Anheuser-Busch Companies, Inc.

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Anheuser-Busch Companies, Inc.

founded: 1852

Contact Information:

headquarters: 1 busch pl.
st. louis, mo 63118 phone: (314)577-2000 fax: (314)577-7622 toll free: (800)dial-bud url: http://www.anheuser-busch.com http://www.budweiser.com

OVERVIEW

Anheuser-Busch Companies, Inc. is a St. Louis-based corporation with subsidiaries that include the world's largest brewing organization, the second-largest U.S. manufacturer of aluminum beverage containers, and one of the largest theme-park operators in the United States. Anheuser-Busch is also involved in producing malt, milling rice, developing real estate, and other business activities. In 1997 Anheuser-Busch Companies had worldwide sales of $12.8 billion.

Anheuser-Busch, Inc. (ABI), a subsidiary of Anheuser-Busch Companies, is the largest brewer in the world. In 1998, ABI accounted for 46.9 percent of all the beer sold in the United States, compared to 22.7 percent for the second largest U.S. brewer, Miller Brewing Company. ABI sold a total of 96.6 million barrels of beer in 1997. The company's Budweiser beer, with it famous "King of Beers" slogan, is by far the best selling brand of beer, with 21 percent of the U.S. market.

COMPANY FINANCES

In 1997, Anheuser-Busch reported gross sales of $12.8 billion, up 1.7 percent from 1996 sales of $12.6 billion. Net sales for 1997 were $11 billion, compared to $10.8 billion in 1996. All divisions performed well and realized increased revenues, including the Busch Entertainment Corp. (theme parks), which exceeded $100 million in operating profits for the first time. Gross sales for the first quarter of 1998 were reported as $2.9 billion, $87 million more than first quarter 1997 sales, an increase of 3.1 percent. The company's theme park operations noticed a loss in earnings over the period from first quarter 1997 to first quarter 1998, however, as did its international beer operations. The decline in international operations was attributed by Anheuser-Busch to 1997's unusually strong first quarter, during which new operations were opened in China, Argentina, and the Philippines. Worldwide beer volume rose 4.4 percent in 1998's first quarter, while domestic beer volume increased by 5.3 percent.

In 1997, Anheuser-Busch paid $1 per share dividends to shareholders, an 8.7-percent increase over dividends paid in 1996 of $.92 per share. Anheuser-Busch stock showed a 52-week high of $49.31 per share, and its 52-week low was $38 1/2. Anheuser-Busch earnings per share were $.54 in the first quarter of 1998, 5.9 percent more than the same period in 1997.

ANALYSTS' OPINIONS

Opinions of stock market analysts on Anheuser-Busch (A-B) Companies have appeared to be somewhat mixed. For example, in a November 1997 report, JP Morgan Securities Inc. recommended Anheuser-Busch stock only as a "long-term buy," citing reasons such as price constraints in the U.S. market (meaning Anheuser-Busch could not raise its prices) and because analysts expected lower earnings per share from 1997-99. JP Morgan did cite some factors that could offset the impact of this on A-B stock, such as better cost containment by the company and more revenue contributions from Grupo Modelo in Mexico.

However, in 1998 Brown Brothers Harriman rated Anheuser-Busch as "outperform/buy," citing expected increases in the company's earnings per share, an expected increase in domestic consumption, and growth in Bud Light sales. The company's growth in international business and increases in overall demand for A-B products prompted other analysts, such as those at CIBC Oppenheimer, to rate the company a "strong buy," while others remained neutral on A-B stock. Analysts at Zacks Investment Research and Morgan Stanley recommended a "hold" rating on Anheuser-Busch stock through 1998, citing a sluggish domestic market for beer and an expected modest 3-percent growth rate for the company.

HISTORY

Anheuser-Busch was founded in 1852 as the Bavarian Brewery in St. Louis by George Schneider, who sold the brewery eight years later to Eberhard Anheuser. Anheuser's son-in-law, Adolphus Busch, joined the company in 1865, eventually becoming a partner and president of the company. In 1876, Busch helped restaurateur Carl Conrad create Budweiser beer—rights to the name Budweiser had been purchased from another brewery. In 1896, they created the Michelob brand.

When Adolphus died in 1913, his son August took over the company, which was re-named Anheuser-Busch, Inc. in 1919. Anheuser-Busch has grown from its roots as a regional beer company into the largest international brewer/marketer and a leading operator of theme parks. During prohibition, when it could not sell beer, the company nearly went under, but survived by selling other products such as ice cream, ginger ale, malt syrup, and nonalcoholic Budweiser. Once Prohibition was repealed, in the 1930s the firm began a steady ascent toward the top of the beer business. By 1957, Anheuser-Busch surpassed Schlitz in sales to become the largest U.S. brewer, a title it has held ever since. Busch Entertainment Corp., a theme park operator, was created in 1959 with the opening of Busch Gardens in Tampa, Florida. In 1982, Anheuser-Busch bought Campbell Taggart, a baked goods maker, and also created its Eagle snack foods unit. Both were sold off in 1996, taking the company out of the food business. That same year the company also sold the St. Louis Cardinals, an earlier acquisition. In 1989, Anheuser-Busch acquired Sea World from Harcourt Brace Jovanovich, adding Anheuser-Busch to the ranks of the country's largest theme park operators.

STRATEGY

In the mid-1990s Anheuser-Busch Companies summed up its corporate strategy with four key phrases, which still applied in 1998: focusing on the core businesses of beer, entertainment, and packaging; leveraging resources; thinking differently; and "making friends." The company's focus on core businesses was illustrated by its exit from unrelated businesses (see History above). The company planned to leverage its resources by investing $2 billion in its brewery systems from 1996 to 2001, increasing its quality standards, expanding internationally, and creating new "specialty" beers. They also used aggressive marketing to capitalize on core brands. One of the most successful campaigns was Budweiser Concentration Week, the largest selling promotion in Anheuser-Busch's history, in which employees and wholesalers "hit the streets" selling Budweiser.

"Thinking differently" applied to improving relationships with wholesalers and re-engineering internal management systems. And "making friends" referred to the promotion of the safe use of alcoholic beverages, increasing the company's charitable activities, and promoting environmental conservation. Another corporate strategy, articulated in 1998, focused on reducing costs, improving productivity, and changing the company's pricing strategies in order to increase the profit margin, rather than increasing price.

Global marketing was clearly on the mind of Anheuser-Busch in the late-1990s, since the global beer market was four times larger than the U.S. market. As of 1997 Anheuser-Busch's beer brands were sold in more than 80 countries, either as an imported beer or produced locally under license. While brewing traditionally has been a local industry, Anheuser-Busch was expanding into China, Japan, Mexico, Brazil, and other countries in the mid-1990s. In the early 1990s, Anheuser-Busch bought a 5-percent stake in Tsingtao, China's largest brewery, for $16.4 million and later purchased 80 percent of a large brewery in Wuhan in central China. The company also spent $600 million buying shares of leading breweries in Mexico and Brazil.

FAST FACTS: About Anheuser-Busch Companies, Inc.

Ownership: Anheuser-Busch Companies, Inc. is a publicly owned company listed on the New York Stock Exchange and other stock exchanges around the world.

Ticker symbol: BUD

Officers: August A. Busch, III, 59, Chmn. & Pres.; W. Randolph Baker, 50, VP & CFO; Patrick T. Stokes, 54, VP & Group Exec.; John H. Purnell, 55, VP & Group Exec.

Employees: 24,326

Principal Subsidiary Companies: Anheuser-Busch Companies, Inc., is the parent company for Anheuser-Busch, Inc. (U.S. brewing); Anheuser-Busch International, Inc. (overseas brewing and marketing); Busch Agricultural Resources, Inc. (raw materials for brewing); Busch Media Group, Inc. (advertising placement); Busch Creative Service Corporation (marketing and business communication); St. Louis Refrigerator Car Company (railroad car maintenance and repair); Manufacturers Railway Company (terminal rail-switching services); Metal Container Corporation (aluminum can manufacturing); Anheuser-Busch Recycling Corporation (collection of recyclable materials); Precision Printing and Packaging, Inc. (labels and cartons); Busch Entertainment Corporation (theme parks); and Busch Properties, Inc. (real estate development).

Chief Competitors: Anheuser-Busch is primarily a maker and distributor of beer. As such, its primary competitors are: Adolph Coors Co.; Bass; Boston Beer Co.; Carlsberg; Guinness; Heineken; Inter-brew; Molson; Miller Brewing Co.; Stroh Brewery Co.; and San Miguel. As an owner and operator of theme parks, Anheuser-Busch also includes among its competitors Six Flags; Viacom, Inc.; and Walt Disney Co.

The company established an international division in 1981, but major growth in international sales did not begin until the mid-1990s. One observer noted that Anheuser-Busch's international efforts "were going nowhere" until the company gave up efforts to set up its own overseas operations and began establishing partnerships with foreign brewers in the early 1990s. After that, results were more promising. For example, Anheuser-Busch's international volume grew 13.4 percent in 1997, to 7 million barrels. However, this was still a small total compared with its U.S. sales of 89.6 million barrels. In 1997, Anheuser-Busch had an 8-percent share of the worldwide beer market.

Anheuser-Busch planned to grow internationally through a complex web of joint marketing agreements, local brewing, import distribution agreements, joint ventures, contract brewing, and equity investments. In 1997 sales outside the U.S. market increased by 13 percent. The company also planned to build Budweiser as a global brand, focusing on marketing the beer in countries with rising growth rates and standards of living. Sales of Budweiser overseas increased by 18 percent in 1997, mostly in China, the United Kingdom, Ireland, and South America.

INFLUENCES

Today, the company is known as much for its intensive and creative marketing as for its beer. Despite fierce competition, A-B's creative television and print advertising has kept its flagship "Bud" brand on top of the beer market. In the mid-1990s, nearly all A-B beer brands were growing despite slow growth in the overall beer market. Bud Light was particularly successful, growing fast enough to overtake Miller Lite as the nation's number-one light beer.

In 1996 Anheuser-Busch made a major marketing change by using "freshness dating" on its Budweiser beer. The company called the freshness dating a "born on" date to show that its beer is brewed, transported, and sold quickly. The company aggressively focused on this new concept in a major television advertising campaign and continued to use this as a strategy illustrating the beer's high quality in the late 1990s.

CURRENT TRENDS

Even though specialty beers accounted for a small part of the U.S. beer market in the mid-1990s—about 2 percent—large breweries such as Anheuser-Busch began making specialty beers under different labels to appeal to people who like exotic beer. One of the specialty beers introduced by Anheuser-Busch's Specialty Brewing Group was Pacific Ridge Pale Ale, which was launched in California in November 1996. Other brands included Red Wolf, Elk Mountain Amber Ale, ZiegenBock, and Christmas Brew.

At the same time, the company aggressively challenged much smaller specialty brewers. In 1996, the company went so far as to petition the U.S. Bureau of Alcohol, Tobacco & Firearms to require small "contract brewers," which market specialty beers that are actually made at larger breweries, to state the name of the company that brews the beer on labels and advertisements. The petition was supported by some microbrewers who brew beer in their own establishments.

Another major trend Anheuser-Busch faced in the mid-1990s was social and regulatory pressure over its marketing tactics, particularly television advertising. Most of the controversy was concerned with the effect of advertising for beer and other alcoholic beverages on teenagers. While Anheuser-Busch said that its marketing and advertising was geared at an adult audience, many consumer activists claimed that the "spillover" effect of such marketing encouraged underage drinking.

CHRONOLOGY: Key Dates for Anheuser-Busch Companies, Inc.

1852:: Founded as Bavarian Brewery
1860:: Is sold to Eberhard Anheuser
1865:: Adolphus Busch joins the company
1876:: Purchases the Budweiser beer brand
1896:: Creates the Michelob brand
1913:: Adolphus Busch dies
1919:: Company renamed Anheuser-Busch, Inc.
1920:: Prohibition closes the brewery for thirteen years
1934:: August Busch dies
1953:: Acquires St. Louis Cardinals
1957:: Becomes largest U.S. brewer
1959:: Opened Busch Gardens in Tampa, Florida
1981:: Establishes an international division
1982:: Buys Campbell Taggart and creates Eagle snack foods unit
1989:: Acquires Sea World
1996:: Sells Eagle Snack Foods, Campbell Taggart, and the St. Louis Cardinals; introduces freshness dating and Bud Ice

As a result, Anheuser-Busch and other brewers tried to create a more favorable image by funding programs that encourage abstinence for people under 21 and responsible drinking for adults. The company also modified some of its marketing tactics. For example, in response to regulatory pressures, Anheuser-Busch removed its beer commercials from the cable channel MTV in 1996 since many MTV viewers were below the legal drinking age. However, MTV Networks planned to transfer most of the ads to its affiliate, VH-1, which is oriented toward adults.

PRODUCTS

Anheuser-Busch extended its product line in 1997, adding new specialty extensions to its Michelob line. These included Honey Lager and Pale Ale, released in the United States. HefeWeizen, another brand, was expanded from select markets to national availability. And Black and Tan was planned for national release in 1998. Seasonal beers were also planned under the Michelob name, including Maple Brown Ale and Winterbrew Spiced Ale.

In Japan, Anheuser-Busch also extended its product line. Through its existing alliance with the Kirin Brewery Company, the company began brewing Kirin Lager, Kirin Ichiban, and Kirin Light at the A-B Los Angeles brewery. The joint venture, the first time Anheuser-Busch has brewed foreign brands for U.S. sale, is 90-percent owned by Kirin.

CORPORATE CITIZENSHIP

Anheuser-Busch and its charitable foundations donated funds to hundreds of charitable organizations in the mid-1990s, helping to provide relief after disasters like the Oklahoma City bombing, flooding, and hurricanes. The company also funded educational opportunities through the United Negro College Fund, National Hispanic Scholarship Funds, and National Korean American Scholarship Foundation. Anheuser-Busch donates to health care institutions, the arts, civic and cultural groups, and social service agencies. The company also participates in alcohol awareness and education, sponsoring programs that send a message of personal responsibility in schools, in the home, and anywhere that sells alcohol. The company's goal is to work with teachers, law enforcement, and community organizations to fight drunk driving and underage drinking. They teamed up with 7-Eleven and created a program promoting "Family Talk About Drinking." 7-Eleven stores post prominent notices to make the public aware of the program, information about which patrons can receive by calling 800-359-TALK.

Anheuser-Busch is also the world's largest recycler of aluminum beverage containers. The company's recycling efforts are coordinated by the Anheuser-Busch Recycling Corporation, which recycled 125 percent of the amount of cans actually sold by Anheuser-Busch in 1997.

GENTLE GIANTS—THE BUDWEISER CLYDESDALES

Working together in eight-horse teams called hitches, the Budweiser Clydesdales are arguably one of the greatest American icons. First introduced in 1933 to celebrate the end of Prohibition, the Clydesdales have risen to immense popularity. However, these horses have to pass strict standards to earn a place on the team. An acceptable horse must be 72 inches tall at the shoulder, be reddish-brown (bay) with a black mane and tail, have white stockings on all four legs, and a white blaze on its face; it must also have passed its third birthday.

Descended from ancient European war horses, the Clydesdales have been bred in North America to be powerful enough to pull a wagon or a plow. Anheuser-Busch is dedicated to preserving the Clydesdales and maintains breeding and training facilities at Grant's Farm in St. Louis, Missouri, and in Romoland, California. From there horses that meet the standards are trained and sent to one of three touring hitches in St. Louis, Romoland, or Merrimack, New Hampshire; or they are sent to one of Anheuser-Busch's theme parks so visitors can see them.

The touring hitches travel all over the world to perform at special events such as the Rose Bowl and other parades. Before a hitch can make an appearance they must be groomed and decorated with red, white, and blue ribbons woven through their manes and tails. The handlers hitch them up to an antique four-ton brewery wagon using a custom made black leather harness. The finishing touch on every hitch is a dalmatian. The Clydesdales are beautiful to watch as they perform "high, graceful strides" while pulling the wagon, and people come from miles around to see them. Thanks to Anheuser-Busch, the next generation will enjoy them, too.

GLOBAL PRESENCE

Anheuser-Busch's two main strategies for global operations were to build Budweiser into an "international premium brand" and to build partnerships with foreign brewers. The company's largest and most profitable foreign market was the United Kingdom, in which the Budweiser brand showed double-digit growth rates—Budweiser had 2.9-percent market share of the U.K. market at the end of 1997. Bud Ice, introduced in 1996, holds 25 percent of the United Kingdom's ice beer market. Through a partnership with Guinness Ireland, Budweiser has been introduced into Northern Ireland and captured 25.4-percent share in the lager market there. Budweiser has also been successfully introduced into Paraguay, Brazil, Colombia, Honduras, China, and the Philippines. Latin America and Asia were still considered "key strategic markets" by the company in 1998.

In 1996 Anheuser-Busch began making beer for Japan's Kirin Brewery, the company's first attempt to make a foreign brand of beer. At the same time it ended talks to obtain the rights to the Budweiser name throughout Europe, which it sold previously. Anheuser-Busch continued the same arrangement it had for decades: it kept the Budweiser name in 11 European countries while Czech brewer Budvar Budejovicky owned it in nine others (in those countries, Anheuser-Busch uses the alternative, "Bud").

SOURCES OF INFORMATION

Bibliography

Anheuser-Busch Companies Annual Report 1997. St. Louis: Anheuser-Busch Companies, Inc.

Anheuser-Busch Companies 1996/1997 Fact Book. St. Louis: Anheuser-Busch Companies, Inc.

"The Beer Barons Raise Their Glasses to the World." The Economist, 13 May 1995, 61.

"It's a Small World for U.S. Brewers; International Beer Sales Are Flourishing, Providing a Pleasant Change From a Flat Domestic Market." Beverage Industry, May 1996, 10.

Palmer, Jay. "Brewing Storm: New Beer Makers Gain Popularity, But Trouble May Bubble Up." Barron's, 28 October 1996, 37.

For an annual report:

The company's annual report is available on the Internet at: http://www.anheuser-busch.com/finhome.htm or call (314)577-3889 or write: Vice President and Secretary's Office, Anheuser-Busch Companies, 1 Busch Pl., St. Louis, MO 63118.