created a program devoted solely to such activities, including training materials.
"It's key to taking on the wine and spirits industry because a large part of the beer-drinking occasions that have been lost have been on premise," says hedge-fund manager Steven Dixon of The Global Beverage Fund.
NEW SENSATIONS. Core brands like Budweiser and Bud Light have gotten a face-lift in part to give them more cachet among the cocktail set. Longneck bottles of Bud Light now feature fidget-resistant plastic labels instead of the more common paper ones. Anheuser is rolling out aluminum bottles of Budweiser this week, sleek packaging designed to gain distribution in high-end bars and night clubs where looks matter. Earlier this year, it introduced the first of the retro Budweiser cans featuring the "Eagles Claw" logo from 1936. More nostalgic cans from the 1950s should hit stores and bars throughout the year.
Management is also filling up its pantry with new products to fight off competitors. They rolled out Budweiser Select in February. With its low-carbohydrate profile and rich color, many critics have seen the move as a response to the success of Miller Lite. Other product innovations seem to go after wine and spirits. Anheuser launched BE, a beer chock full of caffeine that may make beer as appealing as the caffeine-charger Red Bull, which has been a popular vodka mixer.
It's also test-marketing Bistro 8, a fermented beverage that's similar to a cider with a citrus kick, in Sarasota, Fla. With its green bottle and gold-foil top, Anheuser hopes to appeal to consumers in white-cloth restaurants, venues traditionally dominated by wine. There's also speculation that Anheuser may be diversifying by buying some liquor brands. "We're not going to sit idly by and say we can't change," says Anheuser's Owens.
SCRATCHING THE NICHE. Anheuser's game plan certainly isn't a slam dunk. For one, the competitive environment continues to heat up, with Miller and others in the spirits and wine industry opening their wallets with bigger ad budgets and acquisitions.The spirits industry shelled out $430 million in 2004, according to the Distilled Spirits Council of the U.S., and is likely to spend at least that much this year.
Some beer experts are critical of Anheuser's recent product launches. Many industry insiders are concerned that Budweiser Select, for example, will only cannibalize sales of established brands like Bud Light. Others think products like BE are too niche to prove to be a big win for the behemoth. "I doubt BE is going to have any real impact," says Dixon. "Even if it were a huge success, it wouldn't move the needle for Anheuser-Busch."
Still, Anhueser management can't let competitors continue to nip at its heels. Its plan may have a few holes, but Anheuser doesn't need to be perfect. It just needs to continue to be a powerhouse.
By Adrienne Carter in Chicago