US Beer Business Continues Decline Written by: James B. Anrndorfer, Adage.com Presented by: Adrianne Johnson

A Shift From Beer to Spirits Beer sales down from 56% of alcoholic beverage market in 1999 to 53.2% in 2004 Spirits segment up from 28.2% to 31.3% of the market

Factors Driving Change Blurred image for beer brands Distiller moves Consumer affection for luxury goods Decrease in blue collar jobs

Marketers Fighting Back More bar promotions Sweeter drinks – cocktails taking away beer business Want to emphasize that beer is “America’s favorite beverage” Brewer’s, however, cannot do much but adjust

Generational Dynamics Baby boomers’ parents  wine/spirits –Their kids  Beer –New trend  Other way around Sprits most popular drink (40%) for year olds Stronger image with this group than beer; 44.4% of males drank beer in Fall 2004, down from 48.8% in Fall 1999 Increase of 5% sales in the top 25 spirits brands in 2004

Reversal of Expected Growth Publicly traded brewers hurt by decline in sales –Beer volume expected to grow less (0.50%) than all alcoholic beverages (0.90%) annually for 2004 – –Spirits growth 2.0% –Wine growth 3.50% Reversal of what beer industry is accustomed to –1970s – sales grew 3 to 4% annually –Dominated through 1980s –Didn’t see the spirits surge coming

Brand Differentiation Issues Humorous ads done by everyone –No effort to differentiate each brand –Advertised like water and soft drinks –Only emulation of Anheuser-Busch ads Spirits marketers enter radio/cable in early 1990s –Marketing up 12% from 2003 to 2004 –Beer only up 7%

Societal Factors “Sex and the City” –Make products more fun, mainstream –Many consumers in different markets traded up –Appeals to women