Relevance of the topic
As the current health crisis due to the dramatic spread of COVID-19 poses a challenge to societies, governments and businesses across the globe, also the American brand Budweiser is strongly affected by its consequences. Therefore, the objective of this written report is to examine to what extent the corona crisis affects the brand Budweiser and its marketing management. To begin with, after providing some general information about the brand, I will investigate how strongly Budweiser is currently affected and will be affected in the next one or two years by the effects of the corona crisis. Secondly, it will be analysed how the brand is currently communicating with its end consumers as well as how this communication is changing compared to the time before the sanitary crisis. Eventually, I will evaluate the quality of communication and finally, I will declare what I would change as a marketing manager.
In the 2019 Interbrand ranking, Budweiser was in 32nd place out of the 100 best global brands. It is an American-style pale lager that was “introduced in 1876 when company founder Adolphus Busch set out to create the United States’ first truly national beer brand – brewed to be universally popular transcend regional tastes” (Interbrand, 2020).
Moreover, Budweiser is a beer brand within the wide-ranging product portfolio of Anheuser-Busch InBev (Anheuser-Busch InBev, 2019), the world’s biggest brewery company best known for lagers like Budweiser (Brown, 2020).
Concerning its brand strength, a distinction is made between internal and external factors whereby brand strength measures the ability of the brand to create loyalty and, therefore, sustainable demand and profit into the future. Hence, each brand strength factor represents a lever of growth. Internally, Budweiser’s top performing factor is commitment, since the brand receives immense support in terms of time and influence. In addition, the two external top performing factors are consistency and presence provided that consistency is “the degree to which a brand is experienced without fail across all touchpoints or formats” (Interbrand, 2020) and presence is defined as “the degree to which a brand feels omnipresent and is talked about positively by consumers, customers and opinion formers in both traditional and social media” (Interbrand, 2020).
Current and prospective consequences due to the corona crisis
As the corona crisis in spring 2020 represents a major challenge for companies worldwide, also AB InBev, the owner of, inter alia, Budweiser, Stella Artois and Corona that has operations in approximately 50 nations and sells beer in more than 150 countries, is negatively affected. In times characterised by uncertainty, it is very difficult for businesses to outline strategies, effectively allocate budgets and start to plan for a desired recovery, whenever it may come (Whiteside, 2020).
Moreover, the Belgium-based company sells more Budweiser in China than in the lager’s key US market. After the outbreak of the novel coronavirus that is believed to have originated in a market in the Chinese city Wuhan in December 2019, the virus expanded to a global pandemic at the beginning of March. That is why the Chinese market was also the first one to be economically affected. Hence, this had a notable impact for AB InBev during the Chinese New Year that took place on January 25th 2020, as their beer sales and shares declined significantly. The reason for this is a substantial decrease in demand in China because the Chinese drank less beer both at bars and at home (CNBC, 2020).
Thus, AB InBev’s chief executive states that for the first two months of 2020, a lost revenue of approximately $285m, which represents 2.3% of its first-quarter group revenue last year, and lost EBIDTA of $170m in China is estimated (Whiteside, 2020).
Since the US and Brazil are AB InBev’s key markets, the impact of the virus on the Brazilian beer market also needs to be considered. In addition, AB InBev’s CEO Carlos Brito, confirms that their performance in 2019 was below their expectations and they are not satisfied with the results, as the company’s core profit declined 5.5% to $5.43 billion in last year’s fourth quarter. Furthermore, AB InBev acknowledged that the results in the Latin American country in the first quarter would not match the very strong figures of the first months of 2019 (CNBC, 2020).
In mid-March, AB InBev declared to withdraw its 2020 outlook, as the scale of the coronavirus increased. Among the reasons are the uncertainty and volatility of the rapidly evolving pandemic, and thus, the overall impact of COVID-19. At the end of February, a decline in EBITDA by 10% in the first quarter and by 2-5% for the whole year had been predicted. However, at that time, the outbreak of the coronavirus was fundamentally confined to China. Since then, the extent of the pandemic has increased significantly, resulting in social distancing measures and the shutdown of most shops, especially restaurants and bars, in a vast majority of countries. Additionally, the company promotes a $11 billion deal with Asahi Group Holdings of its Australian operations that had initially been set to close in the first quarter and will now hopefully be concluded in the second quarter of 2020 (Blenkinsop, 2020).
Since the beer consumption declined for closed restaurants and bars on account of the outbreak of COVID-19, AB InBev proposed to halve its final dividend. While it paid an interim dividend of 80 cent in November 2019, it will pay a final 2019 dividend of 50 cent per share even though €1 had originally been proposed. As the brewing giant purchased the stock corporation SABMiller for about $100 billion in 2016 and had a net debt of $95.5 billion at the end of 2019, the saving of approximately €1 billion thanks to the halved final dividend will bring some relief and will slightly ease the company’s debt burden. Additionally, the brewer announced that its annual shareholder meeting will be postponed from April 29th to June 3rd, which means that the payment of its final dividend will be rescheduled from early May to June 11th (The Irish Times, 2020).
Another issue that needs to be considered is the fact that one of AB InBev’s brands is the Mexican beer called Corona with its brewer Grupo Modelo. At the beginning of March, Corona beer attracted attention after consumers mistakenly associated it with the rapidly evolving coronavirus because of the coincidental name. In early April, the Mexican government declared a health emergency and ordered non-essential businesses to close in an effort to curb the spread of the coronavirus. As a result, the production and marketing of Corona beer in Mexico has temporarily been suspended. According to a survey conducted by CBS News, 38% of interviewed American beer drinkers indicated that they would not buy Corona beer ‘under any circumstances’. Nevertheless, Constellation Brands, which operates the distribution and import of Grupo Modelo’s beers in the US, asserted that the pandemic has not affected sales (Ortiz, 2020).
In spite of the expectation that Corona’s coincidental name with the deadly virus would dent sales, according to Constellation, sales of its beer brands were boosted by 8.9% in the first quarter of 2020, provided that Modelo and Corona are its top sellers. In the first three weeks of March, sales accelerated with its beers increasing by 24% compared to one year ago. In addition, a rise in sales of beer and other alcohol occurred in April, as Americans were forced to stay at home practicing social distancing (Valinsky, 2020).
Anyway, AB InBev is looking ahead and wants “to be an even stronger company in China after this crisis is over” (Whiteside, 2020). During times of COVID-19, there is likely to be an increase in demand of e-commerce, since customers are not able to visit their usual drinking sports or are more cautious. Besides that, Brito stated that their business is all about going out with friends either to restaurants or to nightlife, i.e. bars and clubs (CNBC, 2020). According to a survey of Chinese consumers undertaken by the research provider Kantar, most respondents stated that once they are released from their confinement and quarantine, they intend to go out in order to meet friends, dine at restaurants and enjoy nightlife which includes bars and clubs. While AB InBev is prepared to go back to business, going back to normal life is also associated with a higher beer consumption, as “beer is key to the social fabric” (Whiteside, 2020). Meanwhile, more than half of the company’s 33 Chinese breweries have reopened except the one in Wuhan where the virus that can lead to pneumonia has emerged (CNBC, 2020).
In my opinion, it is completely logical that after several weeks of isolation and social distancing people will want to go out and enjoy meeting their friends at restaurants or bars – consuming beer (maybe also Corona, especially after the corona crisis is overcome), probably a lot of beer in order to celebrate the end of confinement and quarantine. Thus, I think that it is very likely that beer consumption and therefore profits of breweries like AB InBev will strongly increase. Against this backdrop, one can say that obviously AB InBev with its brand Budweiser is currently negatively affected by the corona crisis and has to bear considerable losses now and in the near future. Nevertheless, from my point of view, AB InBev’s profits will rise again in the next one or two years and thus, will ease its debt burden that has increased due to the sanitary crisis.
Communication with end consumers and how it has changed
Regarding the communication with its end consumers, the main channels are Facebook, Twitter, Instagram, YouTube and the website www.ab-inbev.com. To begin with, Budweiser has released a coronavirus-themed remake of their famous ‘whassup’ commercial from 1999 that has been repeatedly used as a pop culture reference. The present video is basically the same, but the audio has been modified to fit the current health crisis. Therefore, now the two friends are saying to each other that they are ‘in quarantine, having a bud’ in compliance with the social distancing guidelines due to the health crises instead of ‘watching the game, having a bud’. Just as they did 21 years ago, the actors in the commercial also scream ‘whassup’ to each other. At the end of the video, the message ‘Be a bud. Check in on a bud.’ is shown followed by the hashtag #oneteam and the Budweiser logo (Boroff, 2020).
Beyond that, Budweiser uses the hashtag #TogetherAtADistance.
Moreover, there is also a contemporary remake of the iconic Budweiser ‘whassup’ commercial including the five celebrities Dwyane Wade, Chris Bosh, Gabrielle Union, Candace Parker and DJ D-Nice. As they self-quarantine, they are seen using the ‘whassup’ line and commiserating with each other on the screen. Finally, the lines ‘Staying connected matters more than ever right now.’ and ‘Checking in, that’s whassup.’ are displayed. In addition, they provide a hotline in cooperation with the Salvation Army in case someone needs to talk in order to get through this severe crisis that significantly affects our daily life. Following the belief that this message is crucial, Dwyane Wade and his wife Gabriella Union wanted to partner with Budweiser because they loved the idea of bringing back the original ‘whassup’ commercial as a message to remember to connect with each other. They also encourage everyone to take a moment out from their day to check-in with their friends and loved ones during this difficult time, since in times like these, something as simple as a hello, or in this case, ‘whassup,’ means a lot. Thus, we should make use of the fact that we are able to remain virtually connected in times of isolation and social distancing, thanks to modern technology (Boroff, 2020).
- Quote paper
- Laura Hins (Author), 2020, Consequences for Budweiser and its Marketing Management due to the Corona Crisis, Munich, GRIN Verlag, https://www.grin.com/document/987768