Anheuser-Busch management reviewed the company’s strategies to accelerate U.S. beer sales and profitability, and reaffirmed the company’s 7 to 10% long-term earnings growth objective, in a presentation given at the Consumer Analyst Group of New York Conference.
“Our top priority in 2008 is to accelerate core beer sales and profitability,” August A. Busch IV, president and chief executive officer of the company, told investors and analysts.
There has been an acceleration in consumer demand for beer over the past two years and the company aims to capitalize on the improved growth of the U.S. beer industry.
Based on an extensive consumer research effort, the company has fine-tuned its marketing messages, and redirected and enhanced its marketing and media resources to meet the demands of a changing marketplace.
The company plans to increase total media spending by 10% in 2008 and will focus its national media spending on fewer brands, emphasizing those like Budweiser and Bud Light that benefit the most from large scale media exposure.
The company’s consumer research efforts have also identified promising opportunities for innovative new products, such as Bud and Bud Light Chelada, and Landshark Lager, which have been rolled out nationally in the first quarter, and Bud Light Lime, which will be launched nationally on May 5.
Through mid-February, the company’s total wholesalers’ sales-to-retailers increased 1.9%, with Anheuser-Busch produced brands up 0.6%.
In addition to volume, effective revenue and cost management are also key to accelerating U.S. beer company profit growth. A strong revenue per barrel performance is expected in 2008, with the increase on core brands greater than in 2007.
Productivity improvement and supply chain savings to mitigate commodity cost pressures are a very high priority for the company this year. The company has expanded its “Blue Ocean” brewery cost reduction initiative to drive additional cost savings and process improvements across all areas of the company.
Busch also provided highlights of the company’s international beer business, which is a significant contributor to Anheuser-Busch’s consolidated earnings growth. The majority of international beer profits are driven by the company’s 50% investment in Grupo Modelo, the leading brewer in Mexico and the brewer of Corona, the leading U.S. import brand. The company is also well established in China, the largest and fastest growing beer market in the world, and particularly well-positioned in the country’s most profitable beer segments. Budweiser is by far the leading super-premium brand in China and will be the official international beer sponsor of the 2008 Summer Olympics in Beijing. Anheuser-Busch also has a 27% equity stake in Tsingtao, China’s leading premium brewer.
