Anheuser Busch and the brewing industry

Anheuser-Busch is subject to a wide range of environmental factors. One factor is the company's suppliers. a-B has strong power over its suppliers as a result of its size and market share. The company is able to exact favorable terms on all key inputs. For inputs that are subject to volatility in terms of price and/or availability, such as hops, a-B is vertically integrated. On the buyer side, the environment is more complex. Because of laws stemming from Prohibition, a-B must use distributors to sell its product to retailers. a-B has high power over its distributors as a result of its dominant market position. The end users, however, have numerous other options and this can have a dramatic impact on a-B's revenue and profit streams. Anheuser-Busch has seen a steady decline in its business over the past few decades as a direct result of consumers choosing to drink less, drink other beers or to drink other alcoholic beverages.

Competition in the beer industry is intense and has significant impacts on a-B's business. The industry was once an oligopoly, but the rise of microbreweries and the proliferation of imports has weakened that oligopoly somewhat. Market share is stable or declining, which has resulted in intense competition between the remaining competitors. Anheuser-Busch is also subject to events in the global beer market, in part because they have extensive operations in China and in part because they are one of the world's largest brewers. The hostile takeover by InBev is the most significant example of the global beer market's impact on a-B.

Another microenvironmental factor is the public. Change in consumer tastes have eroded Anheuser-Busch's market share dramatically in recent decades. A shift towards more healthy food and drinks weakened the beer market. A move towards more flavorful beer reduced a-B's market share. New market segments have emerged, such as alcopops. Changing demographics has forced a-B into increasing market segmentation.

Changes in the macroenvironment have also impacted Anheuser-Busch. The beer industry is heavily regulated, so the political environment can have a major influence. For example, tax changes in the alcopop segment have shifted the profit capacity of those products. Regulations concerning the sale of alcohol can impact firms in the beer business as well.

Because beer is made with natural ingredients, the natural environment can have a substantial impact on a-B's operations. Prices on key inputs such as barley, rice and hops are all set by commodities markets. Poor harvests can dramatically increase a-B's factor costs. Also, global demand for these products in relation to supply can have an impact.

Industrial brewing is subject to technological change. New equipment, increased automation of brewing and bottling, and other technological changes have affected a-B's profits, production efficiencies and ability to develop new products. Advances in technology have allowed for improved product quality control as well. There is limited risk from technological change, however, as it is unlikely that the beer production process will be radically altered by technological development.

The global trade environment also has an impact. The lowering of trade barriers allows a-B to enter more markets. They were able to build a brewery in China, for example. The reduction in trade barriers has also brought more imports into the United States. Rapid growth in the import segment has eroded a-B's market share. Foreign direct investment rules allowed InBev, a Belgian company, to buy a-B.

A-B is also subject to shifts in the global economy. In China, for example, increasing wealth has made a-B's products affordable for more Chinese. In the domestic market, not only is beer consumption affected by the state of the economy, but the types of beers consumed are also affected. As a low-cost provider of beer, Anheuser-Busch tends to benefit from a weak economy.

Market Segmentation

Anheuser-Busch has been a leader in market segmentation. The beer market is segmented not only by geography but by gender, age, and ethnicity as well. a-B's main segment remains young males, but the company has a broad base for its products. Consumption of Anheuser-Busch beer is higher among males than females. Beer consumption decreases with age.

Anheuser-Busch has enjoyed much success with the ethnic segmentation. The "Whazzup?" ads targeted to the African-American market were one of the most successful campaigns in the company's history. a-B has programs to help it reach the Hispanic market and the Asian-American market as well.