InBev Price Hike Will Help Anheuser-Busch Distribs

Implications: InBev price increases to wholesalers will allow AB distribs to increase profitability and still maintain pricing advantages over HeinekenUSA and Grupo Modelo (Corona) in the marketplace. The move comes as no surprise since virtually all brewers (except InBev) announced price hikes in Feb '07.

Analysis: InBev announces...
 
that pricing will go up 1.0% on April 1st, 2007 and will also rise an additional 2.5% on July 1st of the same year. This move allows AB wholesalers to narrow the price gap between inBev brands (Bass, Becks, Lowenbraü) and import leaders Heineken and Corona. The average price increase will amount to an additional 85¢ to $1.00 per case, a 3.75% hike.

Importers for Grupo Modelo...
 
and Heineken USA raised prices to wholesalers in February, establishing a $1.50 gap between themselves and InBev, leaving the door open for an InBev hike. The new InBev pricing still leaves the mega-brewer with a 60¢ advantage per case heading to Retail...a move which should resonate well with Retailers and result in very favorable ad activity in supermarkets and big-box outlets.

Anheuser-Busch has transitioned...
 
approximately 60% of InBev's US volume to its distribs since the merger was announced last December. The move has delivered an additional layer of volume and profit to distribs hurt by the flatlining of domestic beers in America since 2001. Many wholesalers will used the InBev increase to raise prices on other allied brands such as Grolsch, Harbin, Tiger, and Kirin.

AB's goal is wholesaler exclusivity...
 
again as it continues to expand the portfolio for its business partners. In recent times AB has reminded distribs to, "Dance with the one who brought you"...a veiled reminder that their brands deserve wholesalers 'best efforts' and those who follow the model will be rewarded.