Budweiser Celebrates Its Bigness with Attack on Small Craft Beers

Image: Screen cap from Budweiser's "Brewed the Hard Way" commercial.

Anheuser-Busch InBev spent $9 million trying to convince beer drinkers it could give two whits about craft beer. With 30-second spots during the Super Bowl running about $4.5 million, Budweiser's minute-long ad snapped it fingers under the nose of small-time brew rivals while reveling in its own macro-ness. Leave the pumpkin peach ales to the hipsters who sip, dissect, and fuss over their beers, Budweiser was going to be off brewing some "golden suds."

It was a bold ad representing a strategy the King of Beers probably should have taken earlier. It brews up some 16 million barrels of beer annually, so why run from it?

Objects are closer than they appear

In truth, Budweiser has been looking over its shoulder for years now, first as light beers gained in popularity and then as craft beer exploded on the scene (A-B's own Bud Light is actually the best-selling beer in the country, and has been since 2000, followed by Molson Coors Coors Light).

So Budweiser has been on a long, slow ride down for the past 25 years.

According to TheWall Street Journal , Budweiser's peak of popularity was in 1988 when it shipped 50 million barrels, so it's lost two-thirds of its volume over the past two decades and craft beer has helped contribute to 9% of that loss.

Equally worrisome for the King of Beers has been its loss of market share, from over 14% of the $100 billion U.S. beer market to just 7.6%.

Crafting a takeover plan

At the same time, craft beer now commands a growing portion of the market and shipped over 16 million barrels last year, hitting $14.3 billion in retail dollar value growth (up 20% over 2012). Boston Beer , often viewed as the face of the craft beer industry, shipped 3.4 million barrels in 2013. Over the first nine months of 2014, shipments were up 26% from the comparable period.

While this is comparing an entire industry compared to just a single brand, it's wrong to say Budweiser isn't worried about further encroachment on its turf, because the situation's not getting any better.

Sales going flat

Anheuser-Busch reported overall U.S. volumes were down 2.7%, sales to wholesalers fell 3.7%, and sales to retailers were off 1.9% in the third quarter, while the Budweiser family lost another 40 basis points of market share.

That may be why Budweiser chose to directly confront the biggest challenge it faces today. Four out of the five largest beers, including Budweiser and Bud Light, suffered falling volumes in 2014 even as craft beer continues to grow at double-digit rates.

Through June 2014, craft brewers enjoyed 18% growth by volume and the market analysts at Mintel expect craft beer to exceed $20 billion in sales for the full year.

Despite the bravado Budweiser exhibited during the Super Bowl, Anheuser-Busch has been busily crafting its own presence in craft beers. It created the popular Shock Top to challenge craft beers, and has snatched up craft brewers, Goose Island, 10 Barrel Brewing, and Blue Point Brewing.

In fact, a week before the Super Bowl, A-B purchased Elysian Brewing, which just so happens to make a pumpkin peach ale called Gourdgia On My Mind. Let's just say the macro brewer isn't endearing itself to its own brands let alone craft beer devotees.

Image: Screen cap from Budweiser's "Brewed the Hard Way" commercial.

But the Budweiser ad wasn't about trying to convert craft brew drinkers to come over to mass-produced beer. It was playing to its base and trying to prevent further defections.

Global domination

Despite falling volumes in the U.S. and Europe, over the first three quarters of 2014 Anheuser-Busch InBev enjoyed higher volumes elsewhere around the world, particularly in Mexico and Latin America. Over the past year A-B's stock has risen 32%, not so far behind Boston Beer's 52% gain or even Molson Coors 48% bounce.

Still, it was a pricey bit of snark on Budweiser's part to tweak the nose of craft beer lovers (and some of its sister brands too). But as a signal to how Anheuser-Busch InBev plans on tackling the challenges it faces, it should be a welcome sign for Bud investors that it's willing admit it's big and beautiful.

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The article Budweiser Celebrates Its Bigness with Attack on Small Craft Beers originally appeared on Fool.com.

Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Boston Beer and Molson Coors Brewing Company. The Motley Fool owns shares of Boston Beer. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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