Anheuser-Busch Companies, Inc. continually seeks opportunities to maximize
shareholder value and increase efficiency. Through their extremely effective marketing
strategies A-B has gained control of over 47% of the global market share. In the process of doing this, Anheuser-Busch has become one of the most recognizable trademarks.
This is not without its faults though. Anheuser-Busch’s aggressive advertising campaign has targeted more than who they bargained for. Through A-B’s catchy advertisements, they have attracted customers other than the 21+ age group, and recreational drinkers.
It is the opinion of many researchers that Anheuser-Busch is negligent in their advertising, and insists that changes need to be made. Through proper regulation of their advertising, consumers would be allowed to make choices free of media persuasion.
Anheuser-Busch Companies, Inc. continually seeks opportunities to maximize shareholder value and increase efficiency. As noted in the Annual Report for 1999, Anheuser-Busch remains focused on three major objectives to enhance shareholder value:
Increasing per barrel profitability which, when combined with continued market share growth, will provide solid long-term earnings per share growth.
Profitable expansion of international beer operations by building the Budweiser brand worldwide and making selected investments in leading brewers in key international beer growth markets. The company has made significant marketing investments to build Budweiser brand recognition outside the United States and operates overseas breweries in China and the United Kingdom. The company also has a significant equity position in Grupo Modelo, Mexico’s largest brewer and producer of the Corona brand.
Continued support of profit growth in packaging and entertainment operations. Packaging operations provide significant efficiencies, cost savings and quality assurance for domestic beer operations, while entertainment operations enhance the company’s corporate image by showcasing it’s heritage, values and commitment to quality and social responsibility to 19 million visitors annually as well as adding their profit contribution.
The company’s strong commitment to achieve these objectives benefits all firms and individuals that maintain a vested interest in their corporation.
With an estimated 47.5% of the total market share for 1999, Anheuser-Busch continues to widen the gap separating them from their nearest competitors. Budweiser and Bud Light are the No.1 and No. 2 best-selling beers in the world. Miller, their closest rival maintains 22.1% of the market share. The following chart illustrates market share in 1999 for the nation’s leading breweries.
In 1999, they achieved record sales and earnings, selling over 100 million barrels of beer worldwide for the first time in history. August A. Busch III, Chairman of the Board and President, says his company owes its success to, “The combination of outstanding domestic beer industry fundamentals, the highest quality and freshest beer in the industry and exceptional marketing and sales execution.”
According to Fortune Magazine, the company applies venerable marketing techniques more vigorously and imaginatively than the competition. The company’s most important technique is target marketing. Anheuser-Busch sponsors events and runs advertising specifically aimed at all sorts of consumers: blacks, whites, blue-collar workers, computer-buffs, and sports fans. Sports fans make up a large, diverse population. The company has strategically positioned themselves to promote to this target audience, with 70% of their advertising dollars going towards sports programming. They have exclusive deals with 21 of 24 major league baseball teams, 21 of 28 National Football League franchises, 300 college sports teams, and most professional basketball, hockey, and soccer teams. Anheuser-Busch has been very effective in maintaining a competitive advantage over its fellow rivals.
The primary economic issue affecting this company’s environment is taxation. The company is significantly impacted by federal, state and local taxes, including beer excise taxes. Beer excise taxes are a sin tax, which raise revenue for the government. The national median is 18 cents per gallon of beer (St Louis Post, 98). An increase in taxes effects costs to the company, hence, costs to the wholesalers and consumers.
According to the Annual Report for 1999, taxes applicable to 1999 operations (not including the many indirect taxes included in materials and services purchased) totaled $3.0 billion an increase of $114 million, or 3.9%, vs. 1998 total taxes of $ billion. Taxes in 1998 increased 8.1%. The increases in taxes in 1999 and 1998 are primarily due to higher excise taxes on increased beer volume. The economic constraints beer excise taxes impose considerably affect the company’s overall performance.
The social environment plays a key role in how Anheuser-Busch effectively markets their product to its consumers. For apparent reasons, such as, alcohol abuse, underage drinking, and drunk driving, not everyone is in favor of promoting alcoholic beverages. Many individuals and organizations lobby against the brewing industry and have a strong voice in the political arena. MADD, (Mothers Against Drunk Driving) is well known for its prominent position in the fight to end alcohol abuse.
There has been much controversy on how Anheuser-Busch chooses to advertise its beer products. Over the years, some of their most successful advertising campaigns have been targeted for promoting underage drinking. Listed below are article summaries related to this controversial issue.
Controversy: Frothing Anti-drink Forces Set Out to Nip Spuds in the Bud (People, 10/26/87) MADD member, spots stuffed Spuds MacKenzie doll in toy store. MADD claims Anheuser-Busch is promoting alcohol to minors. Anheuser-Busch, places blame on merchandising pirates and claims Spuds items are not intended to be sold to people under 21.
TV Ads vs. Alcohol Abuse Drive: Uneven Contest (St. Louis Dispatch, 1/30/93) Sue Giles, division director of Missouri state’s division of Alcohol and Drug Abuse, says the brewing industry will spend more money to promote drinking in three minutes of Super Bowl commercials than Missouri will spend in one year to prevent alcohol abuse.
Anheuser-Busch Shareholders Want Teen Drinking Advertising Study (Gannett News Service, 4/25/95) The Dominican Sisters of Adrian, Michigan, who number about 200 shareholders, argue that A-B’s beer advertising appeals to those under 21. They attend annual shareholder meeting to suggest study be conducted on current advertising strategies.
Trouble Brewing Bud Frogs Appeal to Children New Study Says (St. Louis Dispatch, 4/25/96) The Center on Alcohol Advertising, based in Berkeley, California, conducted a study which indicated children from ages 9 to 11 were more likely to recognize Budweiser’s television frogs than Kellogg’s Tony the Tiger, The Mighty Morphin Power Rangers or Smokey the Bear.
Commentary: Do Budweiser Frogs Give Young People a Bad Idea? (Gannett News Service, 9/20/96) MADD believes the Budweiser frog ads clearly appeal to United States youth and believe the frog commercials should be banned from television.
MADD Blasts Beer Company: Group Pushes Teen Drinking as Campaign Issue; Budweiser Defends Ads (The Dallas Morning News, 9/14/96) MADD says Bud’s animated bullfrogs are the “Joe Camel of beer ads.” Anheuser-Busch hosts news conference, spokeswoman, Francine I. Katz, states “We are not helped by the abuse of our product. We are strong and out there with a voice that says we want our product consumed safely and by adults.”
Anheuser-Busch Super Bowl Ad Encourages Parents to Talk to Teens to Prevent Illegal Drinking (Business Wire, 1/25/99) Anheuser-Busch Super Bowl Ad encourages parents to talk to teens to prevent illegal drinking.
It is evident; alcohol advertising is subject to serious debate. These issues may place constraints on marketing activities and must be taken into consideration.
In contrast, this company owes its success to its product’s popularity. A large majority of the adult population enjoys alcoholic beverages, drinks responsibly and is strongly in favor of promoting alcoholic beverages. Anheuser-Busch must be prepared to effectively handle the social controversy, which arises with the sale of their product.
The political environment is very influential on the brewing industry. Often, social issues affect the political realm, consequently, placing more restrictions on the sales or consumption of alcohol. For instance, MADD seeks support from politicians during election time. Political leaders may then fight to increase alcohol taxes, as well as, place more restrictions on the marketing and consumption of alcohol. In 1993, Senator Paul Simon, of Illinois, introduced legislation that would require all liquor advertising to carry a Surgeon General’s warning. Also, due to the serious problems of drunk driving, efforts were made by state and federal officials to lower the blood-alcohol limit to .08 for offenders. Political influence impacts how the brewing industry handles its operations.
Anheuser-Busch must respond accordingly to these political issues. They stress their opposition to alcohol abuse, underage drinking and drunk driving. With community programs across the United States, they lead the industry in the promotion of alcohol awareness and education.
The legal environment in the brewing industry is often affected by social and political attitudes directed at constraining business practices. There has been much controversy over the advertising of alcohol products through various forms of media. For instance, Anheuser-Busch and Miller Brewing Co., ceased advertising on the MTV network after the FTC launched an investigation into the airing of beer commercials to an audience consisting of mostly underage viewers. The White House has requested the FCC investigate possible restrictions on liquor advertising on TV. Although, there are no federal regulations that apply to alcohol advertising, local governments have placed restrictions on alcohol advertising. Alcohol ads were recently banned from billboards in Baltimore, and other cities are planning similar actions (Journal of Advertising, 1998). These legal restrictions impact on Anheuser-Busch markets its product.
Anheuser-Busch prides themselves on using the most modern equipment in the industry to ensure the highest level of quality beer is processed. As indicated in the Annual Report for 1999, “our beers use only the highest quality ingredients, such as barley and hops…building in quality at each step of the brewing process, and having twelve strategically located breweries in the United States forming the most extensive production network in the industry, ensure that the freshest beer reaches consumers.” This company is aware of the importance of technological improvements to enhance their growth.
Before a company decides that it is going to initiate a new project it is important to gather all the needed information and get a firm understanding of what they are getting into. A useful tool for doing this is a SWOT analysis. It looks at four aspects that will aid in making decisions for future plans. The four steps are strengths, weaknesses, opportunities, and threats. It gives a better understanding of how they may stand in a certain market.
The first stage to focus on is the strengths of the company. Anheuser-Busch has many different strengths that will help them if they where to look into new markets. One advantage that Anheuser has is their financial status. A look at their annual report shows that they achieved their best results of the decade. Earnings per share increased 16.2%. Sales to retailers increased 3% over the year. They also received 3% more revenue per barrel due to more cost-effective manufacturing. Sales for all of Anheuser’s major brand families increased, and Bud Light continued with its eighth consecutive year of double-digit growth. Anheuser has strength in other areas to. Budweiser controls 70.1% of the domestic beer market. Their nearest competitor is Miller Genuine Draft with 11.2% of the market share. Anheuser’s distribution also gives them more power in the industry. They have devised an incentive plan for their wholesalers that rewards them for selling only Anheuser-Busch products. This plan focuses the wholesaler on selling only one product group. This approach had helped boost domestic sales over the competition. Anheuser’s manufacturing plants are the most technologically advanced in the industry. This is due to a modernization program that involved updating and replacing old equipment. This has reduced cost by around $300 million per year. It has also increased the output of each facility. Anheuser has an advantage because of their name. Budweiser is one of the most valuable trademarks in the world today. This is due to the large number of promotions they have each year.
Every company regardless of the size has certain weaknesses. When dealing with a company of Anheuser’s size it is hard to pinpoint exactly what the problems are. Typically there are a few common problems that plague any organization. They range from management to distribution. Even though they offer great incentive programs for their wholesalers they may not have the proper direction to sell the product efficiently. If the wholesaler is not promoting, sales in the area will be hurt. Poor marketing can reduce the market share of a company by losing it to others in the industry. Management within the company can also be a problem that could effect future projects. If the management is not focused and on track the projects will not receive the results they expect. It is also important that they have people with the necessary skills to do the job. With out the proper input projects could be slowed down substantially. Research and development is also a key to an organizations success. If the proper research is not done for a project they may go in with higher expectations and fail. There is also the possibility that equipment failure may come into play. If a project depends on a certain number of item and they can’t produce it could cause the whole project to fail.
A new project means new opportunities. With the right approach and proper preparation a company could have a big opportunity to enter the market and maybe even dominate. Anheuser has an advantage when it considers new projects. They have the resources that it takes to succeed. They just have to use them in the proper situations.
Right now Anheuser has a big opportunity to increase globally. The international market is four times the size of the U.S. market. This allows them many chances to expand their market. With a bigger market it will also give Anheuser a chance to experiment with different product lines that may appeal to different market segments. The size of the international market may also be more likely to produce higher growth rates. With less restriction on trade barriers it gives a company a better chance to import products into a country. It is a lot easier for a company who has the resources to enter new markets.
Even with Anheuser’s size they still will have threats when they enter new markets. They will have to compete against the existing companies that have already established themselves in the market. They could drive Anheuser out before they even get a chance to fight. Competing in another country can be very expensive. Keeping costs down will be a problem that arises. They will have extra costs involved with oversees distribution or production. The costs will be absorbed in the price of the product. Lower priced alternatives would be able to compete and slow down their market growth. Foreign exchange rates will also have a big impact on operations in the international market. They could cause a big loss in profits due to a shift in the rates. Increased barriers or government regulations could also prevent market penetration.
Another possible source of threats could be the regulation of their ability to advertise and market their products the way they currently do.
Problems Found in Situational Analysis
Advertising is part of the complex process that shapes people’s ideas about what is normal and right to think and do. Alcohol advertising’s most powerful role is in helping to sustain an environment in which drinking and heavy drinking are seen as normal activities. As many researchers have shown (Gerbner 1990), most alcohol advertising seeks to associate drinking with possessing desirable qualities or experiencing pleasurable sensations. Advertising attempts to make alcohol a pursuit of the good life, the American dream, proper masculinity, and other compelling themes in American culture.
Recent literature reviews (Atkin 1993) state that a large body of research indicates that exposure to or awareness of advertising contributes to an increase in drinking. For example, Atkin et al. 1993 found that greater exposure to advertising stimulates drinking, excessive drinking, and drinking and driving (or riding with a driver who has been drinking).
A recent study conducted by the Association for Consumer Research revealed a startling link between exposure to alcohol advertising and youth drinking, drinking by adults, and heavy drinking. Using surveys from a national sample, the researchers found that:
31% of respondents between the ages of 12 and 18 who had “high exposure” to liquor advertising reported having tried each of 11 brands of liquor listed in the survey questionnaire, compared to 15% of those who had “low exposure” (“high” and “low exposure” are not defined in the article)
52% of these respondents reported having tried each of six beer brands listed on the questionnaire, compared to 37% of “low exposure” respondents
78% of those with “high exposure” to alcohol advertising reported typically drinking at least one mixed drink per week, and 50% report having at least one straight drink per week, compared with 51% and 19%, respectively, for those in the “low exposure” group
32% of the “high exposure” group drink five or more beers per week, compared with 19% of the “low exposure” group
11% of college student respondents said that they had decided to have a beer and 1% decided to have a drink of liquor after seeing an alcohol ad that day.
Exposure to advertising is also associated with frequency of drinking:
Respondents who have high exposure to ads report having an average of 4.5 drinks when they go to a party or bar, compared to 2.9 for those with low exposure.
Asserting that “there is little doubt that alcohol advertising exerts an influence on the frequency and quantity of adult alcohol consumption,” the researchers estimate that people consume between 10% and 30% more alcohol after seeing alcohol ads than if they saw none.
The report also presents data on brand awareness and preference, attitudes toward drinking, and responses to selected advertisements (Atkin 93).
The findings are based on survey and experimental research with a sample of 1,227 people of “diverse backgrounds from different regions of the country” conducted in 1992-93.
Strategic Alternatives for Solving Problem
Description of Strategic Alternative One
It is clear that alcohol advertising has very serious detrimental effects on its target audience. While advertising is an integral part in every organization’s ability to market its products, we need to be more conscious of the message that is being sent out to potential consumers of alcohol.
While the current ads are very effective in marketing alcohol, they need to focus more on the product and less on the lifestyle. There also needs to be defined limits on how much advertising can be done, where it can be done, as well as what time the ads can be run, ultimately avoiding the underage and underprivileged audience. Also, there needs to be a clear message of drinking responsibly in every single ad that markets alcohol.
For this to be done fairly and effectively, it should be the responsibility of a government body to impose these new regulations. That way the same rule would be applied to all alcohol brewing companies.
In addition to regulating the advertising of alcohol, tax deductions allowed to businesses for advertising need to be taken away from producers of products that have the potential to harm its consumers.
In a study based on data from the 75 top television markets in the U.S. from 1986 to 1989, Saffer argues that increased advertising leads to increased consumption which, in turn, results in increased motor vehicle deaths. He estimates that eliminating the tax deduction for alcohol advertising would reduce alcohol advertising by 15%, resulting in 1,300 fewer motor vehicle deaths per year.
The obvious benefits of a controlled advertising campaign would be a more accurate targeting of the legal drinking market, a less distorted image of what the product will do for its consumer, and fewer alcohol related injuries and violence.
Budweiser has been an innovator in the area of responsible advertising. While they are still not perfect, they have taken steps to encourage responsibility when drinking. Actions like those are what helped many believe that Budweiser is a responsible corporate citizen, in turn, making consumers feel better about buying Bud products.
The cost of regulated advertising will be a reduction in sales. To offset the loss in revenue, Anheuser-Busch could look into foreign markets, as well as creating new product lines that could compliment their current line but not contribute to its consumption.
By looking at the big picture though, a more responsible advertising campaign would limit Buds liability in lawsuits and other litigation that would involve over-consumption.
Description of Strategic Alternative Two
The alternative to limiting advertising would be to eliminate alcohol-related advertising all together. In this case, the products could only be advertised directly where they are sold. Grocery stores would only have advertisements in the liquor department, sporting events would rely strictly on the mobile beer vendors, and other venues could only advertise in the actual “beer garden”.
Clearly, a reduction in consumption would be attributed to this type of, “Out of site, out of mind” campaign. Without the constant bombardment from advertisers, people might actually choose an alternative to consuming alcohol.
The cost of eliminating advertising will be a reduction in sales. To offset the loss in revenue, Anheuser-Busch could look into foreign markets, as well as creating new product lines that could compliment their current line but not contribute to its consumption.
Selection of Strategic Alternative and Implementation
Regulated advertising would be the best strategy for all parties involved.
Justification for Selection of Strategy
While regulated advertising wouldn’t reduce alcohol consumption the most, it would allow consumers make decisions without the usual bombardment associated with current alcohol advertising. Given the opportunity to make a clear decision, I believe consumers would make more appropriate decisions, as well as benefit from the message of drinking more responsibly.
This would also be the most favorable strategy from Anheuser-Busch’s point of view. Completely banning alcohol advertising would infringe on some of their basic rights.
Description of Implementation of Strategy
To implement this strategy, it would take the support of a government agencies like the FTC, FDA, or FCC. It would be their responsibility to set guidelines for each company to abide by. They would then need to monitor those advertising activities to ensure complete compliance with the regulations.
1999 Annual Report, Anheuser-Busch Companies
“Anheuser-Busch Announces Record Sales and Earnings for the Fourth Quarter and Full Year 1999; Worldwide A-B Brand Shipments Exceed 100 Million Barrels.” Business Wire, 2/2/2000. Online. Electric Library.
Atkin, C.K., “The Role of Alcohol Advertising in Excessive and Hazardous Drinking.”
Journal of Drug Education 1993, p.313-325
Best, Kathleen. “Simon Wants Warning on Liquor Ads.” St. Louis Post-Dispatch 3/31/93, p. 15A. Online. Electric Library.
Fox, RichardJ.;Krugman, Dean M.; Fletcher, James E.;Fischer, Paul M., “Adolescents’ attention to beer and cigarette print ads and associated product warnings.” Journal of Advertising, 9/22/98. vol. 27. p. 57. Online. Electric Library.
Gerbner, G., “Stories That Hurt.” Journal for Substance Abuse Prevention, 1990, p. 53-57
Saffers, H., “Alcohol Advertising and Motor Vehicle Fatalities.” Review of Economics and Statisitics. 1993, p.431-442
Sellers, Patricia. “Selling: How Busch Wins in a Doggy Market.” Fortune Magazine, 6/22/87, p. 99. Electric Library.
“Tax and Sin in Moderation.” St. Louis Post-Dispatch 2/26/98. Electric Library.
Cite this Business Analysis of Anheuser-Busch Companies
Business Analysis of Anheuser-Busch Companies. (2018, Jun 21). Retrieved from https://graduateway.com/budwieser/