Oligopoly brief: Anheuser-Busch
Anheuser-Busch, until recently the world's #1 brewery, has followed a different course from rivals like SABMiller and InBev, formerly Interbrew, which became #1, at least by volume, after its merger with Brazil's AmBev.
While mostly a beermaker, Anheuser-Busch is involved in two other industries. It makes aluminum cans and glass bottles, mostly for its own products. It also hosts a series of US amusement parks, namely Busch Gardens, SeaWorld, Sesame Place, Water Country USA, and Adventure Island.
In the beer category, the company depends heavily on the US dominance of its flagship Budweiser brand. While it has been looking globally for new markets, it has not thrown itself into the acquisition game with as much abandon as its two main rivals, a reluctance that is starting to hurt the company.
Anheuser-Busch has a market share of 49% in the US, impressive in any business. Its principal brands are Budweiser, Michelob, and Busch. As we've shown before, it is the master of the pseudo-variety game, with dozen of variations on the same basic recipe for American lager beer. Other minor brands in the US are O'Douls (non-alcoholic), Anheuser World Lager, ZiegenLight, Bare Knuckle Stout, Killarney Red, Natural, Hurricane malt liquor, King Cobra malt liquor, and Tequiza and Bacardi-branded alcopops. The company also distributes microbrewery products from Redhook and Widmer.
But there are problems for Anheuser-Busch. Growth, in terms of both revenue and net, has declined over the last year. In fact, the net income is down 31% from last year. While a prosperous and well-run company by any measure (it had six years of growth until the past year), its stockholders are getting restive. In fact, the company slipped form 50% US market share to 49% over the past year.
The reasons are several. First, the US beer market is utterly mature, with little room for growth other than at the expense of rivals. In fact, beer consumption dropped by 2% over the last year. And there is a movement away from beer to wine and spirits, and among young people to alcopops (like spiked lemonade).
Second, the industry decline and competition has kept Anheuser-Busch from an annual price rise, something that has added to profit in past years. Both SABMiller and Coors are busy discounting their brands, and A-B has had to follow along.
Third, chief rival SABMiller, with a renewed campaign for its popular Miler Lite brand is eating away at the one major category that Anheuser-Busch would like to dominate with its Bud Lite brand.
Fourth, there's the international factor. International beer sales are up 11%, but unlike its chief rivals, Bud is not in the best position to profit from that growth. It started international operations in 1981. But in fact, the company operates only one brewery in Britain and a number in China. Its biggest international move to date was the acquisition of Harbin Breweries, #4 in China, in 2004. The company also owns a 27% share in Chinese beer leader Tsingtao.
Anheuser-Busch also has a 50% share of Grupo Modelo, the leading player in the Mexican beer market (brands: Corona, Modelo Negro) and one of the top ten brewers by volume worldwide. Bud is also marketed in a number of other countries under license, including Argentina, Ireland, Italy, and Spain.
A-B has a strong position in China, a big growth market, but its rivals have also taken up a position in China and have further expanded in the other growing markets in South America and Eastern Europe.
