And Then Hell Froze Over

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Michelob goes back to all malt By Jeremiah McWilliams ST. LOUIS POST-DISPATCH 02/07/2007

In a television commercial airing this week, a craftsman rolls liquid glass into the teardrop shape of a Michelob bottle, to a swing soundtrack: "I can feel a change a'comin' . A change will do you good."

With that in mind, Anheuser-Busch Cos. is pushing its Michelob beer family back to its roots.

The St. Louis brewer will make Michelob, Michelob Light and Michelob AmberBock with 100 percent malt — one of the signatures of fast-growing craft beers.

Backed by a national advertising blitz, the brand's teardrop bottle will return after a five-year absence.
"We've got a chance for new drinkers to get into it and get excited about Michelob," said A-B brewmaster Nathaniel Davis. "It's a nod to the original heritage."

Michelob has been positioned as A-B's "super-premium" or higher-priced beer family since 1896, when it was first brewed in St. Louis using 100 percent malt. It was originally available only on draught in exclusive restaurants and hotels. In 1961, rice was added to the Michelob brewing process, and the beer was packaged in its teardrop bottle, which was designed for easy recognition in smoky lounges and bars.

Michelob and Michelob Light have struggled in recent years against competition from craft and import beers, although low-carb Michelob Ultra, boosted by the Atkins diet, enjoyed explosive growth in 2003 and 2004.

Volume in the overall Michelob family dropped by "low single-digit" percentages last year even as A-B's overall volumes increased, W. Randolph Baker, A-B's chief financial officer, said last week.

But that understates the long-term decline of individual brands. Michelob Lager shipments in the U.S. plunged by 48 percent between 2002 and 2005, with Michelob Light falling 43.6 percent, according to the trade publication Beer Marketer's Insights.

Meanwhile, craft beers grabbed some of the fastest growth in the U.S. beer industry as drinkers experimented with specialty beer. Dollar sales of craft beers in supermarkets climbed 18 percent last year, according to Beer Marketer's Insights.

The repositioning "appears to be an effort to more closely link (Michelob) with the world of craft beers," said Mark Swartzberg, a New York beverage analyst with Stifel, Nicolaus & Co. "One of the things it struggles with is, it's hard to argue that it's a niche beer. Michelob has always been the known cousin of Budweiser."

The redesign gives Michelob a sharper focus, said Bill Finnie, an adjunct business professor at Washington University and former A-B strategic planner.

It's "really targeting the craft beer drinker in a coherent sort of way," he said. "Now, the Michelob family will have a much more distinct role."

The revamping of Michelob's ingredients and packaging is its second major makeover in about five years. For years, Michelob had attracted older customers, partly because of its longtime sponsorship of golf tournaments. But in 2002, A-B scrapped the teardrop bottle and rolled out hip and sexy television ads meant to compete with imports and target drinkers aged 21-27.

Now, A-B is pitching Michelob as a beer for quality-conscious adult drinkers, regardless of age.

"Our core drinkers will appreciate this and they'll appreciate the beer's heritage," said Eduardo Pereda, marketing director for the Michelob family.

The switch to all malt will give Michelob a fuller body but not drastically change its taste, Davis said. Rice, an ingredient in Michelob, Michelob Light and AmberBock, gives beer a lighter, crisper taste than all-malt craft beers.

A-B plans to roll out the reformulated Michelob and new packaging by Feb. 26.