This essay has a total of 3978 words and 23 pages.
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.
1999 Market Share
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 hel
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