In the four years since the $52 billion transatlantic merger that created Anheuser-Busch InBev (BUD), most of the Leuven (Belgium)-based brewer’s efforts have been focused on selling assets, cutting costs, and paying down debt. Lately the world’s largest brewmeister is turning its attention to something its customers can relate to—the beer itself. In 2012, AB InBev sparked growth with new beers, including Bud Light Platinum, an upscale cousin that costs 35 percent more than America’s No. 1 beer, and the Mexican-inspired Bud Light Lime-A-Rita. Next on tap: On Jan. 21, Budweiser will introduce U.S. drinkers to Black Crown, a new take on the iconic Bud, America’s most popular regular brew. “When we bought AB, our focus was much more on deleveraging,” says AB InBev Chief Marketing Officer Miguel Patricio. “This is behind us. Now we’re focusing on what we’ve been seeding” in new products.
Black Crown, with more alcohol and a stronger hops taste than classic Bud, is the latest example of the brewer’s push to reinvigorate its core brands. The drink, chosen from among 12 experimental varieties submitted by head beermakers at each of Budweiser’s U.S. breweries and made from the original Bud yeast, prevailed in taste tests of 25,000 consumers last year. Attention-grabbing drinks are becoming more important for brewers facing competition from craft beers, which are growing faster in the U.S. than big-name brands. “Black Crown’s bringing Bud to a more sophisticated crowd and occasion,” Patricio says.
The brand could use the help. Sales of Budweiser to U.S. retailers fell 6 percent by volume in the nine months through September. Keeping Bud strong at home is key, as AB InBev wants to expand it globally. Bud Light Platinum, a higher-strength beer in a blue bottle, and margarita-flavored Lime-A-Rita helped add about 0.75 of a percentage point to Bud Light’s 21.5 percent share of the U.S. market in the third quarter of 2012, AB InBev estimates.
It’s not all new brews, either. Budweiser is using packaging and marketing promotions to draw buzz to older brands. Consumers can send a Facebook (FB) friend a video of a glamorous blonde delivering a chalice of Stella Artois directly to their home, integrating a picture of it into the video using Google’s (GOOG) Street View service. AB InBev is also tweaking its containers more frequently. It used a red-and-gold dragon-patterned Bud bottle in China to celebrate Chinese New Year; in Brazil the entire lid of the brewer’s Brahma beer can be peeled off to create a ready-made mug. This year the company will introduce a new Bud can with a distinctive waistline shape in the U.S. “We’re feeding this funnel of innovation constantly,” Patricio says.
The brewer, known for its adept cost cutting, is not reducing sales and marketing spending, which climbed 7.7 percent in the first nine months of 2012, after rising 4.1 percent a year earlier. AB InBev’s profit margin is wider than those of rivals SABMiller (SAB:LN), Carlsberg (CABGY), and Heineken (HEIA:NA), so it can afford to spend. Still, profit in 2012 was hurt by higher distribution and administrative costs in the U.S. as the brewer struggled to meet demand for Platinum and Lime-A-Rita. Patricio isn’t exactly crying in his beer. “I wish we had that problem everywhere,” he explains, “of having innovation be so successful.”