As of a few weeks ago Anheauser-Bush InBev SA slashed its dividend which halves its debt payment to shareholders, saving the company $4 billion. The company is struggling in several markets because of declining beer consumption. Its share also fell more than 10%. The third quarter profit of AB InBev was $956 million compared to $2.06 billion last year. This is a drastic fall, and the company’s overall revenue in the United States has been dropping for years. The cause for this could be because they are focusing on beer while consumers are looking for a healthier alternative.
The United States consumer in recent years have become focused on being healthy. They want to drink alcohol without worrying about the extra calories. This can be noted by the rise in “healthier” chooses for alcohol on the market currently. For example, Spiked Seltzers. AB InBev did buy Spiked Seltzer and early on in the market this was the only seltzer available. However, other companies have now been releasing their own take on the successful product. Smirnoff owned by Diego recently released their take on the product called “Spiked Sparkling Seltzer”. Kettle One also owned by Diego released a healthy alternative to their staple product vodka. This is called Kettle One Botanical and it is marketed as a vodka that has fewer calories than wine. The flavors include cucumber mint, orange blossom, and grapefruit rose. As you can see these flavors are marketed at a very particular consumer, the health conscious female.
The issue for AB InBev is these healthy alternatives are they are taking market share from beer. The more seltzers a consumer is buying the less beer they are buying. AB InBev’s most successful and noteable products, for example Budweiser, Bud Light, and Corona, are in the beer industry where market demand is dropping. So what should AB InBev do in order to maximize profits and gain back market share?
Considering sales for Michelob Ultra, which is considered a “healthier” beer; rose in the third quarter, the company should shift the marketing focus from Budweiser and Bud Light to Michelob Ultra. Budweiser and Bud Light are already both well established in the minds of the consumer, and have decent brand loyalty. When consumers think of beer their thoughts usually include those two beers. Therefore, the marketing strategy should focus more on proving and repeating the idea that Michelob is a beer for athletic and fit people and gaining more brand loyalty. They could also consider creating a new product with this market segment in mind. However, this would be more expensive and risky, than upping the share of an existing product.
AB InBev could also focus more on Spiked Seltzers because they have more competitors in this market than in previous years. If AB InBev could also gain male consumers in this market they would gain a step up against the competitors. By increasing market share in this market the cuts in market share in the beer market may not be as detrimental to their overall profits. The bottom line is if consumers aren’t drinking as much beer the company needs create a broader market definition, and start focusing more on different markets.