USA: SABMiller CEO says US price wars still loom

SABMiller sees price competition continuing in the U.S. beer market despite rival Anheuser-Busch Cos Inc. pledge to reverse last year's price cuts, SABMiller Chief Executive Graham Mackay told Reuters on February 23.

"Anheuser-Busch eliminated the price premium in the subpremium category," Mackay said, adding that even if Anheuser-Busch raises prices this year it isn't clear if the company will drop the level of promotional discounting.

Mackay spoke to Reuters ahead of his presentation at the Consumer Analyst Group of New York, or CAGNY, conference in Arizona where he plans to say that the three-year turnaround of Miller Brewing is on track.

London-based SABMiller -- which bought No. 2 U.S. brewer Miller in 2002 -- and larger rival Anheuser-Busch Cos Inc. are fighting to grab a share from each other in the stagnant U.S. beer market.

The U.S. beer industry has suffered in recent years as consumer tastes have shifted towards cocktails and wine, which had forced Anheuser-Busch Cos Inc. , which accounts for about half of all beer sold in the United States, to offer multiple discounts to try to drive volume higher.

But last October Anheuser-Busch said it planned to reverse its price cuts in a bid to generate stronger revenue growth. Anheuser-Busch Chief Executive Patrick Stokes reiterated on Thursday at the CAGNY conference that the company will take price increases in the 2 percent to 3 percent range in 2006.

Norman Adami, chief executive of Miller Brewing, told Reuters: "The question now is whether the increases in prices will stick and will Anheuser-Busch resort to discounting to maintain share if they were losing share."

Anheuser-Busch and Miller Brewing have also been using advertising as a key weapon in their battle, often mentioning each other directly in commercials.

Analysts have said Anheuser-Busch's recent volume improvements have come at the expense of Miller Brewing.

Miller plans to fire back by promoting its premium imported brands Peroni and Pilsner. While domestic beers are suffering in the United States, premium imported beers are a fast growing category.

Earlier this week, Anheuser-Busch said it will exclusively import and distribute Dutch brewer Grolsch NV's beers from 2007.

"It is about lifting the game in the category and we see these two brands (Peroni and Pilsner) at the high end of imports," Adami said. "A lot of the imports are becoming mainstream. So there is an opportunity for the next generation of imports." Adami said Miller is not chasing volume with the Pilsner and Peroni brands for now and is trying to keep the pricing of the brands at the top end of the category.

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .