This Bud’s for You, Emerging Markets
Anheuser-Busch InBev’s flagship Budweiser brand has long been closely linked to America’s Heartland. Born in 1876, the brew that turned the Clydesdales into an icon. Now the world’s largest brewer is intent on giving Brazilian drinkers their own taste of America. It’s betting that the world’s third-largest beer market by volume—and the birthplace of the majority of the parent company’s board—can help turn Bud into a truly global brand. The plan is to sell “the American Dream in a bottle,” says Chris Burggraeve, AB InBev’s chief marketing officer.
Whether consumers in Brazil—and emerging markets worldwide—will buy into the dream is yet to be seen. AB InBev introduced Bud as a premium brand in Latin America’s largest nation on Aug. 31, with flashy promotions including Budweiser-branded concerts featuring artists such as Rihanna and Pearl Jam. Influential Brazilians, including UFC middleweight champ Anderson Silva, were enlisted to serve as brand ambassadors and raise local awareness of Bud. Budweiser is the official sponsor of the World Cup soccer finals, which Brazil will host in 2014.
Anheuser-Busch was bought in 2008 by Belgium-based InBev for $52 billion, the beer industry’s largest takeover of the decade. InBev had previously bought a leading Brazilian beer company. Today, AB InBev’s beers beat competitors SABMiller and Heineken in both revenue and beer volume worldwide. Budweiser accounts for 7 to 8 percent of AB InBev’s beer production, estimates Nomura, with about three-quarters of Budweiser’s sales in the U.S. Taking Budweiser global is “the cherry on the cake—a nice cherry, but never part of our valuations” in the 2008 purchase, Burggraeve says.
The brewer has already rolled out Budweiser in China, the world’s largest beer market by volume. A bottle of Bud sells there for about $1.75, vs. many local brews that cost about $1. The premium market accounts for about 3 percent of China’s beer sales, with Bud accounting for a third of that. Last year Bud debuted in Russia, where it has grabbed a 1 percent market share.
AB InBev, which already controls about 70 percent of the Brazilian market, plans to sell Budweiser at prices about 15 percent higher than its Skol and Brahma brands there. It’s a bid to expand the county’s underdeveloped premium beer market. More expensive drinks such as Budweiser represent just 5 percent of that market, compared with about 20 percent in the U.S. and 40 percent in Britain, Burggraeve said.
Though Bud has been slowly losing share in the U.S. in recent years, Ian Shackleton, an analyst at Nomura in London, says selling the U.S. brand at a higher price in another country won’t work against it. “It’s not unusual you’d end up with a brand in its home market that’s seen as standard but sold as premium in export markets,” he says, citing Heineken and Guinness, popular-priced drinks that are sold at a premium outside the Netherlands and Ireland.
Shackleton says Brazilian drinkers may warm to the taste of Budweiser, which is similar to local light beers. Successfully selling Bud in Latin America’s largest nation could also help launch the beer in other countries, he says. It “makes it a lot easier to work in the next market.” It could also help AB InBev reverse recent sales declines in the region, which it attributes to slower increases in wages and a pullback from the strong sales during the 2010 World Cup.
Although Burggraeve says Budweiser has the potential to become a powerhouse global brand like Coca-Cola, analysts say it could be tougher for a beer to gain the same global traction as soft drink brands since beer drinkers have historically been loyal to local brews. That’s the theory espoused by rival SABMiller, which owns a stable of strong local beers including South Africa’s Castle Lager and Aguila in Colombia. Budweiser could also be hindered by the fact that it’s not from Europe, the home of beer. “However, in markets where beer has developed more recently it’s less of a problem,” Shackleton says.
Burggraeve even cites the Budweiser brand’s U.S. roots as one reason it could make it big. “Many Brazilians have never been abroad,” he says. “We’re bringing abroad to them. They’re hungry for the world.” There’s also a difference between American politics and American values, he said, which he believes resonate globally. “It doesn’t stand for America. It stands for deep American values that are extremely relevant worldwide” such as camaraderie and a “can-do” attitude, he says.
Going global comes at a price. AB InBev said in August it will spend about $3.1 billion this year to build capacity to meet demand in growth markets including China and Brazil. Still, with no presence in most of Asia and Africa, AB InBev could find itself at a disadvantage to Heineken or SABMiller which have been building business there for years. And Heineken, which purchased Fomento Economico Mexicano’s beer unit in 2010, is also pushing its flagship brand as a premium brew in Latin America. None of that, however, is stopping Burggraeve, who says he’s embraced the marketing slogan Bud uses in Brazil: “Great times are waiting.”