Anheuser-Busch InBev (BUD +0.98%) recently unveiled a creative way to confront beer drinker preference for locally brewed suds: it is producing limited-time-only labels for its Budweiser brand that will feature the state in which the beer is brewed.
It's not going to dramatically reverse sales of its mass-produced beer, but it shows that the biggest brewer is continuing to address the changing landscape in beer brought on by the craft beer revolution.
Image source: Getty Images.
Crafting a response
The demise of the craft beer industry has been greatly exaggerated. While growth slowed to just 6% last year from the double-digit rates it's scored year after year, a lot of factors when into the reduced growth rate.
For one, Anheuser-Busch has been buying up craft brewers hand over fist and taking out beer volumes from the calculation. Craft beer is still growing at such a pace that it's been able to replenish the amounts that can no longer be included in the equation and today there are more than 5,200 craft breweries operating, more than at any other time in the country's history.
While that has obviously impacted mega brewers like A-B InBev and Molson Coors, it's also hitting the biggest craft brewers like Boston Beer (SAM +0.03%), which continues to see depletions decline (depletions are shipments or sales to distributors and retailers and is considered a proxy for consumer demand). In its second quarter earnings report last week, Boston Beer said depletions fell 3% year over year, better than where it was, but still falling.
A good part of the reason has been beer drinkers looking ever closer to home for their favorite brews. It's part of the reason Anheuser-Busch began scooping up the craft brewers and why Constellation Brands (STZ 0.26%) was willing to pay out $1 billion for Ballast Point Brewing.
While A-B said its craft beer portfolio gained share ahead of the the broader industry, its also putting pressure on its core beers (Budweiser and Bud Light0, which lost 40 and 80 basis points of share respectively over the last six months.
Image source: Anheuser-Busch InBev.
Home team advantage
That's why the mega brewer's new promotional campaign is intriguing. Running from the beginning of July through the end of September, bottles and cans of Budweiser will feature labels that reflect the breweries from whence the beer comes.
Anheuser-Busch has breweries in 11 different states and each will enjoy their own custom packaging:
- The name "Budweiser" will be replaced with the name of each state
- The medallion in the center of each label that usually features the "AB" monogram will be changed to the state's initials
- "King of Beers" will be changed to each state's motto
- "Anheuser-Busch Inc." will be replaced with each state's nickname
Moreover, each of the breweries will host open houses that will feature the Clydesdale horses.
Again, it's not going to boost sales all that much, except perhaps in the individual states where the breweries are situated, and to anyone who is a beer can collector (do people still do that?), but it does give a nod to the trend toward local.
One would think a national brewer like A-B or Molson could take it a step further and produce labels with each state's name -- regardless of where it was brewed -- much as when the U.S. Mint issued individual state quarters. Obviously there would be logistical issues in doing so, but a brewer with a national distribution network ought to be able to pull it off.
Ultimately, these kinds of gimmicks are just that, and it's going to be hard to fight the trend of drinkers swearing off mass brewed beer in favor of local craft, wine, and spirits. But, for a huge global operation like Anheuser-Busch InBev, its nice to see it paying tribute to what's driving the beer market today.
