Budweiser sees big sales drop

Anheuser-Busch isn't seeing hot sales of the iconic American beer. But more profitable brews are selling well.

By Kim Peterson Nov 1, 2012 3:50PM
Image: Men drinking beer - Radius Images, CorbisIs Anheuser-Busch Inbev (BUD) killing American beer? That's the theme of this very persuasive Businessweek article, and the company's latest results show that Americans continue to turn against Budweiser.

The brewer's flagship beer saw a 7% decline in U.S. sales in the third quarter. That's a pretty dramatic fall, continuing a trend we've seen for years. Coors Light booted Budweiser from the No. 2 spot in America last year, though Bud Light still has the top spot. The company also makes Stella Artois and Beck's, and said overall U.S. beer sales fell 0.9%.

But Anheuser-Busch is still making plenty of profit. Its North American profit was $1.82 billion in the quarter, Reuters reports. That disappointed analysts who expected to see $1.92 billion. But overall profit rose 15% from a year earlier to $2.34 billion.

The company is trying to reverse its downward spiral by introducing new products, and it seems that drinkers have responded to Bud Light Lime-A-Rita and the more potent Bud Light Platinum. But getting consumers to buy those new drinks came at a cost: Selling and marketing expenses rose 12.8% in North America in the quarter.

Try as it might, Anheuser-Busch cannot sell more beer. Organic volume -- which removes the impact of acquisitions and disposals -- fell by 0.3%. Analysts expected a 2% increase, Bloomberg reported. Much of that volume slowdown was due to Brazil, one of the company's largest markets. Europe and Russia also saw lower quantities of beer sold.

We're now on two straight quarters of volume declines; Anheuser-Busch saw volume fall 0.1% in the second quarter. But overall organic sales rose 9.1% in the third quarter, beating the 7.5% Analysts expected.

So how can sales be rising on falling volume? Higher prices. Beer drinkers are moving away from Budweiser, but they are embracing the more expensive Bud Light Platinum and Lime-A-Rita. That's bringing revenue up.

Although it may not look good, these numbers are pretty much where Anheuser-Busch wants to go. People aren't drinking lower-margin Budweiser but they're trying the more profitable Bud Light Platinum and Lime-A-Rita. Anheuser-Busch is paying for that attention, hoping that eventually it can bring down those marketing costs once consumers are sold. Overall gross margin rose to 58.4% in the quarter from 57% a year earlier.

It all jibes with Anheuser-Busch's intense and aggressive focus on profit at all costs. Here are some of the moves made by CEO Carlos Brito to shore up profits, according to Bloomberg Businesweek:
  • Shifted the brewing of Beck's from Germany to St. Louis, alienating fans who said the taste was weakened.
  • Laid off 1,400 people, or 6% of its American workers.
  • Sold the SeaWorld and Busch Gardens theme parks.
  • Made its labels smaller, the glass in its bottles thinner and cardboard packaging weaker.
  • Used broken rice instead of whole grains in its beer, something previous management would not do.
  • Cut the number of employee BlackBerry phones and told execs to start flying commercial.
  • Cut purchases of high-quality hops, like those from Germany's Hallertau region, in favor of cheaper hops.
Investors have applauded every step along the way, making Brito one of the most well-known CEOs in business. Shares of Anheuser-Busch have risen by 50% in the last year.

And where does that leave Budweiser, once an American icon? Anheuser-Busch has tried several times to revive Budweiser, without success. For now, it seems happy to place Budweiser on the back burner while it brews up more profitable beverages.

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Tags: BUD
304Comments
Nov 1, 2012 6:36PM
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I quit buying bud because they got greedy and kept raising their price.  There are several beers just as good and a lot less.  I may never go back to them, maybe if they lower their price below the others for six months to make up for it.
Nov 1, 2012 6:35PM
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Cheapen everything so the CEO can have a bigger paycheck and the investors are happy. But the people wanting to buy a quality product are left out. The Busch family sold out their legacy along with all the people that built it. It always happens; eventually there will be a generation that doesn't care about what their ancestors built as long as they can have their cash.
Nov 1, 2012 6:35PM
Nov 1, 2012 6:33PM
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Several of us a few years ago did a blind taste test. There were ten Budwesier drinkers in attendance and the rest drank whatever was available. No loyalities. Pabst Blue Ribbon blew Budwesier away. No one chose it as the best flavor. The taste was overwhelmingly better. Even the Bud drinkers were standing with their eyebrows in their foreheads. Pabst has been around 168 years -- it's had it's ups and downs -- but in 2006 it was the Gold Medal Winner at the Great American Beer Festival. What am I saying? I think if you're a serious beer drinker of American beer -- and not imports -- you are missing something if you don't try Pabst. I'm not even suggesting everyone will like Pabst -- but, there are ten former Bud drinkers who drink Pabst now. It must be gaining in popularity, when we go to our liquor stores for Pabst -- many times they are sold out. Bud needs to rethink it's brand. Pabst is beginning to crop up in music lyrics, movies and TV shows more and more. 
Nov 1, 2012 6:32PM
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Another company biting the dust under the Obama economy to destroy American plan.
Nov 1, 2012 6:32PM
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Soon Busch brews will just be another Grain Belt beer.  Sad  Bud was so good back there.
Nov 1, 2012 6:29PM
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Bud Light used to be the beer I drank. Not anymore. It's terrible now. Yuck!
Nov 1, 2012 6:29PM
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Once told a Bud salesman that I read that a local man was going to sue Budweiser. He asked me why?

I said because the guy opened a Bud and found beer in it!

Nov 1, 2012 6:29PM
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Lessons for Tuesday.  All things are not best when the marketizing, profit-as-pinnacle-of-all-virtue zombies get hold of things.

 

Tour the plant in St. Louis.  Learn about the history.   There are lessons there the current CEO is forgetting or never learned.  But he's a business guy, which makes him stratispherically more qualified to be way for the company.  Right. 

 

Broken rice?  Broken America. 

Nov 1, 2012 6:28PM
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Boycott Budweiser, and anything else that the Jesse jackson Family has ownership in.  Racist Family
Nov 1, 2012 6:26PM
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Can;t blame it on Augie. Blame ir on the Belgians.
Nov 1, 2012 6:26PM
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This is typical of a Belgian-owned corporation. Dellhaize, a Begian company that bought out Hannaford, an American company, treats its American consumers and employees like crap.  Many of its stateside employees can not plan a day off more than 3 days in advance and they have a crappy health insurance policy where they have to pay  a $1500 deductible before coverage begins. Hannaford in its earlier days would never have used employees like this. And I know Dellhaize does not get away with this in Europe, where European laws require employees to take a minimum amount of vacation days and have health coverage. This is an example of the Eurotrash taking advantage of Americans. I'd rather shop at WalMart.

Nov 1, 2012 6:25PM
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Actually Budweiser originally imitation Bohemian Pilsner, not German, made possible in the States by adding rice, an essential ingredient. Generally when using rice the husks are used which are tasteless, changing only consistency by aiding filtering during lautering. 
All in all no manufacturer can compete with a home brewer if he or she knows what they are doing. Busch did more to influence Henry Ford than home brewers. For all labeling this a discount beer, enjoy your 8 dollar 12 ounces at the game.
Nov 1, 2012 6:25PM
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Cost savings will never save a company. Cost savings can help the bottom line but once you sacrifice quality to get it, the company will start a downward spiral. Consumers are not as stupid as these corporate management teams think they are. The see right through it. Quality and real innovation will win every time. History proves it over and over again.
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All this yak-yak,,ridiculous. Most of it is a Corporate smoke-screen for what they already know. Out-pace inflation with 2X prices increases and what do you expect will happen?  
Nov 1, 2012 6:24PM
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I had no clue they made Becks or Stella - will now never order those beers either out of spite.  BUD SUCKS!
Nov 1, 2012 6:22PM
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All it ever was and will be is massed produced low quality beer....just one level above piss.

Nov 1, 2012 6:22PM
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Even the old classic Budweiser from twenty years ago was crap and now they are making it worse? Why not just package Natty Light as Budweiser and be done with it.
Nov 1, 2012 6:21PM
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Since Bud is no longer an American company I don't buy it.  The Busch family sold out  how rich does rich have to be  It can go the way of the 8track for all I care
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