Anheuser-Busch -- A Treat*
By Yi-Hsin "Spooky Spice" Chang (TMF Puck)

This BUD's for you.

Okay, it's not a good idea to pass out beer to little kiddie trick-or-treaters dressed as Mulan, Teletubbies, or Barney -- well, maybe if they start singing, "I love you, you love me..." But we're talkin' "Anheuser-Busch, St. Louis, Missouri." We're talkin' "The King of Beers." We're talkin' the world's largest brewer, which sells close to 100 million barrels of beer each year worldwide -- and that's barely scratching the surface in terms of potential sales overseas.

This is a treat if I've ever seen one. Here are the top 10 reasons why:

10. Theme parks. While beer isn't much of a treat for the Power Ranger crowd, the company's family entertainment subsidiary, Busch Entertainment Corp., runs nine profitable amusement parks that continue to achieve record attendance levels. While it may be obvious that the company owns Busch Gardens, you may not realize that its portfolio also includes the ever-popular SeaWorld, Water Country USA, Adventure Island, and Sesame Place -- inspired by those lovable characters of Sesame Street fame. Last year, these theme parks raked in more than $100 million in operating profits. In the past six years, annual earnings have grown at an average rate of 20%. And while the kiddies play, the parents can kick back and enjoy some nice cold brewskies.

9. Market share. Anheuser-Busch, which has been brewing beer since 1852, is a solid, well-established company that makes more beer than anyone else in the world -- 96.9 million barrels last year and counting. In the U.S., the company commands some 46% of the beer market -- more than twice its nearest competitor (Miller Brewing Co.). In fact, it makes more beer than its four largest competitors (Miller, Coors, Stroh, and Pabst) combined. Globally, Anheuser-Busch has a leading market share of 9.3%. Its anchor brand, Budweiser, is the best-selling beer in the world, while Bud Light has been the country's No. 1 light beer since 1994. The Bud family accounts for more than 30% of the beer consumed in the U.S.

8. Marketing. Even non-beer drinkers know that Budweiser is "The King of Beers" and recognize Anheuser-Busch's corporate symbol -- the eight-horse Budweiser Clydesdale hitch. Anheuser-Busch spent nearly half a billion dollars in advertising last year, and it shows. It's almost impossible not to see the company's promotional messages -- from TV commercials and neon signs in bar windows that say "BUD," to sponsorships of professional and amateur sports, including "extreme sports," NASCAR, bowling, and the Olympics. (Anheuser-Busch is the exclusive beer sponsor of the U.S. Olympic Team through 2004 and the sole beer sponsor of the 2002 Winter Olympic Games in Salt Lake City.)

7. Cost reduction. The company has continued to cut expenses and improve productivity. Last year, it eliminated 5% (500 positions) of its salaried workforce almost entirely through attrition. It also has adopted a new company-wide purchasing plan to maximize its buying power, and it has centralized the production of small-volume brands in three breweries to improve efficiency and responsiveness.

6. "Share of mind" incentive program. Last year the company started an incentive program for wholesalers to strengthen their commitment to Anheuser-Busch brands. Since the company announced the program, the percentage of its beer volume sold through wholesalers that carry Anheuser-Busch products exclusively has increased from 40% to 53%.

5. Financials. In spite of operating in an intensely competitive pricing environment last year, the company's gross sales managed to gain 1.7% while operating earnings rose 1.2% -- edging out the sluggish U.S. industry as a whole, which grew less than 1%. The company followed that performance with a solid first half, in which domestic shipments were up 3.3%. Worldwide, Anheuser-Busch's beer volume, including exports and equity in international partner brands, jumped 9.3% to 53.9 million barrels -- on track to beat last year. The company expects 1998 earnings per share to achieve mid-single digit percentage growth.

4. Raising prices. After cutting prices to keep from losing market share to discount-happy Miller Brewing last year, this year Anheuser-Busch initiated a new pricing strategy that reduces the depth, duration, and frequency of its discounts, but keeps regular prices the same. The idea is to increase profitability by subtly closing the spread between regular and discount prices.

3. Untapped markets. The math is simple: Only 7% (7 million barrels) of all the beer the company sold last year was sold overseas, while roughly 95% of the world's population lives outside the U.S. -- that's a lot of thirst to quench. The company's foreign sales jumped 13% last year. In China, the world's most populous country and now the company's third largest market, Budweiser sales were up more than 140% and represented one-seventh of Anheuser-Busch's international volume. In the U.K., the company's most profitable foreign market, sales increased 17% in 1997.

2. Improving demographics. The company can't take credit for this, but the number of over 21-year-olds in this country has started to rise this year after several years of decline. What's more, Baby Boomers (age 34-52) are maintaining their beer consumption levels more so than their predecessors. Plus, by early next century, almost a third of the world's population will fall in the 21 through 39 age bracket, a.k.a. the all-important beer-drinking group.

1. (This one's for the bears out there -- or realists, I guess, depending on your take.) Alcohol is recession-proof. In fact, when the country is in a recession, people consume more alcohol. While Americans may decide to put off buying a car, a house, or new clothes, they will indulge in life's simple pleasures, especially ones that can help lift their spirits. Beer certainly falls in that category, and it's much more affordable than wine or hard liquor. With Anheuser-Busch commanding nearly half of the U.S. market, it's a safe bet that millions of Americans will be drinking Budweiser, Bud Light, Michelob, or some other Anheuser-Busch brand as they sit back and enjoy the simple pleasures of watching Monday Night Football, college hoops, or the latest movie releases on video.

Related Links:
-- Anheuser-Busch Message Board
-- Check the Most Recent Price
-- Drip Portfolio - 11/19/97

* A Ghoul's Opinion represents the opinion of one Ghoul and in no way should be taken as the opinion of either the Motley Fool, Inc., the company in question or representative of anyone or anything else other than that specific Ghoul's thoughts.