AB InBev is attempting to drive value up in lager with the launch of premium Budweiser 66 in August. Alex Beckett gets a sneak preview

Anything seems possible at the moment, doesn't it? England winning the World Cup, Clegg becoming Prime Minister, the UK basking in a heatwave throughout the summer.

But let's face it, the prospect of one of these happening is remote enough, let alone all three. One nailed-on certainty this summer, however, is that AB InBev will launch its premium lager, Budweiser 66, as revealed by The Grocer last week.

AB InBev UK president Stuart MacFarlane reckons the company's new 4% abv Budweiser 66, which is targeted at brand-savvy 20-somethings, will be the biggest-selling beer innovation of 2010. But with a 10% to 15% price premium to other 4% abv lagers, is it a strong enough proposition, and more importantly, is the price right?

Over the past year, lager sales increased 2% in value to £2.9bn, and volumes slipped 1% [Nielsen 52w/e 20 March 2010]. It trails value sales of ale (+6%), cider (+15%) and spirits (+6%). Many commentators believe the market is fast approaching, if it hasn't already reached, saturation point. Not the best time to launch a premium lager, perhaps.

However, supermarket buyers, welcome the new product, claims MacFarlane, who predicts a warm reception from the iPhone generation. "We are targeting a brand-savvy generation that doesn't see the beer category as a commodity category. They will pay more for the right brand."

Premiumisation trend
AB InBev's recent track record in NPD suggests the company knows what it's doing. Bud 66 follows the launch of Beck's Vier in 2006 and Stella 4 in 2008 both key examples of how the group has been catering for the premiumisation trend, says MacFarlane. Stella 4% has recorded a 130% jump in sales value to £64m on a volume rise of 123% over the past year.

And although Beck's Vier has seen value dip 0.8% to £19m, with volumes dropping 8.7% [Nielsen 52w/e 20 March 2010], its on-trade success is a different story, says MacFarlane, adding that distribution in 2009 rose 20% compared with 2008.

But while he claims the brand has taken "iconic design cues," from Jack Daniel's and Coke Zero, Dave Brown, UK chairman of brand agency The Brand Union, sees clear similarities with another American lager.

"The new beer looks to have borrowed key visual equity from the well-established and quintessentially American beer: Miller Genuine Draft.

"Even down to the smooth taste message. With Bud's claim of authenticity, genuineness and 'smooth easy taste', it's strange that the King of Beers appears to be blurring its positioning with the equity of another."

Then again, maybe that won't be a problem in the UK, where Miller's off-trade presence is limited. The 4.7% abv lager doesn't even feature among the top 100 biggest alcohol brands, points out Nielsen. Premium brands that could provide stronger competition such as Peroni and San Miguel are faring well up 45.4% to £52m and 39.2% to £52m, respectively. It's not as if the core Bud brand needs impetus either sales of Budweiser have soared 41.2% in value to £187m with volumes up 57%.

MacFarlane stresses Bud 66's share hunting ground will be in cider and spirits categories as well as lager. But Peter Spencer, MD of Gaymer Cider Company, believes otherwise. "I think Bud 66 will steal from other lagers not cider. "Cider is for quite a different drinking occasion."

4% abv market "saturated"
Another rival questions AB InBev's decision to sell Bud 66 in cans. "The 500ml can format is simply not a premium image," says the sales director for a premium lager brand. "But at least they are doing something. The lager industry needs to get prices up and it will be interesting to see how Bud 66 markets itself."

Details of the marketing support are still under wraps, but AB InBev can take heart from previous efforts to engage with a youthful audience, says Brown, pointing to the Whassup? campaign from 1999 to 2002. However, making a play for the "cool vote" can be treacherous.

"'Cool' is credited, not claimed; discovered, not manufactured," says Brown. "To market to the iPhone generation the campaign needs to be more disruptive."

AB InBev stablemate Beck's hit the spot last year with its Music Inspired Art campaign, which saw hip young bands design its bottle labels. Experts predict that Bud 66's chances of success will hinge on the ability of the brewery's marketers to connect with its target audience.

If they fail, the premium lager is more likely to be met with a triumphant "whatever" rather than an apathetic "whassup".

Read more
AB InBev unveils new Bud 66, the iPhone of lagers (17 April 2010)
Party spirit tempered as flat beer sales hit festive trading (30 January 2010)
MacFarlane urges duty fraud action (21 November 2009)