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.

More from Top Stocks





Tags: BUD
304Comments
Nov 1, 2012 4:11PM
avatar
And this is what it is all about these days, the INVESTORS and the CEO. See where quality, employees, and customers rank, right?
Nov 1, 2012 4:47PM
avatar

Bud used to be an American made and OWNED company that cared about quality and their employees. "Broken rice instead of grains?" They deserve to lose.

Nov 1, 2012 4:07PM
avatar
I havent bought Budweiser for the past 10 years.  I enjoy the micro brews and American made beers, Samuel Adams has some great beer, dont need the politics of Budweiser or their crappy product.
Nov 1, 2012 4:58PM
avatar

"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."

 

Why don't they just try brewing real beer instead of waterd-down and/or flavored beer-like products?

 

 

Nov 1, 2012 4:15PM
avatar
I'm amazed they haven't started brewing in China.
Nov 1, 2012 4:40PM
avatar
Well, they could start with making better beer.
Nov 1, 2012 5:00PM
avatar
Budweiser used to be a premium beer. Now it has no "bite" or personality. PBR tastes a lot like the old Bud and it's cheaper to boot.
Nov 1, 2012 5:41PM
avatar
And that in a nutshell is what is wrong with the megabrewers.  Might as well drink water.  Cheaper grain, cheaper bottle, cheaper hops and cheaper make believe "German" Beer.  Profits are up, CEO gets a big bonus and then consumers wise up and switch to micros (or to wine) where quality and taste still count for something.  Do they even remember what good beer tastes like?
Nov 1, 2012 4:57PM
avatar
Cracked Rice!!!!!!   This abomination before God cannot be allowed to stand!!!!!!!
Nov 1, 2012 5:38PM
avatar
They could always try making beer that doesn't taste like watered down horse pee.
Nov 1, 2012 5:18PM
avatar
Whole problem with business short term profitable gains that have a long time cost that will hurt or destroy the business.  Slow steady quality growth is always better for the ones working at the company. 
Nov 1, 2012 4:30PM
avatar

There still is time to turn the slide around.  You just need to change the thinking at the top. 

 

Nov 1, 2012 5:36PM
avatar
America's decline is on display everywhere for everyone to see.
Nov 1, 2012 5:48PM
avatar

When you cut jobs for profit, this is what happens in the end.  You should have treated all those loyal employees with respect and dignity.

Nov 1, 2012 5:44PM
avatar
No wonder people aren't drink Budweiser ...making the glass thinner , packaging weaker, and using cheaper ingredients make for a crappier beer !!! Of course this guy is making TONS of cash for the investors so screw the consumers that actually drink the crappier beer. I won't drink a "German beer" that's brewed outside of Germany.... My Kraut ancestors know how to brew a potent beer.  Moving Becks to America will probably make the beer weaker and thus crappier as well.... Maybe Annheiser Busch should change their name to Annheiser Crappy Beer !!!
Nov 1, 2012 5:02PM
Nov 1, 2012 5:44PM
avatar
Gotta agree with atlantaguy there! All about profits! unfortunately even if the company actually did die the only people that would be hurt would be the workers!


Nov 1, 2012 5:54PM
avatar
simple reason, it sucks!!!!

didn't realize the taste could get any worse after AB was sold
Nov 1, 2012 5:44PM
avatar
I love Beer ,but Budweiser no ...tastes bad to me
Nov 1, 2012 5:41PM
avatar
Who drinks Bud? The middle class gets screwed again!
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

124
124 rated 1
279
279 rated 2
471
471 rated 3
714
714 rated 4
642
642 rated 5
604
604 rated 6
614
614 rated 7
450
450 rated 8
303
303 rated 9
115
115 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
ARCPAMERICAN REALTY CAPITAL PROPERTIES Inc10
BIDUBAIDU Inc10
CITCIT GROUP Inc NEW10
HPQHEWLETT PACKARD CO10
ITUBITAU UNIBANCO BANCO MULTIPLO S.A.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.