Craft beer flies as Anheuser falters

- Last updated on GMT

Falling beer sales in the US have left big brewers like Anheuser
Busch banking on new products and better marketing to revitalise
growth as small-time craft beers go from strength to strength,
writes Chris Mercer.

A-B said beer sales to domestic wholesalers dropped 2.7 per cent to 24.4 million barrels during the first quarter of 2005 as margins came under pressure from rising raw materials costs.

The brewer said its sluggish home performance reflected "generally weak industry volume conditions"​. Domestic beer sales only rose by 0.5 per cent across the whole industry in 2004, according to the Brewers Association of America.

Yet the consumption problems besetting America's big brewers have not hampered the country's smaller craft brands, described as the shining light of the sector at the recent Craft Brewers' Conference.

"The craft beer industry is on fire with consumers, gaining seven per cent growth in 2004 and easily surpassing large brewers, imports, wine and liquor,"​ said Paul Gatza, director of the Brewers Association of America.

The rise could mark a significant juncture in the development of speciality beer on the market having stuttered through the 1990s and posting a mere two per cent sales increase in 2003.

One of the best performers in 2004 was the New Belgium Brewery, which increased sales by 16 per cent.

Gatza said in his conference speech that moves to install more uniform quality standards were increasing consumer trust in craft beer, while retailers had begun to react to craft beer's rising popularity by giving it more shelf space.

America's craft brewers, numbering more than 1,300, still only control around four per cent of the US beer market compared to the 80 per cent stake held by big industry players like A-B and Molson Coors. A-B's market share alone is 51 per cent.

But, the progress of the craft sector in the face of industry-wide decline begs greater attention than its market share merits, and may hold opportunities for larger firms in need of new avenues.

A-B's chief executive Patrick Stokes said the firm already had a plan:"The company has a number of initiatives in place to enhance beer volume growth, including introduction of new products, led by Budweiser Select, increased investments in domestic marketing, stepped up on premise sales initiatives, new packaging and tactical price promotions."

If A-B was to spend more time devoted to craft-style beer then, despite the criticism it would likely receive from speciality producers, the firm's sheer marketing power could make the move very lucrative.

The company is perhaps already moving in that direction by heavily promoting its new Budweiser Select - positioned as a "new kind of beer" using two row and roasted speciality malts for a rich colour, as well as a blend of domestic and imported hops to create a clean, crisp taste.

A-B said Select had driven first quarter sales alongside the more established Bud Light, despite only being launched nationally in February.

The company increased beer volume in international markets by 131 per cent due to the acquisition of China's Harbin Brewery Group towards the end of last year. Without Harbin, volume would have decreased 1.6 per cent the firm said.

Related topics: Markets, Beer, Wine, Spirits, Cider

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