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Has the King of Beers Abdicated?

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Free beer, get your free beer here! Conditions have gotten so bad at the Budweiser brand that parent Anheuser-Busch InBev (NYSE: BUD  ) is resorting to free beer. From Monday until Wednesday of next week at bars around the country, the iconic brand will try to become relevant with the under-30 crowd again by offering a free taste of an old classic.

Budweiser unit sales were down 9% last year and are off as much this year, but the biggest concern for Anheuser-Busch is the loss of the next generation of drinkers. Young drinkers have passed over the classic Budweiser brand for craft brews and new concoctions, helping drive Budweiser's rank in national product brands down from 16th to 220th in the last seven years.

For Anheuser-Busch and Molson Coors Brewing (NYSE: TAP  ) , a trend of some concern is the move toward craft beer like Boston Beer's (NYSE: SAM  ) Sam Adams. The year 2009 saw a shift toward craft brew, and in the first half of 2010 overall U.S. beer sales were down an estimated 2.7% by volume, but craft brews were up 9%. Even better for investors in craft brews: the retail dollar share of craft brewers was up 12%. Craft brewers are selling more volume and getting a higher price for their product.

This doesn't spell the end for the diversified Anheuser-Busch. Consumers have been "trading up" to its other products, such as Stella Artois, nearly tripling Stella's U.S. share in the import category since 2005. Similar to Molson Coors, Anheuser-Busch has a brand in nearly every category to satisfy the whims of consumers, so the relative underperformance of Budweiser may be an opportunity to coax consumers to trade up to one of its more premium offerings.

Overall, I don't see how this is a good sign at all for the King of Beers, Budweiser. As a beer connoisseur in the target market for this promotion, I think other bar aficionados will take the bait and try a Bud or two. I'll give the server a "hmmm ... that was interesting" and then order a round of my favorite local craft brew. A free beer just isn't enough to make Budweiser relevant to me again.

Interested in reading more about Anheuser-Busch InBev? Click here to add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

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Fool contributor Travis Hoium does not own any stock mentioned here. Boston Beer is a Motley Fool Stock Advisor selection. The Fool owns shares of Molson Coors Brewing. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 23, 2010, at 7:47 PM, XMFTom7 wrote:

    Excellent article, Travis [he says, as he hoists a Terrapin Beer Hopsecutioner IPA ;) ]

  • Report this Comment On September 26, 2010, at 3:19 PM, BeerHere2010 wrote:

    When you're looking @ the worst declines in your history and confronting a trend 'sea change' in consumption, by giving away your product seems...desperate.

    sounds like a lot of BOD BUD (born on date) Bud is going 'bad' and i for one am not interested in 'free' at the cost of drinking swill, it isn't worth the 'price'.

    Now, they'll be covering the cost of this (no so) 'Happy Hour' giveaway by instituting a significant price increase so 'free' ain't exactly gonna be free.

    I'd look for continuing losses thru the end of this year and extending into next in the US, because craftbeer's time has come and your (grand)father's beer is acquiring a 'taint' of ...old.

  • Report this Comment On October 09, 2010, at 8:59 PM, blesto wrote:

    I'd be careful after having one of those free Buds. The after taste may make your craft brew taste funny.

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