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.