NO DooDahs

DiWORSification: Anheuser-Busch's Plan to Sell Liquor is Already Giving Us a Hangover (BUD)

Alcoholics are the target market for Budweiser Scotch. People who drink scotch in a non-alcoholic manner will buy on the basis of brand prestige or taste. However, alcoholics who want to switch from beer to scotch to see if that helps limit their drinking might welcome having a scotch to try that is mid-brand between rot-gut and Glenlivet. After all, the purpose of drinking is getting drunk, but you might as well have something that tastes halfway decent – and you have to balance that against price. Non-alcoholics, when faced with which scotch to buy, will think of scotch as a "treat" or "luxury" and gravitate towards the most expensive brands. Alcoholics will see that their choices now include an affordable scotch of better-than-rot-gut quality and may give it a try.

I happen to think that advertising in the beer industry is genius! They have keen insight into the alcoholic mind and target their ads appropriately. However, I don't really think their target market cares two hoots about brand.

Keep this in mind – it's not how many people are in the group that buys a product, it's how much of the product that people in each group buy! The primary consumers of alcohol (not by numbers of consumers but by amount of consumption) are college-age youths on binge-drinking episodes and alcoholics. THESE ARE NOT BRAND-LOYAL CUSTOMERS. Taste of the product and brand are constantly being balanced against the cost-to-drunkenness ratio. This cost ratio is one reason why Budweiser Scotch might actually work.

Big picture, I don't think BUD is trying to improve their brand, but rather trying to prevent the type of cyclicality of earnings they've had as trends in the U.S. move from liquor to beer and back again. By offering a knock-off of a luxury product (scotch), they might actually be able to create a niche market that they can own.

I'm still a BUD bear.

Wall Street Continues to be Dead Wrong on Continental Airlines (CAL)

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Continental Airlines Should Continue to be a High Flyer (CAL)

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Wall Street Continues to be Dead Wrong on Continental Airlines (CAL)

I opened a short on CAL at 28.40 today. Cheers!

Matsushita Repurchases $250+ Million Shares, More to Come (MC)

It would seem that the shares bought back in 2003 for less than $10 were, in retrospect, a good idea. It's far more arguable wether the shares bought back in 2006 for over $20 were a good idea.

A few of the obvious pitfalls of buybacks have been avoided, since the company isn't just announcing a plan but actually executing one, the company isn't borrowing money to buy back, the company actually seems to have quality earnings, and the company isn't "just" buying back stock but is also paying down debt. This may be (MAY be) the first buyback I've looked at that actually wasn't just a total waste of cash. I've come around to the point of view that a share buyback plan is a bad idea until proven otherwise.

I did notice that the company has spent more than twice as much cash on buybacks as they have on dividends over the last four years. Would it have been better for the shareholders if the company had raised the dividend yield from 0.9% to about 3%?