Consolidation Has Not Helped the King of Beers Regain Its Crown

Source: Wikipedia

Fortune reports today that Budweiser is now the #4 beer in America. Thirty years ago, Anheuser Busch sold 49.2 million barrels of the core Budweiser brand in the United States, accounting for more than one in four beers sold. In 2016 the company only sold 14.4 million barrels of Budweiser. Today, Bud Light is the #1 beer in America, and the traditional Budweiser brand has fallen behind both Coors Light and Miller Lite. Of course, Budweiser's struggles are not unique.  Bud Light has lost volume as well over the past decade, as Americans turn to craft beers and imports.  According to Fortune, the top ten brands account for only 50% of the beer sold in America, whereas they once accounted for 2 out of every 3 beers purchased by consumers.  

The beer industry has consolidated dramatically in recent years, as brewers engaged in a wave of mergers and acquisitions.  While they have achieved considerable cost synergies, these mergers have not solved the fundamental growth problem that the mainstream brands have in the United States.  Consolidation often occurs when companies experience top line pressures.  That may help improve earnings in the short run, but often mergers do not recharge growth.  The King of Beers needs help, and the solution won't come from further dealmaking.  

Bud Light's Decline: What's the Brand Promise?

The Wall Street Journal reports today that Budweiser and Bud Light continue to experience market share declines in the United States.   The chart shown here documents the eroding share over the past six years for the Bud Light brand.  The main Budweiser brand also has experienced share decreases over this time.  The article attributes the declines to the growing appeal of craft beers and imports.   The article makes me wonder about Budweiser and Bud Light's brand promise.  What is it, and has it been updated effectively for the current market environment. What is Bud selling these days, and has it positioned itself appropriately amidst the heightened competition from craft brews and imports?

Consider the concept of a brand promise.  What is a brand promise?   Hinge Marketing describes it as "the tangible benefit that makes a product or service desirable." Workfront defines it as " a value or experience a company’s customers can expect to receive every single time they interact with that company." Workfront argues that a highly effective brand promise has five attributes: simple, memorable, credible, different, and inspiring.  

Does Bud Light have a brand promise that meets these five criteria? Has it updated that brand promise for the current competitive situation and to meet today's customer needs and desires?  It's not clear to me that they have figured out how they should position themselves in this current environment.  

What's an example of a brand promise that does meet these five criteria?  How about Ritz Carlton?  Their brand promise is quite compelling:  "Ladies and gentlemen serving ladies and gentlemen."  

The Budweiser Rebranding Campaign

By now you probably have heard that Budweiser plans to rebrand itself as "America" for the summer and fall.  The Wall Street Journal reports on the move, and it explains the rationale:

Budweiser has been making a concerted effort to shake up its image in recent years with bold marketing campaigns. The brand has been losing market share for more than 25 years as younger drinkers increasingly opt for pale ales and cocktails over the King of Beers. The company’s “Brewed the Hard Way” ad, launched during the 2015 Super Bowl, criticized craft brewers for making beer to be fussed over while Bud brewed beer “for drinking.”  This summer’s packaging builds on that by framing Budweiser as more American than competitors. “This is bold and new,“ said Ricardo Marques, vice president, Budweiser. He added that the brand needs “to surprise” consumers, especially during the key summer sales month.

Budweiser clearly is searching for ways to combat the loss in market share.   The brand has lost share both to light beers in the mainstream portion of the market, as well as the emergence of a strong craft beer segment in the industry. Bud Light displaced Budweiser as the top beer brand in the U.S. in 2001, and Coors Light overtook Budweiser for the second spot ten years later.   Meanwhile, craft brews accounted for more than 10% of the market for the first time in 2014.  

What are the risks of this rebranding campaign?  The Financial Times reported on a few potential downsides in an article this week.  Here's my take.  First, it might seem odd to actually take your brand's name off of the product.  Will people still recognize it on the shelf?  I don't think that is a problem at all. The Budweiser can is iconic.  People will easily spot it on the shelf.  Perhaps more seriously, one has to wonder whether some customers will complain since Budweiser is no longer owned by an American company.  AB Inbev is the parent company, and it's based in Belgium.  Finally, how might the rebranding play out on social media?   Could the campaign shift in unexpected directions, particularly as an incredibly unpredictable and perhaps tumultous US election campaign unfolds?  The rebranding is a bold effort to jumpstart a slumping brand, but it does have some potential risks. Executives might feel that they have no choice.  Miller's core brand was once Miller High Life.   Look what happened to that once iconic brand.  

For more on this issue, check out my Facebook Live chat with The Great Courses.  

Budweiser: Can It Go Global?

According to the Wall Street Journal, Anheuser Busch Inbev is making a big push to take the Budweiser brand global.   A quick look at the brand's performance in the United States tells us why the company is focused on expanding Budweiser's global reach.  The historic brand's consumption in the US has fallen for twenty-four straight years, and it has now fallen to number 3 in market share in the United States (behind Bud Light and Coors Light).   Budweiser faces challenges winning over customers in foreign markets though.  As the Wall Street Journal reports:

"Adolphus Busch launched a pale lager in St. Louis fashioned after beer from the Bohemian town of Budweis—has never won over most beverage connoisseurs. It scores only a 56, when any rating below 70 is "poor," on the website Beer Advocate. In Europe, where some beer brands have been popular for 500 years, Budweiser 'is not seen as a real beer by beer aficionados,' says Ian Shackleton, a London-based analyst with Nomura."

Budweiser faces a more fundamental challenge though.   In global markets, the local beer brands still dominate.  Many companies, including Anheuser Busch Inbev, have pursued acquisitions across the globe, because they understand this dynamic.  In the article, SAB Miller CEO is quoted: 

"We remain convinced beer is fundamentally a local business,'' says Alan Clark, SABMiller's chief executive in an interview. Although SABMiller is expanding international distribution of brands such as Miller Genuine Draft and Italy's Peroni, it puts far greater stock in its local beers, like Snow. "There's an emotional resonance we find consumers have with beer brands which frankly is different," he says. "We just see it continuing."

Of course, the question is:  How large are those global economies of scale, if local brands dominate so much.  What value does the global parent add?   I wish that Alan Clark had commented on those core questions.