Submitted by:

Deepa Chirayath

10KJM109

II MBA ‘B’

Industry ProfileHistory of Beer Industry in India

Beer began to be exported to India in days of the early 1700s- during the British Empire. The demand for beer in the hot climate of many parts of India by the British administrators and the troops was so great that it led to creation of a new style of beer by George Hodgson in his London brewery — “India Pale Ale” also known as IPA. As of today no brewer in India makes India Pale Ale. All Indian Beers are either: Lagers (4.3% alcohol)

Strong lagers (15 % alcohol)

Market Overview Indian beer market is valued at INR 35 bn with volume sales of 172 mn cases for FY 2008-09 and at the current trend the market is expected to grow at an annual rate of 17.2% till 2011. Foreign brewers are eyeing the Indian beer market which is largely untapped and has huge growth potential.International beer companies have a good enough reason to tap markets like India. That their main markets, North America and Europe, are either flat or in a state of decline is no secret. Carlsberg, for instance, said it could look at closing select European breweries due to a slump in demand. In contrast, beer is flying off the shelves in India. A recent report by global beverage consultants Canadean states that consumption of beer in BRIC countries (Brazil Russia, India and China) increased by almost 50 per cent during 2002-2007. In India, beer sales grew at nearly 90 per cent, compared to a less than 60 per cent growth for other alcoholic drinks. Industry sources estimate that the Indian beer market is expected to nearly double to 23.3 million hectolitres by 2012 from 12.5 million hectolitres at present. But the market is difficult to break into. More than 80 per cent of the market is controlled by the two players, UB and SAB Miller. While UB with brands like Kingfisher, Zingaro and Kalyani Black has a 48 per cent market share, SAB's bouquet of acquired brands-- Haywards, Royal Challenge, Knock Out and Foster's deliver a combined market share of 37 per cent.(See exhibit 6 for Market share) In the last 9 years beer consumption has been growing rapidly at a CAGR of 7% .Looking from the industry perspective,the Indian beer industry has been witnessing steady growth of 10% per year over the last ten years. With the average age of the population on the decrease and income levels on the increase, the popularity of beer in the country continues to rise. Drivers & Challenges Drivers

Young population

Nearly 28% of Indian population live in urban areas which comes close to the population of USA. Urbanization is happening at a very fast pace and about 40% of the total population is expected to live in urban areas by 2020. Also people in India are relatively younger when compared with global average. About 50% of the Indian population would be under 30 years even in 2015.

Low per capita consumption Indian per capita beer consumption is very low compared to global average. In the total alcohol market in

India, beer contributes only 4% of revenue. The low penetration in beer consumption provides a substantial and sustainable growth in demand for beer in future.

Rising income levels

India is one of the most attractive consumer markets in the world with about one-sixth of the global population. The rising income levels has a direct positive impact on beer sales in India. Also, urban consumers who are more exposed to the western culture socialize with beer. The growing income levels particularly in the urban earning class is a potential market for beer manufacturers in India.

Dynamism in Beer market

Many foreign beer manufacturers have entered or plan to enter the Indian beer market with their product line. The market is set to flourish with 15 new breweries and 10 international brands in the next 3 years. With the global markets experiencing low or stagnating growth and focus shifting to India, the Indian industry is expected to witness fast growth in the coming years.

Bottling shortage

What often happens is people have more bottles at home than they drink on a weekly basis because they tend to buy regularly and bring them back irregularly. SABMiller, which manages Shaw Wallace Breweries Ltd, has warned that the country could face a beer shortage in the approaching summer, the peak consumption season. Mr.Richard Rushton, Managing Director of SABMiller India Ltd, told Business Line in an interview that he feared industry would not be able to adequately service the demand in the summer months on the back of "an inefficient bottle pool management" in a market that is heavily dependent on recycled bottles. The 650 ml beer bottle is common to all companies and only the 250-300 ml bottle has proprietary designs and logos on it. Thanks to breakages and diversion to other unorganized players, only around 60-65% of bottles are actually returned to the company, says liquor industry consultant, UB Bhat. Till about a year and half ago, bottles were being returned to companies at an average of Rs 3.00 to Rs 3.50 per bottle. Taking advantage of the shortage, second hand bottle traders hiked prices from the normal Rs 3.00 to Rs 3.50 to Rs 7.00, almost equal to the price of a new bottle! Not to be left out of the party, glass manufacturers sharply increased prices too. The shortage in bottles took their toll on profitability of the companies. Richard Rushton, managing Director of SWBL admitted that bottle prices had seriously affected the company’s profitability, especially considering that regulations in a number of states prevent companies from passing on cost increases to. UB too talks of an “unprecedented cost push” caused by the shortage in its annual report. In fact, UB disclosed that the spiraling bottle costs shaved off Rs.30 crore - 40 crore in its operations during the last financial year, 2003-04. Indian brewers have injected about 250 million new returnable glass bottles into the beer market during the last nine months to beat down prices of recycled bottles. Many bars across the State of Kerela now display the sign ‘No beer' and several others tell their patrons: “Only one bottle per person, sir.” They apologetically tell the customers that they are not getting sufficient

supplies from the Kerala State Beverages Corporation (Bevco), the government-owned monopoly distributor of liquor. Government Tax and regulation Advertisements barrier

Building brands, particularly for alcoholic beverages, is easier said than done. In the mid-1990s, the Indian government banned advertising of alcoholic beverages. By then, existing brands such as Kingfisher, Foster's and Haywards had already built their brand without any surrogate branding efforts. In contrast, the new entrants will have to rely only on surrogate advertising. For instance, Cobra is now advertised on television as sparkling water with the tag line "so smooth, anything goes down well". As the advertisement of liquor is banned in India, Carlsberg has cashed its international image to boost its sales in the domestic market. They have targeted the public houses and discotheques for their promotion which is very apt. Kingfisher employs the style of surrogate advertisment, where it try to gain cutomer attention by advertising about its mineral water,etc. But with government banning even indirect advertisements of wine, alcohol, liquor and any tobacco products forthwith in the interest of public health, the brand building is going to be a great challenge.

Beer Highly Taxed

Minority preference for beer in India and high tax structure are the major challenges for Indian beer industry. One of the reasons for the low preference for beer is high taxes imposed on beer consumption. On absolute alcohol basis, beer is taxed higher than spirits in most of the states in India. There are about 26 different alcohol specific taxes that constitute 50% of the consumer price which is among the highest in the world. In India, beer taxes are levied by individual states and taxes are also paid between states.The Indian beer industry is plagued with myriad taxes & levies that vary from state to state. In fact no two states or UTs have a same or even a similar policy. The inconsistency in the state policies leads to fostering an environment of mismanagement & lack of focused strategy to manage state finances. States usually do not adopt policies based on scientific management or by considering the social aspects of managing this trade. The policies are generally short term in their outlook, with little or no thought to long-term interests of all stakeholders, including the general public.

Price Restrictions

Price restrictions in many large markets remain a biggest challenge for the industry. The Government decides the End Consumer Price (ECP), leaving the manufactures with no say in determining the price of the beer. In a free market economy this has no rationale.

Inadequate Market Infrastructure

The market infrastructure for beer in India is inadequate. For every 21000 persons there is one outlet hampering the availability of beer. In China, for instance the figure is 300. The highly regulated market hampers beer sales, unlike most developed countries where beer and wine are not regulated in grocery/

retail stores. The retail distribution channels are not completely open for selling beer in India. Regulations are stiff with respect to selling beer through modern retail chains where as in most developed nations beer and wine is available in grocery or retail stores.

Restriction of Movement of Beer

For the movement of beer from one state to another, an export license and an import license is required. Export fee is imposed in the state where beer is manufactured and import fees on the State where it is sold. In some states only beer manufactured in that state can be sold. Few states like Tamilnadu have strict rules of selling only beer manufactured within the state.

Consumer choice and preferences:

India is predominantly a hard spirits market and beer is a minority preference for those who consume Beverage Alcohol. Beer makes only 4% by revenue of the total alcoholic market. It would be pertinent to mention that while per capita consumption of spirits in India is 65% of global average, in the case of beer it is a mere 3% of global average.World over it has been identified that policy focus should not as much be on controlling consumption but more importantly on reducing harm. Therefore, beer and wine dominate the alcohol market in most countries. It is considered to be common man’s drink and in many countries is even priced in parity with soft drinks. But in India things are different in India. The per capita consumption of beer in India is just 1 liter per person per year as compared to the world average of 22 liters. This is one of the lowest in the world.

Capital Barrier

The capital required to set up and maintain a brewery is very high. Branding is another issue. It takes time for a new beer brand to gain acceptance and shift loyal customer tastes. So the companies prefer to grow inorganically by acquisitons and mergers. Characteristics and trends

Growing demand for barley and evolving contract farming

Barley accounts for one-sixth of the cost of making beer. Increase in domestic consumption and export demand has pushed the barley prices up by 20% from Jan 08 - June 08. Moreover, Increase in barley prices has let to 10% increase in cost of beer. The protein content in barley crop in India is 13-15% compared to 7-10% in developed nations and this high protein content in Indian barley is not suitable for making beer. Rajasthan is an ideal place where barley can be grown under suitable climatic conditions for having lower protein content required by the beer industry. SAB Miller India is encouraging farmers in Rajasthan to cultivate a type of malt barley required by the industry. The company launched a programme called Saanji Unnati for educating farmers to sow the right type of certified seeds and practices

Rise of premium beer sector

Premium beer segment is outpacing the mainstream beer market touching a growth rate of between 40-50%. The Indian beer industry is moving towards premium category of beer. Lifestyle changes and increasing western culture in India are some of the factors driving the

premium segment. Many domestic and foreign premium brands are finding the interests of young urban working class. Premium beers are priced about 30% higher than regular brands.

Consumers open to Experimentation

New sub-categories of beer are emerging as consumers in India are now open to experimentation. With Indian consumers open to experimentation, many multi-national firms are introducing alcohol-free and flavoured beers in the market. Craft beers, which are available in unique flavours, is expected to penetrate the lager dominated Indian beer industry. Craft beers are expected to attract women consumers and these new sub-categories are estimated to cut 25-30% of market share of regular lagers. Cobra beer is bullish on alcohol-free beer and flavored beer in India. It has rolled out: Cobra LightLow calories and low carbohydrates Cobra Zero %: Alcohol-free Cobra Bite: Flavored beer (Includes Lemongrass, Blood Orange, Sweet Lime and Fresh Ginger flavours)

The UB group also sees an opportunity for new beer sub-categories and segments in India. The company plans to cater to different consumer segments in the industry and will launch three new varieties of beer including fruit flavored and low alcohol brands.[13] Competition Currently more than 80% of the market is controlled by two major players United Breweries Limited (48%) and SABMiller India (35%).Strong beer is predicted to grow faster as it is perceived to offer value for money alternative to spirits. With InBev acquiring Anheuser-Busch, it has potential to emerge as the third major player in the Indian beer market. The future of beer market in India looks positive with the entry of many international players. Beer sales will increase along with increasing number of brands and sub-categories in India. Existing players like UBL and SABMiller are planning to expand their range of products.New players like ABInBev, Carlsberg are bringing their internationally renowned brands to India

Top Player’s

United Breweries United Breweries crossed milestone of 100 million cases. It enjoys a 57 per cent share in the estimated 200 million cases domestic beer market. Its total volume of sales increased by 20% while the revenues increased by 18%. The company also saw huge rise in its net profits- by 51%. UB Group today controls 60% of the total manufacturing capacity for Beer in India. The company, which sold over 100 million cases of beer in 2009-10, expects a sales growth of 30-35 per cent in the current fiscal. For FY 2008-09-The Company reported a net turnover of INR 17475.7 mn and profit after tax of INR 624.9 mn Brands: Kingfisher (Premium, Strong, Strong fresh, Draught, Ultra, Blue, Red, Bohemia), Zingaro, UB Export, Londer Pilsner Premium strong, Kalyani Black Label strong, Bullet, Marco Polo, Guru Strong, London strong.[15] Business Strategy: UBL has a manufacturing network of 22 breweries across India. The company enjoys a market share of 48% in the industry and plans to expand its share further. Kingfisher Strong is the single largest selling beer brand in India, while Kingfisher Premium continued to outperform in its category.UBL plans to set-up two new green field breweries at Mallepally in Andhra Pradesh and Nanjangud in Karnataka in order to support the revenue

growth. UB Group firm United Breweries Ltd today said it is planning to locally produce Dutch beer brand ''Heineken'' by next fiscal besides launching a refurbished ''Tiger'' brand in India this year.

SABMiller SABMiller India is a subsidiary of SABMiller PLC registered in India as SKOL Breweries Limited. For FY 2007-08 the company reported a net turnover of INR 10860 mn and profit after tax of INR 344 mn. Brands: Haywards 5000, Haywards 2000, Haywards Black, Foster’s, Indus Pride, Peroni, Royal Challenge, Knock Out Note on Foster’s: Foster's Lager is a uniquely international beer, brewed with the finest sun-dried malted barley, the purest water, and Foster's own specially bred 'Pride of Ringwood' hops imported directly from Australia to give the beer an authentic flavour. Its crisp, clean flavour won it immediate international acclaim when it was first brewed in Melbourne in 1888. Today, more than one hundred years later, it is still recognized as one of the world's best beers. Foster's Lager is a uniquely international beer, brewed with the finest sun-dried malted barley, the purest water, and Foster's own specially bred 'Pride of Ringwood' hops imported directly from Australia to give the beer an authentic flavour. Its crisp, clean flavour won it immediate international acclaim when it was first brewed in Melbourne in 1888. Today, more than one hundred years later, it is still recognized as one of the world's best beers.Business Strategy: SABMiller has 10 breweries located strategically across India to serve the beer markets efficiently. The company has a market share of 35% and stands in the second position. The company has invested about INR 1250 mn in the past two years for upgrading the breweries to global standards. SABMiller has leveraged its global expertise in packaging, pricing, occasion and product gaps which were improved based on consumer insights.Also it plans to bring the iconic Dutch premium beer Grolsch to India. SABMiller Plc has acquired the brand for USD 1.2 bn in 2007.

Other players InBev India Brands: Tennents Super, Beck’s, Stella Artois, Hoegaarden, Leffe Anheuser-Busch (AB) was acquired by InBev in 2008 and formed ABInBev India; currently operates using trading name InBev India. InBev operates in India through a 49:51 joint venture with soft drink bottler RKJ Group. AB started operations in India through a 50:50 joint venture with Crown Beers International initially but later AB purchased the remaining ownership from Crown Beer India Ltd. Business Strategy: InBev India has a production capacity of 1.9 mn cases a year through two contract brewering arrangements in Regent Breweries in Madhya Pradesh & Dasappa and Sons Bangalore. InBev plans to introduce Tennents brand in North India either by finding a contract brewer or by setting up a brewery. ABInBev India launches Budweiser beer in North India in August 2009. It has received a good response in the Southern states and Maharashtra. The company expects to cross 2.9 mn cases in sales of Budweiser beer by December 2009. Carlsberg It entered Indian market in 2006 & operates here through a joint venture named South Asia Breweries and positioned itself as a premium mild beer. With the launch of its flagship brand, the company is trying to create a premium, all-malt beer category. In 2009 Carlsberg was the 4th largest brewery group in the world. Its products are sold in more than 150 markets. In 2008 the Group sold more than 120 million hectoliters of beer, nearly 100 million bottles of

beer a day. Their major consumers are in Southern India. Howsoever, it consciously chose the north, east and west regions of the country to set up its breweries Strategy adopted by Carlsberg is to concentrate on to the untapped market of north and west India in the initial stage of the production. Moreover, since it has positioned itself as a premium product, it is only catering to the urban cities of India.

Comparison between Indian and US Beer Industry US Beer Industry- A snapshot Production Beer is the most popular alcoholic beverage in the United States, manufactured by more than 1,500 breweries which range in size from industry giants to brew pubs that sell their beer only on premises. Home Brewing is very popular in the US. The United States produces about 230 million hectoliters (about 6 billion gallons) of beer annually and leads the world in beer production with regards to volume. The number of breweries in the United States ranks first in the world. Consumption and Major Players Annual Beer consumption by Americans is about 85 liters per capita, which in 2002 ranked 8th in the world. There are currently five big dominating companies in the US market. These include Anheuser Busch, SABMiller, Molson Coors, Heineken, and Carlsberg. Anheuser Busch firm had the largest market share in the US in terms of sales.Future Prospects In the global stage beer companies face a slower growth, mainly due to the increasing consumption of wine and spirits. Demographic changes in many parts of the world made a strong impact on US beer industry. This is mainly because population growth rate in markets like China, Russia and India incur opportunities for large sales growth for foreign beer companies. European and Asian markets present a great opportunity for American beer companies.

Latest Developments 1. A deal struck in December last year between UB Group and Heineken, the Dutch brewer had agreed to produce and market its world-renowned beer, ''Heineken'', only through UBL. Moreover, ''Heineken'' had also agreed to transfer the Indian operations of its Singapore-based subsidiary, Asia Pacific Breweries (APB), which owns the ''Tiger'' beer brand, to UBL. The company said it will launch the new brand in phases and expects to make a pan-India presence by next fiscal.

2. Year 2009 was highly dynamic in terms of new brand launches, with United Breweries Ltd and Carlsberg India Pvt Ltd expanding their domestic premium lager portfolios by launching Kingfisher Ultra and Tuborg, respectively.

3. Brands such as Tennent’s, Kingfisher Blue and Indus Pride, which were launched in late 2008, became available in outlets nationwide in early 2009.

4. Niche products, such as dark beer, also saw greater availability, with the launch of ales from the Little Devil’s and Coopers portfolios in 2009.

5. VB –victoria bitter was launched at a function on 20 January 2010 in a lead-up to the Australia Day celebrations in New Delhi. VB – The Beer Australia’s favourite beer.

6. 2009 total volume growth was two percentage points lower than the total volume CAGR recorded over the review period. Although 2009 volume growth was higher than that in 2008, growth rates did not bounce back to the highs seen in 2006 and 2007. While the long summer in 2009 buoyed the beer market in North and West India, sales growth in the key southern

states, such as Karnataka, Andhra Pradesh and Tamil Nadu, was adversely affected due to taxation-related price rises in Karnataka and the withdrawal of United Breweries Ltd’s and SABMiller India Ltd’s brands from Andhra Pradesh in first half of 2009.

7. Both domestic and multinational players were very aggressive with brand launches and promotional activities in 2009, and the category benefited from consumers trading down from imported premium lagers to domestic premium lagers. Moreover, brands such as Tiger, Carlsberg and Budweiser, which were available as imports in several cities in 2008, saw a sharp rise in availability and accessibility as domestically produced SKUs of these brands were rolled out nationwide in 2009.

8. The average unit price of beer rose only marginally in 2009, by about 1%. Overall prices remained stable in most of the states in India. Nonetheless, fluctuations in taxation policy did drive up prices in some states, including Karnataka and Delhi-NCR.

9. Imported premium lager grew by 12% in 2009, which was significantly lower growth than the review period CAGR of 18%. Imported premium lager growth was adversely affected by the dual effect of a rise in import taxes in key markets, such as Maharashtra and Karnataka, and the economic uncertainty in the first half of 2009, which resulted in depressed on-trade sales. With major international brands, such as Carlsberg and Budweiser, being priced on a par with domestic brands, such as Kingfisher, consumers had access to several aspirational international brands within domestic premium lager, thus growth in imported premium lager sales slowed down.

10. 81% of volume sales of beer are derived from off-trade sales, as beer consumption is most common during social and family gatherings at home. Moreover, beer is priced on a par with spirits in on-trade outlets, and many consumers prefer consuming spirits with mixers, which provide a quicker “high”.

11. Glass bottles of 330ml and 650ml are the dominant type of beer packaging available in India. However, canned beer continued to see strong volume growth in 2009. Canned beer volume sales grew by more than 20% in India in 2009.

12. In May 2009, Can-Pack India Pvt Ltd started its operations in India, with the aim of supplying 65% of its one billion can annual output to the beer industry, and gained contracts with most of the major beer players.

13. The domestic production of beer is on the rise, with official statistics reporting an 11% increase in domestic beer production in 2008, which is in line with the 12% growth in volume sales of domestic lager in 2008. In October 2009, Carlsberg India Pvt Ltd started work on its new greenfield brewery in Medak (Andhra Pradesh), which is expected to have a production capacity of 4 million litres per month and start operations in late 2010. [32]

14. Exports of beer out of India declined marginally in 2007, while imports rose by 39% in volume terms. This reflected the robust growth in sales of imported premium lager in India. [33]

15. Imported beer accounted for less than 1% of beer volume sales in 2009. Imported beer is only available in niche premium on-trade outlets, where it is sold at significantly higher prices than domestically-produced beer, due to high import duties. In addition to more widespread distribution and lower price points, domestic brands also have the benefit of higher brand recall, due to high-profile marketing activities.[34]

16. Apparent consumption levels grew by 24% in 2007 over the previous year, to reach 390 million litres. This is less than one third of the reported market size of 1,193 million litres in the year. This discrepancy between the calculated apparent consumption and total market size is chiefly due to problems associated with data collection by government bodies. Companies

often underreport actual production figures. In addition, many units will be sold via both official and unofficial channels, such as with the illegal imports of beer into prohibition states. [35]

17. Effect of IPL- The IPL 2010 held in April provided a major boost to the sales of beer. UBL signed a contract with IPL that all the beers used in IPL parties would be supplied by UB groups. In a total of 54 IPL parties, which amounted to 270 hours of partying, approximately 1.3 lakhs beer bottles were consumed. [36]

18. Effect of Soccer World cup 2010- As per the Pub owners the traditional combination of beer and soccer, coupled with the soaring heat, could mean a sale of upto 700 litres of beer for some pubs every day, till the end of the world cup. “We saw an average consumption of 500 litres of beer every day during the IPL; we expect that to double now. Soccer brings a lot of expats and corporates, and for them the game is incomplete without beer,” observed a pub owner. According to South African Breweries (SAB) 100,000 hectolitres (1 hectolitre = 100 litre) of beer will be sold during the five-week World Cup.

Company Profile

Welcome to Anheuser-Busch, where making friends is our business.

Anheuser-Busch operates 12 breweries in the United States. Anheuser-Busch's operations and

resources are focused on adding to life's enjoyment through the responsible consumption of

beer by adults. Based in St. Louis, Anheuser-Busch is the leading American brewer, holding

a 48.9 percent share of U.S. beer sales to retailers. The company brews the world’s largest-

selling beers, Budweiser and Bud Light. Anheuser-Busch is a major manufacturer of

aluminum cans and has been a leading aluminum recycler for more than 30 years.

The company is a wholly owned subsidiary of Anheuser-Busch InBev, the leading global

brewer, and continues to operate under the Anheuser-Busch name and logo. Anheuser-Busch

InBev ranked No. 2 among beverage companies and No. 1 among beer companies in

FORTUNE Magazine's “World’s Most Admired Companies” list in 2010.

About Anheuser-Busch InBev

Anheuser-Busch InBev is a publicly traded company (Euronext: ABI) based in Leuven,

Belgium, with an American Depository Receipt secondary listing on the New York Stock

Exchange (NYSE: BUD). It is the leading global brewer and one of the world's top-five

consumer products companies. A true consumer-centric, sales driven organization, Anheuser-

Busch InBev manages a portfolio of well over 200 beer brands that includes global flagship

brands Budweiser, Stella Artois and Beck’s, fast growing multi-country brands like Leffe and

Hoegaarden, and strong “local champions” such as Bud Light, Skol, Brahma, Quilmes,

Michelob, Harbin, Sedrin, Klinskoye, Sibirskaya Korona, Chernigivske, and Jupiler, among

others. In addition, the company owns a 50 percent equity interest in the operating subsidiary

of Grupo Modelo, Mexico's leading brewer and owner of the global Corona brand. Anheuser-

Busch InBev’s dedication to heritage and quality is rooted in brewing traditions that originate

from the Den Hoorn brewery in Leuven, Belgium, dating back to 1366 and the pioneering

spirit of the Anheuser-Busch brewery, which traces its origins back to 1852 in St. Louis,

USA. Geographically diversified with a balanced exposure to developed and developing

markets, Anheuser-Busch InBev leverages the collective strengths of its approximately

116,000 employees based in operations in 23 countries across the world. The company strives

to be the Best Beer Company in a Better World. In 2009, the company realized revenue of

36.8 billion USD.

Product profile

The following are the products from Budweiser:

Budweiser premium lager ,Bud Light, light lager ,Budweiser Select light lager ,Bud Dry, dry lager ,Bud Ice, ice lager ,Bud Ice Light, light lager ,Michelob premium lager ,Michelob Light low-carb, light lager ,Michelob Golden Draft, premium lager ,Michelob Golden Draft Light, light lager ,Michelob AmberBock, dark lager ,Michelob Honey Lager Specialty, honey lager,Michelob ULTRA, low-carb light lager ,Michelob ULTRA Amber, light amber lager, Busch Beer lager Busch Ice ice lager ,Busch Light light lager ,Natural Ice, ice lager ,Natural Light, light lager ,Harbin Lager International, premium lager ,Rolling Rock, premium extra pale lager ,Anheuser World Lager, lager ,Bud Extra, specialty beer ,Bare Knuckle Stout Classic; Irish-style dry stout ,Stone Mill Pale Ale, organic pale ale ,Wild Hop Lager Organic, lager ,bacardi silver, flavored malt beverage ,PEELS, flavored Malt Beverage ,Tequiza, fruit beer ,SPYKES, flavored malt beverage ,TILT, caffeinated malt beverage ,Hurricane, malt liquor ,Hurricane Ice, ice lager ,King Cobra, malt liquor ,180 Blue, energy drink ,180 Sport, sports drink ,180 Energy, energy drink ,O'Doul's, non-alcohol ,O'Doul's Amber, non-alcohol, Busch NA, non-alcohol

Marketing

Budweiser's four P's:

PRODUCT - Anheuser-Busches Budweiser belongs to a family that is under an umbrella of 60 plus brands. Under the Budweiser brand family, their beers consist of Budweiser Select, Bud Ice, Bud Ice Light, Budweiser Brew Masters Private Reserve, Bud Dry, Bud Silver, Bud Extra, and their latest Chelada . They are definitely adding new product integrations by changing with the times adding more beers, cocktail drinks, energy drinks, and gourmet sauces to their product line. Budweiser, being one of the top choices of beer and being very consistent for its refreshing taste that targets segment areas such as sports fans and leisure drinkers will boast their brand title of the Great American Lager as needed for a distinct clear position between the import, craft and specialty beers in 2008. With their delicate malt sweetness and balanced bitterness for a clean, “snappy” finish, Budweiser is a medium-bodied, flavorful, crisp and pure beer with blended layers of premium American and European hop arom . What makes their beer unique is that its brewed using rice, barley malt, water, hops and yeast. Budweiser creates a smoother taste by having its beer lagered with beechwood chips in the aging vessel .

PRICE - Anheuser-Busches pricing mix, selling their beers through an elastic market roughly has 50 percent of the nation's beer market and ranks as the largest alcohol brewer in the United States and second largest in the world, behind Belgium-based InBev NV. They managed to generate $18.0 billion in 2006. While the company brews the world's two best-selling beers (Budweiser and Bud Light) and generates two-thirds of beer sales in the U.S., the company's recent growth has come from international expansion, primarily in Latin America and China . In the U.S. Anheuser-Busch sells approximately 70% of its products to beer distribution wholesalers, leaving varied prices from one retailer to the next to sell to the consumer. These pricing inconsistencies may cause inconsistency in consumer purchases due to environmental factors. With their reference price range of a 12pk canned Budweiser are competitively head-to-head with Coors Brand at $12.88 in most grocery stores on Oahu, the range of different volumes packaged differs from kegs, bottles, variety of ounces, including happy hour in bars to regular bar hours to nightclub prices. In addition, psychologically, Budweiser's odd even prices, influences the consumer's perception with ending prices with $ .88, $ .95, or $ .99. Currently at local grocery stores on Oahu, their promotion of a 30 pack at Foodland goes for $18.88 compared to Safeway who sells the same 30 pack for $24.99 showing how pricing can be differential while using price discounting. Commodity prices also affect the price of their beer brew creating some inconsistencies. For example, barley is 8% of beer costs. Barley has increased 85% in recent years as farmers are planting corn, soy and other commodities feeding the burgeoning biofuels industry. Aluminum prices have increased 50% in the last two years, due to increases in worldwide demand for this versatile commodity .

PLACE - Budweiser is distributed in three large container volumes -- 1/2 keg, 1/4 keg, and beer ball. In smaller consumption volumes, distributions are in 8-, 10-, 12-, 16-, 22-, 24-, 32- and 40-ounce containers. Smaller consumption containers vary in materials with Budweiser offering glass bottles, aluminum cans, plastic bottles and new-form aluminum bottles in

which gets distributed throughout the world. Operating out of 12 breweries in the United States and 16 internationally, (A-B) Budweiser has produced and distributed 162 million barrels throughout 2007. Having 70% of wholesalers buy their beers to resell, distributors distribute Budweiser to their specific destinations through all available outlets geographically and territorially in which law permits such as grocery stores, convenient stores, bars, nightclubs, restaurants, gas stations, vending machines, coolers, iceboxes, and anywhere it can; making it convenient and consistent for all its consumers. In addition, Budweiser being an intensive distribution are having more distributors consolidating due to health and higher fuel cost in which will shave down cost of distribution operation .

PROMOTION – Continuing to have 90% of their loyal customer's purchases, Budweiser raffling through its maturity lifecycle stage wants to bring back its former customers. Budweiser has been a sponsor for the super bowl for over 20 years and has been the ad leader for the past 9 years making their promotions very consistent. They normally spend a lot of money from one pot for one event such as the super bowl ads because theirs almost a 100 million people watching it. In addition, half of the people who watch the game are beer drinkers and it is almost guaranteed they would not get up to get a bag of chips. What they rather do is watch the ad commercials just as much as the game .To sustain the lifecycle and building longevity for the Budweiser brand, ads been redistributed on websites such as YouTude.com and all over the internet which has the capability to be talked about for the next 20 years. For example, they made a commercial related to Janet Jackson wardrobe malfunction in 1994 and ran it on the internet and 700,000 people visited the site. In 2007, 30 million visited .Here's to Beer program campaign that gives a voice to the entire beer industry that will drive category growth in 2008. It will generate positive publicity for the industry and encourage consumers to choose beer for more occasions much like food is with wine (Belanger, 2007). Budweiser adding another visitor center to their already five which would cost $387 million at Ballpark Village north of their Busch Stadium downtown. This center would feature its famous Clydesdale horses and provide transportation to its headquarters in Soulard for their free breweries tour.Their consistent sponsorships in sports such as the NFL, MLB, World Soccer Cup, NASCAR, Motor Sports, Video Games, and the Olympics etc. are also means of promotion. Anheuser-Busch Inc. plans are to spend $30 million on new ad campaigns and invest more in television advertisements while spending another $70 million more on ads for Bud Light and Budweiser, its best-selling beers in 2008.

SWOT Analysis

Type of factor

Location of factor Favourable UnfavourableInternal Strengths

Leading market position

Strong brand Product development

expertise

Weakness

Market concentration High dependence on

wholesalers

External Opportunities

Growing beer consumption in china

Advertisements and sponsorship

Focus on other beverages

Threats

Industry consolidation

Rising raw material prices

Marketing Strategies

Branding

The Budweiser Clydesdales have been the symbol of Anheuser-Busch for more than 75 years. They were formally introduced on April 7, 1933, to celebrate the repeal of Prohibition for beer. August A. Busch Jr. and Adolphus Busch III. presented a hitch of horses to their father to celebrate the day. To their father’s delight, the hitch thundered down Pestalozzi Street carrying the first case of post-Prohibition beer from the St. Louis brewery.

The Budweiser Clydesdales are a group of Clydesdale horses used for promotions and commercials by the Anheuser-Busch Brewing Company. There are six "hitches" or teams of horses, five that travel around the United States and one that remains in their official home at the company headquarters at the Anheuser-Busch brewery complex in St. Louis, Missouri, where they are housed in a historic brick and stained-glass stable built in 1885. There are eight horses driven at one time, but ten horses are on each team to provide alternates for the hitch when needed. Assorted Clydesdales are also used as animal actors in television commercials for Budweiser beer, particularly in Super Bowl ads.

Anheuser-Busch expands the range of its demographic targets-and diversifies its cable buy. The first commercial ever run on ESPN was a pitch for Budweiser. Even in 1979, the King of Beers knew that while broadcast ads might reach the masses, cable advertising targeted the very specific in this case, male sports fanatics. In fact, early ESPN fans might have thought they were watching the Bud Network because its logo appeared so frequently. Today, as the dominant domestic beer in the U.S., with a market share of 48 percent and climbing, Anheuser-Busch executives bask in the wisdom of that risk-taking first cable buy. The company is pouring more and more money into specific niche network programs to push

brews such as Bud Light, Michelob and O'Doul's. Five years ago Anheuser-Busch spent only $4.7 million on network cable to pitch Bud Light, according to Competitive Media Reporting. Last year, that number more than doubled to nearly $10 million. A-B has also expanded into entertainment and financial programming, including sponsorships on signature shows on E! Entertainment Television and CNBC, among others.

"One of the ways we measure success is to develop entertainment promotions we can bring to retail that are fun, co-ed and tie our brand into television programming," says Peter McLoughlin, vice president of corporate media at Anheuser-Busch. "Network cable does that for us."Current Anheuser-Busch buys include ESPN, with hefty schedules on NCAA college basketball, National Hockey League games, Major League Baseball and SportsCenter. Along with these are spots in National Basketball Association games on TNT, selected spots on BET, and two new major promotions on E!'s Wild On and CNBC's 11 a.m.-6 p.m. business block. In the past, A-B dollars were highly targeted and very carefully placed with one aim in mind: reaching Bud's primary target audience of males 21-34 and 21-49. Beyond ESPN and TNT, however, A-B is adding more niche networks as it seeks to reach women, adults 50-plus, African Americans and Latinos.

"Cable does an excellent job in delivering male audiences," McLoughlin notes. "But we use cable in a different way than just buying spots. We take a sponsorship/ownership position involving developing programs that promote our brand and promote the individual cable networks."Spending big bucks on a big all-sports network is a no brainer. But A-B expanded its buys into E! and CNBC because it wanted to reach entertainment TV viewers as well as upper-income viewers in white-collar jobs. Upscale adults aged 50 and older, for example, are more likely to embrace A-B brands such as the nonalcoholic O'Doul's and Michelob.

In May, Budweiser will be the only beer sponsor doing promotions on Wild On, a late-night party-and event-driven show hosted by Brooke Burke. Wild On games will be available at Bud retail outlets, including bars and cafes, with winners vying to attend the "Ultimate Wild On" parties in the Hamptons, South Beach and Las Vegas. "The benefit for Bud is we reach our targeted co-ed audience, we associate our brand with a known host, and our wholesalers can take this promotion to their retail accounts," McLoughlin explains.

On an even more ambitious note, A-B also created an agreement with CNBC last year to become one of four exclusive advertisers allowed to run special logo spots adjacent to CNBC's real-time ticker scrawl. A constant on-air presence during the 11 a.m.--6 p.m. business block, these A-B spots include commercials for Michelob Light and O'Doul's.

"We had several objectives," McLoughin says, chief among them reaching the financial community. "Americans, and men in particular, are clearly fascinated with the stock market. We wanted to reach an adult demo 25-54 that is more upscale, more white-collar." Of equal import, however, McLoughlin adds that A-B also wanted an Internet component, which it enjoys with CNBC.com and E! online. "The CNBC agreement is very interesting," McLoughlin says, "because during the CNBC Power Lunch program with Bill Griffith, our logo is actually on the computer screen he uses when he goes online. Viewers who go to the CNBC Web site also see that it's sponsored by O'Doul's."According to McLoughlin, while ESPN remains A-B's anchor buy on cable, early returns on the E! and CNBC promotions are positive."Our specific goal to develop an entertainment promotion that was fun, co-ed and clearly tied to a TV program has happened with E!,"McLoughlin says. "With CNBC, we've been able to reach a much broader adult demo interested in the financial markets."Both

campaigns are seven-figure exercises for A-B. For Mcloughlin, A-B's expanding cable palette is a sign that the king of brews is stepping up to target an ever-widening audience.CNBC is currently in 75 million households in the U.S. and in more than 158 million worldwide in 101 countries. E! Entertainment Television estimates its subscriber count will hit 70 million by year-end.

"Bud came to us looking to target entertainment enthusiasts, specifically through our late-night hit, Wild On," says Neil Baker, E! senior vice president of ad sales. "They wanted to reach a young, upscale, 2149 adult audience and wanted to center an integrated platform campaign. We are set up to do integrated marketing across our two networks (E! and Style) and E! Online on a turnkey basis with a single goal: to help advertisers like Budweiser to sell product."

Production

Environmental Scan

The beverage industry is extremely competitive, with private labels greatly influencing theenvironment. A few global “beverage giants” produce many brands, but those brands fall intoself‐contained categories as well. Thus, the “beverage” market is not really one market; it is acollection of markets with many different types of products, processes and requirements. Thebeverage market includes several different products that can be grouped into two maincategories: alcoholic (beer, wine, spirits) and non‐alcoholic (carbonated soft drinks, juice, water, sports drinks, etc.). Each category, and often each type, of beverage have its unique issues and needs.The beer industry is the biggest sector of the Alcoholic Beverage industry, with global annualsales exceeding $325 billion USD. However, market saturation has been reached in much of the developed world, which is limiting the industry’s growth potential and forcing many companies to focus on emerging markets. With so few options for growth, companies that operate in the industry face considerable competitive pressures. Consequently, they must streamline their processes in order to drive real, profitable growth – all while ensuring that they effectively meet the demands of both customers and consumers.Over the past years, there prevailed a significant litigation that advanced the industry’s selfregulation of advertising and marketing practices. This enhanced the efforts to further reduceillegal underage drinking and drunk driving, extend alliances in the broader alcohol beverageindustry, advocate coherent and sensible positions on important regulatory projects, andstrengthened relationships with regulators, lawmakers, and law enforcement officials.In this paper we have highlighted a number of the significant achievements on the legislative,legal, and regulatory fronts. This paper also provides insights on the market trends of the beerindustry and on the issues relevant primarily to beer producers or distributors. It outlines thespecific challenges facing the companies operating in this arena, such as ever‐changingconsumer tastes, a growing emphasis on product safety, and the increasing power of globalretailers. It also explores opportunities for process improvement and cites specific solutionsthat can empower beer companies to meet industry challenges, both today and tomorrow, anddrive towards profitability and growth.

Growth OpportunitiesThe saturation of traditionally thriving beer markets such as North America and Europe hasdriven the consolidation of the industry. Major brewers have sought growth through strategicmergers and acquisitions, which has reorganized the industry and strengthened the marketpositions of the industry’s largest brewers. Expansion into key emerging markets has become a strategic priority for leading firms, who are now competing for market share in severalimportant regions of the world (Hutter, pg. 1). When making strategic growth decisions firmsmust evaluate a new market based upon specific criteria, such as:• Economics & Demographics:o Population/Consumer base: What is the size of the population? What is the demographicmakeup of the population? What are the growth trends? Is there an emerging middle class? How is the population disbursed?o Employment: Are there available jobs? What is per‐capita income? Is the job market growing?o Infrastructure: Does the region have established infrastructure such as roads, utilities, energy, communications, agriculture, private sector?o Business climate: Is there an established local beer industry? Is there a free‐market economy?o Taxes: Is there a stable tax structure? Is it Pro or anti‐business?• Consumer Tastes & Market Trends

o Beverage Preferences: Do current beverage preferences pose any barrier to market entry?o Health & Social Issues: Are there any health or social issues that may pose a risk to expansion into this area?o Competition/Opportunity: What firms already operate in this area? What is the current makeup of the beverage marketplace? How much market share can we capture?o Limiting Factors: What are the logistical or operational challenges for doing business in this area? How will our supply/distribution chains function in this region?• Governmental & Cultural Factorso Government: How much influence does the government have on the private sector? Is thegovernment stable and ethical? What is the government’s attitude toward alcohol?o Government Regulations: Has the government imposed any restraints to trade or favoredcertain industries?o Cultural Issues & Factors: Is there any Religious or social opposition to alcohol?o Societal & Ethical Norms: Is leisure time important to the culture? Is drinking a social norm? Is alcohol viewed as ethically acceptable by the culture?• Environmental Factors & Growth Strategyo Agricultural Opportunity: What is the climate? Can we locally grow our ingredients?o Costs of Importing/Exporting: What type of operation will the logistics of the environment permit?o Dynamics of the Local Market: Are there local brewers that we can acquire or merge with? Do they have favorable market share? Do they have positive partnerships with key suppliers and distributors? With these guidelines in mind, we have identified several emerging markets that have significant growth potential for large‐scale brewers. The following pages provide a brief analysis of the following regions: China, India, South Africa, Russia and Latin America.

Plant Layout

IndiaLike China, India is one of the world’s fastest growing consumer markets. A rapidly growingpopulation, an emerging middle class with rising per‐capita incomes and blossoming urbancenters make India a powerful emerging market. India has an established local beer industryand, although per‐capita consumption is low, as the country becomes more westernizedyounger generations have the potential to be high‐volume consumers. However, regionalism,political unrest and the potential for growing pains temper this market’s attraction.Strengths• Population: 1.1 billion (CIA World Factbook)• Emerging Middle Class: India has a healthy, growing urban workforce with 7.2% unemployment. India’s emerging middle class is relatively young, 63% of the country’s population is between the ages of 15‐64 (CIA World Factbook) and a flurry of foreign investment across all sectors has broadened and westernized the tastes of this young population.• Steady growth in beer market: India has an active domestic brewing industry that includes many local firms and a growing increase in foreign investment. Although per‐capita beer consumption is relatively low, beer sales in India are forecast to grow at a compound annual growth rate of 17.2% until 2011 (mindbranch.com).Weaknesses• Market Saturation: Although market saturation is only a marginal concern, it is worth noting that a rush of foreign investment, combined with a healthy domestic brewing industry, makes India a highly competitive emerging market. Not every firm that expands into India will survive and the long‐run forecast figures to see this region experience its own period of consolidation once the rush of investment has waned.• Regional and logistical challenges: Like China, India is a highly regional market containing significant disparities such as regulatory issues, prices and consumer tastes. This regionalism creates a number of logistical challenges for a volume producer attempting to reach economies of scale and establish a country‐wide brand. Furthermore, regionalism, combined with inconsistent infrastructure and urban/rural socio‐economic disparities, has the potential to make establishing an extensive supply and distribution chain a capital‐intensive undertaking.Opportunities• Continued Growth Potential: Despite the logistical challenges, India’s young emerging middle class offers tremendous upside growth potential in urban areas• Favorable agricultural climate & network: India’s climate is favorable for the harvesting of hops and barley, the primary natural ingredients in beer. There exists potential to establish supply relationships with local commodity producers.Threats• Political instability: The recent terror attacks in Mumbai have served as a reminder that political unrest is a very real threat in India. An escalating conflict or the persistent threat of terror could have significant effects on India’s development and consumer potential.• Socio‐economic growing pains: The disparity between India’s thriving urban centers andimpoverished rural areas creates the potential for civil unrest. India’s rapid growth will require an astute government capable of keeping peace while maintaining a free market system and an educated, employed population.Final Analysis:

Despite its challenges, India’s young emerging middle class and favorable agricultural climate make this an attractive expansion opportunity. We recommend an acquisition strategy.