BUDWEISER (ANHEUSER-BUSCH) MARKETING PLAN

THE COMPANY HISTORY Budweiser is referred to as Bud, a brewing company founded at St. Louis in the mid 1800s. Budweiser beer is Americas drink. One out of five

alcoholic drinks sold in America is a Bud. It is the worlds most popular beer. In 1865, the brewery produced 8,000 barrels. These numbers grew quickly when Budweiser Lager Beer was introduced to public in 1876. The company expanded rapidly and controlled all the means for producing its beer. In the 1950s, the company expanded its businesses in various cities, in an attempt to tap into a European tradition. In 1970s, Budweiser became a true icon of American culture, thanks to a model of commercial development, the envy of the world. In 1980, it made a history by expanding into the global marketplace with agreements to brew and sell in Canada, Japan, and elsewhere. Budweiser along with the brand extensions Bud Light, Bud Dry

and Bud Ice is creating an image for itself: a mass-produced, drinkable beer that symbolizes the good life. Now, the King of Beers is being sold in more than 60 countries worldwide.

Company Mission:

During production of the Budweiser Budvar lager we use traditional procedures and the knowledge passed down to us by previous generations of brewers. We produce our beer exclusively from the highest quality raw materials whole heads of atec hop, selected Moravian malt and virgin clear water from our Artesian wells. Due to the unavoidable delicious flavour, unique composition and care in production, our lager is searched for by lovers of high quality beer in all continents.

BUDWEISER WITHIN THE BEER INDUSTRY

The beer industry in USA is still in a growing stage. On 2006 the total industry production amounted to 196,721 million barrels, not including

non alcoholic beers, an increase of 1.9% from the period before (2005). Another main indicator that confirms this stage is the augment in the number of new competitors, mainly foreign ones. Actually, the largest

growing sector is imported beers with an 11.5% increase in barrel production, representing 13.5% of the total US market1. On average, US Households spent $426 in alcohol beverages. Households in the <$49K category spent 57% of their alcohol budget on beer while high income households only spent 41% on beer. The top ten states:

California, Texas, Florida, New York, Illinois, Ohio, Pennsylvania, Michigan, North Carolina and Georgia comprise near 53% of the total American market. The U.S. beer industry is divided into three basic levels of brewing according to annual production: high volume, regional, and small breweries.

The large breweries: annual shipments of over 15 million barrels. The regional breweries: annual shipment of less than 15 million barrels.

The small breweries: consist of microbreweries and brewpubs.

Budweiser is produced by Anheuser-Busch (AB). ABs market share is 48.4 percent, shipping over 102.3 million barrels. Budweiser is the most well-

known beer brand and leads the beer market in USA. Its main competitors in

http://www.beerinstitute.org/statistics.asp?bid=220

this market are Coors, Heineken and Miller2. Besides competitive forces, Budweiser also faces social and regulatory forces.

Total Industry 2006 November YTD (1,000s of Barrels)

Industry Segment Domestic Production Imports Exports Non Alcoholic Total Industry YTD 2005 YTD 2006 Barrels Barrels 165,727 23,807 3,454 1.051 192,989 166,675 26,546 3,554 946 196,721 Volume Change 948 2,739 101 -105 3,732 Percent Change +0.6% 11.5% 2.9% -10.0% 1.9%

Note for 2006: Molson/Coors closes Memphis brewery and temporarily moves some production including NAs to Canada.
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Source: Beer Institute, 2006

REGULATORY FORCES: It is mandatory to all alcoholic industry to warn the consumers about the consequences of alcohol abuse. Budweiser has placed resources and developed many campaigns to prevent underage drinking as well as alcohol abuse for the last 25 years. Another implication of the regulatory forces is the high taxation imposed on alcoholic beverages, for beer this is around $0.19 per gallon, ranging from $1.19 in Alaska to $0.02 in Wyoming. This tax is a government attempt to discourage possible drinkers by rising beer prices. Actually Budweiser has had to implement moderate price increases during the last years instead of a big one to compensate taxation with a minimal loss of customers.3
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SOCIAL FORCES: American market is a highly segmented one in terms of demographics. This means that every state is a particular market and marketing strategies must be developed for each situation. This represents different marketing mixes throughout US, forcing cost increases. Budweiser main goal is to maintain its position as beer brand leader. It bases its marketing strategy in employing psychological influences to affect the final purchases decision. Given that Humans tend to retain funny images in their minds more than serious ones, Budweiser uses humor to influence the selective retention process and place its brand in the minds of the consumers. Some famous campaigns have entered the popular culture in the United States. That is the case of the campaign built around the phrase Whassup. Budweiser not only uses catchy phrases to retain and attract new customers. Cognizant that the greatest consumers of domestic beers are young sportminded men and woman; Budweiser sponsors many sports ranging from form baseball to fishing competitions, in order to maintain brand awareness in different market segments. As a conclusion, several factors affect todays Budweisers marketing strategy. Our goal will be to take the position of the Budweisers marketing group to study and analyze these factors and provide meaningful

suggestions to this strategy.

BUDWEISERS SWOT ANALYSIS Strengths Financial Status Market share Effective marketing campaigns Distribution channels Cutting edge manufacturing plants Good marketing Brand name recognition creating strong competitive advantage and customer loyalty Highly recognized reputation among customers Opportunities The international market is four times the size of the U.S. market. Weakness Wholesalers and retailers do not sell the product properly. High reliance on the US market.

Increase of cost of production results in low profit margin. Rising prices of barley and wheat. Shortage of beer ingredients

Threats U.S.: Miller-Coors new alliance. Local companies already established within every international market. Extra costs involved with oversees distribution or production

New alliances by becoming the U.S. beer importer of a number of inBevs premium European brands such as Becks, Bass Pale Ale.

Miller and Molson Coors Brewing joint venture High industry competition. In 2001 the company experienced decrease in market share due to Millers discounted marketing approach. Anti-alcohol campaigns can have negative effect on overall sales New regulatory forces can limit sales volume

Becoming an importer for the Dutch premium lager Grolsch, Singapores tiger Beer and Czechvar premium Czech Lager

Establishing new relationship with Hansen Natural Corp; none beer related producer of

Strengths Anheuser-Busch has many different strengths that will help them if they where to look into new markets. One advantage that Anheuser has is their financial status. A look at their annual report shows that they achieved their best results of the decade4. Earnings per share increased 16.2%. Sales to retailers increased 3% over the year. They also received 3% more revenue per barrel due to more cost-effective manufacturing. Sales for all of Anheusers major brand families increased, and Bud Light continued with its eighth

consecutive year of double-digit growth. Anheuser has strength in other areas to. Budweiser controls 70.1% of the domestic beer market. Their nearest competitor is Miller Genuine Draft with 11.2% of the market share. Anheusers distribution also gives them more power in the industry. They have devised an incentive plan for their wholesalers that reward them for selling only Anheuser-Busch products. This plan focuses the wholesaler on selling only one product group. This approach had helped boost domestic sales over the competition. Anheusers manufacturing plants are the most technologically advanced in the industry. This is due to a modernization program that involved updating and replacing old equipment. This has reduced cost by around $300 million per year. It has also increased the output of each facility. Anheuser has an advantage because of their name. Budweiser is one of the most valuable trademarks in the world today. This is due to the large number of promotions they have each year.
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Weaknesses Budweiser focuses on brand positioning and massive distribution, however even though they offer great incentive programs for their wholesalers, they may not have the proper direction to sell the product efficiently. If the wholesaler is not promoting, sales in the area will be hurt. Actually Budweisers retail performance is poor considering its marketing

investments, which sometimes end up boosting competitors retail sales. Another problem is that Budweiser is stuck in a mature market where domestic volume dropped 1.8% in 20055. Although it reported its first profit increase in five quarters in July and sales grew 5.9% to $4.26 billion, it needs to reduce its reliance on the US market. It has tried to build a worldwide brand by marketing campaigns, such as plastering the Budweiser logo on stadium walls at the FIFA World Cup, and through local partnerships. Opportunities Right now, Anheuser has a big opportunity to increase globally. The international market is four times the size of the U.S. market. This allows them many chances to expand their market. With a bigger market it will also give Anheuser a chance to experiment with different product lines that may appeal to different market segments. The size of the international market may also be more likely to produce higher growth rates. With less restriction on trade barriers it gives a company a better chance to import products into a country. It is a lot easier for a company who has the resources to enter new markets. However, their biggest focus is in creating new alliances with other large beer distributors such as inBevs and Hansen Natural Corp.
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Threats Budweiser faces two types of threats, international and local ones. The first one is that even with Anheusers size Budweiser will still have threats when entering new markets. They will have to compete against the existing companies that have already established themselves in the market. They could drive Anheuser out before they even get a chance to fight. Competing in another country can be very expensive. Keeping costs down will be a problem that arises. They will have extra costs involved with oversees distribution or production. The costs will be absorbed in the price of the product. Lower priced alternatives would be able to compete and slow down their market growth. Foreign exchange rates will also have a big impact on operations in the international market. They could cause a big loss in profits due to a shift in the rates. Increased barriers or government regulations could also prevent market penetration. Another possible source of threats could be the regulation of their ability to advertise and market their products the way they currently do. The second threat for Budweiser is local: Now, A-B's last two significant U.S. competitors have combined in a joint venture called MillerCoors6. They are projecting that MillerCoors will achieve $500 million a year in cost savings, which will flow straight to the bottom lines of the two parent companies, besides MillerCoors will have a market share of 29 percent, the closest any rival has been to the St. Louis colossus in 20 years. This cost reductions will eventually reduce Coors and Miller prices, expand their

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distribution channels and allow them to compete in more even conditions against Budweiser.

Beer Industry Environmental Analysis

Beer is broadly enjoyed across all key demographic segments.
I. % of Total Beer Consumers in each Demographic Segment
A. Age

M-7 A2 2- 4 83 3- 9 54 5+ 0

Age %

MA-27 17%

28-34 18%

B. Ethnicity 35-49 50+ 34% 30%

White AfricanAm erican Latino

Ethnicity C. Gender %

white 84%

AfricanAmerican 6%

Latino 10%

Ma le Fe a m le

Gender %

Male 70%

Female 30%

D. Occupation

White Collar Boue collar Gray collar other

Occupation %

White Collar 21%

Blue Collar 19%

Gray Collar 33%

other 27%

E. Income

< $35K $35-49K $50k or more

Income %

<$35K 25%

$35K-49K 17%

$50k or more 58%

II.Growth of these key consumers groups will impact growth of beer consumption. 10-Year Growth Estimate

21-27 Year old Latino African-American 50+ population

+7% +30% +18% +27%

III.Beer buyers are very similar to beer drinkers IV.Beer is purchased in greater quantities and more than any other type of alcohol beverages. V.Grocery is the most common beer channel choice

Grocery is the channel of choices for nearly 1/2 of beer buyers. Grocery/Superm a rket Liquor store Conveniece Mass Merchandise Drug Warehouse club Others

Channel

Grocery/ Supermarket

Liquor store 21%

Convenience

Mass Merchandise

Drug

Warehouse club

Others

46%

13%

5%

2%

3%

10%

COMPETITORS ANALYSIS Because of the high costs involved in the production equipments Budweisers competition has been narrowed down to three main

competitors: Miller, Coors and imported beers: Heineken and Corona. Nevertheless, Corona cannot be considered a real competitor since A-B owns a 50% share in Grupo Modelo7, Coronas manufacturer, and it is imported by A-B as a way to fight back Heinekens growing market share.

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Advertising is a key issue in beer competition and it focuses on selling a high quality brand. Budweiser places $4.08 per barrel in advertising, and sells a fresh image normally related with sports, Millers ads cost per barrel is around $6.09. It represents itself as a great product for people who deserve it, and finally Coors ads cost per barrel is $8.63, in an effort to change the spread image of a product for anti-gay and anti-feminist consumers. In an attempt to reach as many markets as possible and fight competition more efficiently, Budweiser has developed a whole line of products, taking advantage of its brand name to place them in the market. That way, we can see different types of beer all related to Budweiser: Bud light, Bud Silver, Bud Ice, Budweiser Select, Bud Dry and Bud Silver. Recently Budweiser and the beer industry in general are facing a fast growing competitive market: wine. American average consumer is changing his drinking habits for alcoholic beverages considered more refined such as wine, while wine manufacturers are focusing more in low income consumers, reducing wine prices and advertising its benefits. Actually, The United States is set to overtake France in the next five years as the world's largest wine market, U.S. consumption of still wine, that is, not sparkling wine, is estimated to rise to 27.3 million hectoliters, or 721.2 million gallons, in 2010 from 23 million in 2005, and a great part of those consumers will come from the beer market. BUDWEISERS EGG DIAGRAM

Budweisers Current Marketing Mix

Current Products Budweiser Family Budweiser Brewed and sold since 1876, Budweiser leads the U.S. premium beer category, outselling all other domestic premium beers combined. Bud Light Introduced nationally in 1982. Bud Light contains more malt and hops by ratio of ingredients than Budweiser, which gives the brew a distinctively clean and crisp taste. Budweiser Select Bud Select is a new beer developed by using two-row and roasted specialty malts for a rich color. Bud Dry Introduced in 1989 Bud Dry is the first dry-brewed beer produced

by an American brewer. Bud Ice Introduced in 1984, Bud Ice is a smooth-tasting ice beer. Bud Ices ice-brewing process creates a slightly sweet taste. Bud Ice Light Bud Ice Light was introduced in 1994. Bud Ice Light combines Bud Ices unique taste profile with fewer calories.

Current Price The management of Anheuser-Busch Cos. Inc. estimated that 2007 earnings for the brewer of Bud Light and Budweiser are expected to exceed company targets because of a stronger beer market. The annual beer

shipment volume grew by 2.1 percent in 2006, the best annual performance since 1990. In 2007, industry growth is estimated to be 1.8 percent and it is exceeding prior expectations. The strong industry is caused by favorable

pricing environment within the last two years. So far, the brewer raised prices in several states in the fourth quarter and plans to continue to implement price increases in early 2008. Current Promotion The company includes in its marketing promotions a long line of TV advertisements. It is also known for the sports sponsorship, video games (Tapper), and a vast presence in motor sports ; Bernie Little's Miss Budweiser hydroplane boat, sponsoring the Budweiser King Top Fuel Dragster driven by Brandon Bernstein. Budweiser is also the official beer of NHAR and NASCAR. The company also does its marketing through popular music. Budweiser is an official partner and sponsor of Major League Soccer and the Major League

Soccer and Los Angeles Galaxy as well as the headline sponsor of the British Basketball League in the 1990s. Current Place The company distributes its product within American market and has the largest market share within the beer industry. Additionally, marketing management team creates new segments that target many different international sectors. Anheuser-Busch International uses dual focus in its marketing strategy: making equity investments in leading brewers, growth markets and increasing Anheuser-Busch brand sales in international markets.

New Markets Central-America The beer market in Central America has been growing an estimated 4 percent annually since 2000.

China China is by far the worlds largest and fastest growing beer market and during the past five years has accounted for 45 percent of the growth in global beer volume. Over the past 10 years, industry volume growth has averaged 7 percent annually. Anheuser-Busch is well-positioned to take part in the substantial long-term growth opportunities in this country. Canada

Budweiser remains the No. 1 beer brand in Canada through a very successful license and sales agreement with Labatt Breweries. Mexico Mexico is the largest export market for Anheuser-Busch beers, and Bud Light and Budweiser lead the growing import category through a distribution partnership with Grupo Modelo, Mexicos leading brewer. Russia Russia is the worlds fifth-largest beer market, and consumers there are increasingly turning to beer, especially premium international brands. Recommended Marketing Strategy for the Company Anheuser-Bush has been the largest growing company within the beer industry. It sells its product not only in America but also all over the world with long term goal of targeting other large potential markets. Information gathered above has been rather impressive however, after closer analysis we believe that every company should have some room for improvement. This is why our team suggests some improvement as well as new marketing ideas that the Anheuser-Bush should implement in their long-term marketing strategy. Product The company has been very successful in being able to separate its product from the competitors products. People are very aware of its unique taste and quality. After, analyzing beers offered by the company we think that the products offered do represent wide range of diversity in tastes and also fulfill

desires of many different marketing segments. For instance, the line of Bud Light that contains lower amount of calories definitely attracts clients that are more weight conscious; for instance, women. We also support an idea that the company introduces seasonal flavored beers such as chocolate or cherry during seasons such as Christmas time. This marketing strategy attracts additional clients, who dont drink beer on regular bases but enjoy it during holidays. Price Price of beer in general is rather elastic, which means that the price increaser, decreases demand for the beer. This is due to the fact that customers can always find other alcoholic beverages that might substitute for the beer such as hard lemonades, wine, etc. Recent high prices resulted from increase of average barley prices by 17% since the beginning of the year to the highest in 11 years. This increase is partly because farmers are devoting less acreage to the grain in favor of more lucrative crops, especially corn. Barley has also become more expensive because now that more corn is being sold to make ethanol, there is less corn available to be fed to animals. That is leading to greater demand for other feed grains, including barley, for livestock. For instance, Anheuser-Bush Europe, whose sales results include France, Spain and Italy have shown that their overall revenues decreased due to high prices of beer and reduction in product demand. Therefore, our recommendation would be for the company to focus on developing cost reduction strategy that eventually would be recommended to implement within all of their marketing segments. Promotion

As we previously stated the company has been involved in many various ways of marketing promotions, however not all of them have been as successful as expected. For instance, Budweiser introduced new idea of targeting its audience through their own bud TV. It is a creative idea of reaching out to customers who specifically are interested in that kind of product. This idea seems to be very attractive at first, however was not as victorious as the company predicted. This concept did not work because, first of all the channels name implies that it is specifically related to beer only, which limited audiences interest, especially women. Second of all, this channel is available on-line and is a subject to strict age confirmation, which results in visitors driver license verification. This causes too much inconvenience for many viewers. Overall, at first good idea turned into a total disaster. Furthermore, decrease in promoting smoking also negatively affects beer sales, since both complement each other very well. This should be another challenge for the company on how to promote its product without promoting alcoholism and bed lifestyle habits. We believe that the company should also focus on maybe promoting heritage of beer rather than humorous and free of worries way of living. Place Anheuser-Bush is the largest worldwide beer selling company. They sell their product almost everywhere. Our recommendation would be for the company to be very careful and sensitive to the wants and cultural tastes of each market thats being targeted. Cultural differences, and marketing trends differ from country to country, therefore promoting all American beer in China will probably not be the best idea. The marketing product introduction

should be maybe presented as a beer that is for open minded people that crave the worldly taste. Each market should be given a lot of attention and studied carefully.

MARKETING PLAN BUDWEISER