Going Head-to-Head
With the peak summer sales season approaching, a battle is brewing among big economy beer brands in Southern California.
Anheuser-Busch this month is launching Busch beer in California, backed by an aggressive outdoor advertising campaign. Though Busch is the nation’s leading economy beer label, it hasn’t been sold in California, a state the industry has long regarded as higher-priced premium beer territory.
That view has changed with the success of Miller High Life, an economy brand that over the last three years has made inroads into Southern California’s beer market. Miller Brewing Co. said that High Life sales in Los Angeles grew 8% in 1997 at a time when overall beer sales were virtually flat.
“Los Angeles has been an important market for us,” said Bruce Winterton, High Life brand manager.
High Life’s pioneering success as an economy beer must have irked Anheuser-Busch. Sales of Busch beer declined nationally in 1997, in part due to competition from High Life outside California. In California, where High Life and its sister brand Red Dog had the economy, or popular-priced, beer business largely to themselves, the two brands robbed sales from Budweiser, the leading premium brand, as its drinkers traded down to less-expensive brews.
High Life, sold as the “Champagne of beers” in the 1960s and 1970s, hasn’t entirely lost its premium aura. In fact, its packaging still boasts it is a premium brand.
The entry of Busch sets the stage for a high-stakes battle in California, which accounts for 10% of the nation’s beer sales. Although Anheuser-Busch won’t disclose what it is spending, it has prepared billboard ads that use outdoor scenes and announce: “Now in California.” The company is using Spanish-language billboards to pitch Busch as well.
Miller Brewing, meanwhile, is significantly upping the ante, putting $5 million to $10 million behind its first national advertising campaign for High Life in seven years. It has changed the packaging for High Life, bringing back nostalgic elements--like the symbol of a woman sitting in a crescent moon--and is dusting off its previous slogan.
On another front, Miller Brewing is spending $5 million to advertise Red Dog, an economy beer introduced as a premium in 1995. Though initially successful, Red Dog did poorly in 1996. Sales rose 31% in 1997 due to price reductions. In Los Angeles, where price cuts were delayed, Red Dog sales sunk 11% in 1997.
All this attention is being devoted to a category that has been in steady decline. According to Beer Marketer’s Insights, an industry newsletter, sales of popular-priced beer have been falling 2% to 4% annually. Economy-beer drinkers have been trading up to premium brews, in part because price competition between Miller Genuine Draft and Budweiser have made those brands more affordable.
The decline in economy beer sales coincides with a drop in advertising spending on the part of Anheuser-Busch. According to figures from Competitive Media Reports, Anheuser-Busch in 1995 spent $21.8 million to pitch Busch and its sister brand, Busch Light--about 10 times the $2.8 million it spent in 1997.
Though it isn’t growing, the sheer size of the economy beer market makes it attractive to Miller Brewing and Anheuser-Busch. It accounts for 26% of all beer sales, according to Beer Marketer’s Insights. Miller Brewing and Anheuser-Busch are also in position to take sales from weaker national brands, such as Stroh’s Old Milwaukee.
And since regional brands account for nearly half of economy beer sales, large national beer companies can grow by using their marketing and distribution muscle to steal sales from smaller competitors.
Tony Besasie, brand manager for Red Dog, said the share held by regional brands is tempting. “I’d love to have it,” he said.
Ads for Red Dog feature “rules for living” that appeal to what the brand calls “adventure-seeking” beer drinkers. In one ad, bar patrons are reminded “never ever bite the hand that serves you” as a well-trained customer tips the bartender. Another spot shows a dog’s-eye view of a night on the town as viewers are told “every dog loves a good chase.”
The new campaign for High Life is faithful to the brand’s blue-collar roots while using humor to attract today’s younger beer drinkers.
In one new commercial, a High Life drinker demonstrates the power of duct tape as he slaps another swatch of the sticky stuff on the deteriorating door of a refrigerator that keeps his favorite brew chilled.
“The High Life man knows that if the pharaohs had duct tape, the sphinx would still have a nose,” a voice-over says.
To be sure, sales of the beer that made Milwaukee famous remain far below their peak. High Life sales rose 5.8% in 1997 in terms of volume to 5.5 million barrels, according to Beer Marketer’s Insights. It peaked in 1979 at 20 million barrels.
Red Dog, meanwhile, could match the 1.7 million barrels sold in its introductory year if it sustains the same level of growth from 1997. Sales rose 30% in 1997 to 1.3 million barrels.
What isn’t yet clear is how the competition among economy brands will impact premium labels. While Anheuser-Busch disagrees, analysts and competitors say Busch will undoubtedly hurt sales of Budweiser. When Busch was introduced in a test in Bakersfield a few years ago, Budweiser sales fell, although Busch brand manager Bob Franceschelli said that the pricing on Busch was similar to Budweiser.
Some speculate that Anheuser-Busch may have to discount Budweiser in some markets to avoid cannibalization by Busch, although Budweiser has said it is committed to maintaining prices.
“It will impact them more than us,” said Red Dog’s Besasie.
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Popularity Contest
Popular-priced beers account for 26% of beer volume sold in U.S. Thought the category isn’t growing, big brewers are aggressively going after sales of weaker rivals. Here are the leading popular-priced brands, according to the trade journal Beer Marketer’s Insights.
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Brand Share of poplar-priced Annual volume beer market (in millions of barrels) Busch 16.0% 8 Miller High Life 11.0 5.5 Natural Light 9.4 4.7 Busch Light 9.3 4.7 Old Milwaukee 6.4 3.2 Keystone Light 3.8 1.9 Red Dog 2.6 1.3 Others 41.5 20.8
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