What kind of innovations are likely to provide Anheuser-Busch a new competitive edge? What problems do you foresee in this area?

Question

What will be an ideal response?

Answer 1

Product innovations within the beer business offer various possibilities. For example, 3.2 beer is the latest
innovation in the beer business. But there is a variety of other possibilities, from “beer-coolers” to “mix-beers.”
(There are areas in Europe where people drink beer mixed with raspberry soda.) How about beer in fancy colors, or
with different carbonation? These few examples show that beer doesn’t have to stay the way it is. There are plenty
of possibilities for change.
Not only the beer but also the packaging can be altered. Cans and small bottles can be replaced by plastic
containers. Beer could also be sold in larger two-liter containers (like Coca-Cola and other beverages) or in smaller
bottles for a “sip in-between.”
Distribution is another area in which change is possible. A-B could start a chain of Anheuser-Busch pubs. If
they are designed and marketed well, they might be a very effective promotion and selling tool.
Product innovations in other areas can also influence the beer business. New technologies can affect the beer-
brewing process. If one could gain technological advantages in brewing beer, one could revolutionize the whole
industry. Prices and profit margins could change drastically. Innovations could alter the traditional brewing process
completely. Coca-Cola Co., for example, introduced a compact dispenser which mixes the Coke syrup and water for
the customer on the spot. It is even cost-effective in very small offices. If the beer-brewing technology changes in a
similar way, and beer can be sold as a syrup, all of a sudden every small bar or pub will have to have a “beer
dispenser.” And, why not a beer dispenser for home use? The beer business, its production and its marketing, can be
turned upside down.
Innovations such as these could affect drinking habits and beer consumption. Beer could be something one has
to drink before or after dinner. New segments can be created by targeting certain product innovations to new
consumer groups. However, this might affect existing segments and existing customers. These effects must be
studied very carefully.
Success with innovations is not guaranteed. All product innovations have the risk of failure and financial losses.
Even if the innovation is successful, financial success could be prevented by imitations or similar moves by the
competition. In spite of these risks, A-B must take the lead by innovating new products if it means to maintain its
leadership position.
The importance and strong influence of product innovations are illustrated by a recent event. In November
1988, A-B launched Michelob Dry. Dry beer is a new brew that was developed in Japan. It has less sugar, but the
same alcohol level as regular beers. The dry beer was first introduced by a Japanese brewer who was fighting
against declining fortunes. It swept the Japanese market; dry beer now accounts for 35 percent of the Japanese
market.
Within two months of test marketing, A-B found that women, in particular, found this new product appealing.
A-B is so enthusiastic about its new product that it launched Michelob Dry with the industry’s biggest introductory
ad campaign since Bud Light. Most of the other brewers take a wait-and-see attitude, except Pabst (not a separate
company any more) and Heileman, who also started to sell dry beer.