We asked you to give us your opinions on the strategies that A-B and MillerCoors have employed to go to market with new brands. And we got lots of responses. But we were cautioned by MC not to draw too many conclusions as there hasn't been enough time to ascertain their success. That's fair enough.
So let us investigate A-B's mega-brand strategy, which was truly started in 2008. As you know, A-B has been more willing to line extend off their large brands while MC has preferred the pure play route.
A-B has had some successes (Platinum) and some failures (Bud Light Golden Wheat). But when you look at the data, it seems that A-B's strategy has been effective on the whole. And while they're not afraid to line extend, they also roll out pure play brands as well -- most notably Shock Top.
While line extensions have been criticized for having a short shelf life, some of A-B's line extended brands have stood the test of time. Bud Light Lime, despite getting put in the shadow of Lime-A-Rita last summer, is still a substantial brand with 0.94% market share in SIG 52 week food store scans, just shy of a share point, making twice as large as our fave brand Bud Ice, and it's only declining slightly. Bud Light Lime is five years old. So is Bud Light Chelada, which is growing and currently has a 0.14 share.
On the other hand, A-B chose not to line extend with Belgian White. It was originally a successful seasonal of the Michelob franchise, but they ultimately decided to give it its own brand, Shock Top, because they realized that Michelob lacked credibility for a craft wheat beer. That's probably also why Bud Light Wheat failed -- consumers didn't buy Bud Light as a credible purveyor of a crafty wheat beer.
The trick to line extending, according to one reader close to A-B, is to only extend to products that are believable and credible based on what the mother brand stands for. Bud Light didn't have the street cred for a wheat beer, but it did make sense to consumers for a lime flavored beer, a lime and strawberry FMB, and a sweeter higher alcohol super-premium offering. Bud Light's brand equity, in the mind of young adults, equals fun flavors. A-B also monitors brand health very closely, and their data show that extensions like Platinum and Lime have actually improved the Bud Light mother brand's brand's health, rather than hurt it. Of course, there is cannibalization. But it also helps to line extend to higher priced and more premium products, so that even with cannibalization, everybody gets a margin expansion.
And then there is the issue of shelf space. By line extending off their top brands, A-B has been able to hold space -- even with duds like Bud Light Wheat and some Michelob extensions -- by back filling with new line extensions once it is apparent those are failing. They've also filled shelf space by coming out with various package configurations -- smaller cans for instance -- to keep others from claiming real estate. Their latest line extension, Budweiser Black Crown, already has a 0.85 market share in food stores for the latest week, right behind Bud Light Chelada. That's incremental space that came from somewhere, even if it was partially from their own space.
Does this strategy bastardize the brands long term? That is an important question. Their research so far says that it doesn't, but then again it's only been a few years. Is there a fatigue with coming out with new flavors all the time? The FMB section of the cooler knows this challenge all too well.
I would objectively say, on the whole, that the strategy has so far been a success. Yes, A-B is losing share, mostly because of price increases in their sub-premiums. But on the premium and above-premium levels, it's been pretty good.
I was not a fan when they first embarked on this mega-brand strategy in 2008-09. I debated it with Dave Peacock at the time most heartily. I subscribed to the legendary marketers Jack Trout's and Al Ries' theory that line extensions are bad for big brands. Right when I started in this business in the early 1990s, they published a book called the 22 Immutable Laws of Marketing. I carried it around like a bible. But times have changed, as noted by this Harvard Business Review article. http://blogs.hbr.org/cs/2012/04/ries_trout_were_wrong_brand_ex.html
Today, younger consumers seem to be more open to flavors with their favorite brands at the top of the label. Look at Apple and Starbucks. Apple was computers. But they've successfully extended to music players and phones and tablets. Starbucks now makes teas and provides coffee machines and grinds at companies. It's a brave new world. It's been said that young people are more promiscuous today. Perhaps they allow their brands to be more promiscuous as well -- as long as the line extension stays true to the brand's core equity.
After all, the first successful mega-brand line extension in the world was Lite Beer from Miller ("everything you always wanted in a beer, and less"). A-B at the time was loath to extend off their vaulted Budweiser, and waited many years before launching Bud Light, much to their detriment. Roles have seemingly reversed. But it's early days.
Do you agree? email@example.com is where you register your thoughts.
Until tomorrow, Harry
"The very first law in advertising is to avoid the concrete promise and cultivate the delightfully vague."
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