Anheuser-Busch Looks To Slash Costs, But Not Marketing Spend

by David Goetzl, Jun 30, 2008, 7:31 AM

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In the wake of its decision to reject a takeover bid last week, Anheuser-Busch said it would undergo a massive cost-cutting plan, but would not reduce its marketing outlays. In fact, it plans to increase spending by perhaps $200 million-plus this year.

A-B opted to turn aside a bid by InBev to acquire it for $65 a share (its shares closed Friday at just over $62) on grounds that it "undervalues" the company with its iconic brands and market-leading (50% share) position in the U.S.

While discussing its decision on a conference call, A-B CFO Randy Baker said the company would boost media spending by 15% this year--which would be at least $203 million, based on an estimated 2007 advertising outlay of $1.35 billion by Advertising Age.

Some of that will go toward A-B's large-scale advertising on NBC's telecast of the Beijing Olympics later this summer, Baker said.

One of the potential benefits of the InBev merger would have been an opportunity to achieve cost efficiencies, but A-B said it is embarking on its own plan to trim $1 billion over the next two years.

But CEO August Busch IV said "we're not cutting our marketing investment," adding that it has been ramped up recently.

Busch cited the performance of new Bud Light Lime as an example of recent marketing success.

"We continue to increase the value of these brands through creative marketing and innovation," Busch said of the company's portfolio that includes Budweiser and Michelob.

Busch said much of the creativity is derived from a recently completed year-long study of consumer habits that has helped the company refine its messages and its way of approaching new products.

Baker also said the size of the sales force has increased 40% over the last two years.

And Busch and Baker said the company has no plans--after a rigorous review process--to sell its unit that runs theme parks, including three SeaWorlds, Pennsylvania's Sesame Place and Busch Gardens in Virginia and Florida. The parks, in part, serve as a marketing arm, but are producing high single-digit growth.

Baker said the company is on pace to produce an average 8% growth in U.S. beer operations over the next five years.

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