Few consumer brands are as ubiquitous as Bud Light.
It’s been the biggest-selling beer in the United States since it dethroned big brother Budweiser in 2001. With 17.2 percent market share, Bud Light for nearly two decades has represented nearly 1 in 5 beers consumed in the country. (The next-closest is Coors Light at 7.4 percent share.) It’s been the financial engine for Anheuser-Busch and its distributor network for years.
The challenge for Anheuser-Busch is that Bud Light has been in decline since 2008 — a full decade now — and attempting to turn around a brand that size is akin to turning around an aircraft carrier. In short, it isn’t easy, and it takes time.
So when Anheuser-Busch chief Michel Doukeris said last week that the world’s largest brewer has looked “too much” to Budweiser and Bud Light and is increasing investments behind brands such as Michelob Ultra, plenty noticed.
Doukeris, speaking at the Beer Marketer’s Insights conference in New York on Nov. 5, said the prospect of getting those two workhorses back to growth is “not an easy task,” according to published reports.
“We look too much to these brands” sometimes, and instead need to shift focus on how the industry will evolve “so you know where growth is going to be,” Doukeris said, according to Beer Business Daily (subscription required).
His comments followed remarks by Anheuser-Busch InBev CEO Carlos Brito, who told investors late last month the company is taking a “fresh look” at its U.S. strategy and putting “more gas” on shifting its portfolio toward higher-end beers.
That includes the Michelob Ultra franchise, which now has three brands (the O.G., Lime Cactus and Pure Gold) in the top 70 as measured by market research firm IRI. Mich Ultra alone is up 16.4 percent in the off-premise, good enough to pass Budweiser as the No. 4 brand in the U.S. in sales dollars year-to-date, per IRI multi-outlet and convenience data cited by Beer Marketer’s Insights (subscription required).
Plus, Doukeris noted last week, the brand still has plenty of room to grow. He cited nine states in which Mich Ultra has less than a 2 share of the market.
Added spending on the Ultra franchise has to come from somewhere. And, the company hinted, it likely will come at the expense of its two flagships, which Doukeris said “are overdeveloped” in the U.S. market.
Still, the AB chief “was very clear that we will continue to invest in our mainstream brands (Bud and Bud Light), and the growth areas such as Ultra,” said Gemma Hart, Anheuser-Busch’s vice president of communications, in an email.
Despite a continued decline in sales, mainstream beers are among the fastest-moving brands at retail. Nine of the top 10 — and 15 of the top 20 — fastest-moving items among packages with distribution in greater than 25 percent of all outlets that sell beer are domestic premiums.
And packages of the three best-sellers — Bud Light, Coors Light and Miller Lite — hold 12 of the top 20 spots.
MillerCoors aims for balanced approach
The sheer scale of those brands is why a key part of the MillerCoors portfolio strategy remains focused on taking share in the premium light segment, sourcing much of that share from Bud Light.
Indeed, Miller Lite advertising directly challenging Bud Light has played a role in the Original Light Beer gaining share in the premium light segment and holding share in the overall beer category, according to Nielsen. MillerCoors also has recently changed direction on Coors Light advertising to emphasize its position as the World’s Most Refreshing Beer.
It plans to continue backing both beers in its quest to continue siphoning volume from Bud Light.
American light lagers are still huge brands that consumers crave — to the tune of 50 million barrels every year. “I don’t think light lagers are the problem. Brands that don’t stand for something unique are a problem,” said MillerCoors Chief Communications Officer Pete Marino, at the same Nov. 5 event. The challenge and opportunity then is for marketers to ensure brands are interesting, differentiated and relevant for drinkers, he said.
With its balanced portfolio strategy, MillerCoors also is focused on holding market share with its economy portfolio with brands like Keystone, Hamm’s and Miller High Life; and accelerating growth in the above-premium segment.
To that end, the company in 2019 plans to “significantly up (its) game in the above-premium segment … investing more than we ever have against our great brands,” MillerCoors CEO Gavin Hattersley told Behind the Beer recently. That means ramping up its investment behind brands such as Blue Moon and Peroni; strengthening it support for Arnold Palmer Spiked and Sol; and roll out two newcomers: a new craft light lager called Saint Archer Gold and the flavored beverage Cape Line, both of which appeal to drinkers pursuing active lifestyles.
The company also is evolving how it connects with consumers, investing more behind the brands where it sees the greatest return and spending more efficiently on marketing, particularly in digital and online channels, Hattersley said.
AB’s plans to premiumize
Wells Fargo Securities analyst Bonnie Herzog suggested Anheuser-Busch will also continue to focus on innovation and premiumizing its portfolio, putting resources behind ideas that fit into where the industry is headed.
That spending could take new forms, such as investments in line extensions like the successful Bud Light Orange or Bud’s Reserve series.
The near-term volume gain of extensions can be substantial. With Bud Light’s distribution, when it rolls out a line extension like Bud Light Orange “just the pipeline fill is bigger than 90 percent of craft companies in the country,” said Bud Light marketing chief Andy Goeler at a conference earlier this year. “You can get a lot of volume really quick.”
But at what cost? These types of line extensions risk muddying the positioning of two brands that once stood for simple, singular, easy-drinking American lagers, observers say.
“There’s an identity crisis with Bud Light,” said Kimberly Clements, a former Anheuser-Busch distributor in Arizona who now runs a beer industry consulting firm, Pints LLC. The brand today “is confusing,” having “lost its identity when the flavors and line extensions came,” she said in an interview earlier this year. Her business partner, Dan Lust, was succinct in his diagnosis: “Bud Light has become like Diet Coke. It doesn’t know what it is anymore.”
Said Chris Furnari, editor of the beer industry trade publication Brewbound: “You don’t really see too many longstanding, iconic brands that keep diluting themselves every single year with wacky line extensions.”
To Doukeris, these types of innovations are another way to get consumers talking about mainstream beers again, the first step to winning back volume. “Volume will follow brand performance,” he said, pointing to measures such as penetration, consideration and worth, according to Beer Marketers Insights.
It’s an idea he’s been pushing for some time. Earlier this year, for instance, he said Bud Light Orange and a reformulated Bud Light Lime added “a lot of excitement to this category and the entire industry. They’re bringing people to drink lager beers again.”