A-B slip highlights gloomy US beer market

Anheuser (A-B), America's leading brewer, said that both it and the US beer industry as a whole saw volume declines and higher costs in the first half of 2005.

The tough conditions sent A-B's pre-tax profits tumbling by almost 18 per cent in the first half (20 per cent in the second quarter) compared to the same period last year.

And the firm, presenting a gloomy outlook for the market, says it now expects full-year profits to be below those of 2004.

The news is a blow to the US beer industry, which had been forecast to show stronger signs of a recovery in 2005 after recording near flat sales across the market last year.

The only glimmer of hope for the big brewers remains premium 'light' beers, yet competition has inevitably reached fever pitch in this category.

AC Nielsen​ recently named SABMiller's Miller Lite as the fastest growing beer brand in US supermarkets, and A-B's Bud Light came through as one of its best performers over the last year.

SAB recently began directly attacking Bud Light in its TV adverts and has repeatedly alleged that A-B has acted irresponsibly by cutting prices in an already troubled market.

SAB said it stuck by comments made last year by chief executive Norman Adami. He said "results indicate that pricing is not the answer"​, and that the industry's long-term health depended on the major brewers devising good marketing behind their big brands.

Patrick Stokes, chief executive of A-B, said the firm had "implemented a number of initiatives to enhance beer volume and market share growth; including introduction of new products and packaging, increased investments in domestic marketing, stepped-up on-premise sales activities and tactical price promotions"​.

He said A-B had been encouraged by a sales rise in June. The brewer said it's A-B Select had also performed well since its nationwide launch in February this year.

However, much the same statement was made after A-B's first quarter results, so the brewer will be looking to see better returns on its growth strategies soon.

America's top three brewers - A-B, SAB and Molson Coors - could also all take more notice of the progress notched up by premium craft and imported beers in the face of industry problems.

This segment edged up its market share at the same time as increasing prices by two per cent during the two weeks up to the Memorial Day Weekend.

Craft beers also recorded an average growth of seven per cent in 2004, though the category constitutes more than 1300 brewers and only has four per cent share of the total US beer market.

More than 80 per cent of this market is held by the big players. But then, this may not help them so much if the market itself continues to shrink.