Thank U, Next — Despite Pricey Launch, Bud Light Next Posts Modest Sales — Good Beer Hunting (2022)

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Thank U, Next — Despite Pricey Launch, Bud Light Next Posts Modest Sales — Good Beer Hunting (1)

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Touted by Anheuser-Busch InBev (ABI) as an “industry-leading” new product upon its February 7 launch, Bud Light Next’s first three months of sales indicate a much more moderate success story. The zero-carb beer—the first of its kind—has thus far netted $26.4 million in national chain retail sales as tracked by market research company IRI, putting it at around the #50 brand currently in those stores, with year-to-date dollar sales below Heineken 0.0 and Founders Brewing Co.’s All Day IPA.

It’s not a total flop, but it’s also not the game-changing launch that ABI likely hoped for. Designed to be a light beer with crossover appeal to hard seltzer drinkers—many hard seltzers are low- or no-carb—Bud Light Next’s modest gains so far are further evidence of the strong headwinds traditional domestic beer faces. (Bud Light Seltzers sold more than three times the dollar amount that Bud Light Next did in chain retail stores for the four-week period ending May 8.) Though its rollout was a top priority for the U.S.’s largest beer company, Bud Light Next isn’t dominating beer sales, let alone chipping away at competition from hard seltzers or white-hot Mexican imports.

ABI invested heavily in marketing Bud Light Next, a product it says it had been developing for nearly a decade. Those investments included a 30-second Super Bowl ad, at an estimated price tag of $6.5-7 million. Beer Business Daily wrote on May 2 that unnamed distributors say that sales of Next “have fallen below expectations—sometimes drastically so.”

Kevin Keyes, a beer buyer and store manager for a discount drug/grocery store in Columbus, Ohio, says the launch of Michelob Ultra in the early 2000s was the last time he saw ABI introduce a new product with such a high level of marketing investment. (Keyes asked not to name the store where he works because he is not authorized to speak to the press about sales.) But where Michelob Ultra became the third-best-selling beer in the U.S., Keyes compares Bud Light Next’s sales in his store to those of Bud Light Platinum, which year-to-date has sold $67 million in chain retail stores nationally—roughly as much as Angry Orchard ciders.

“We had a pretty good sell-through on the initial [Bud Light Next] drop and sales are consistent,” Keyes says. “But it didn’t blow up immediately where everybody had to have it.”

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A 'BEER' COMPANY

Bud Light Next’s debut raises questions about the scale of success that’s possible for new, straightforwardly beer products. That the world’s largest beer company could put once-in-two-decades momentum behind a new product—only to see that generate year-to-date sales comparable to those of Goose Island (a brewery it acquired more than a decade ago, and whose chain retail sales haven’t matched their 2017 high of $89 million in the years since)—speaks to just how much consumers’ preferences have shifted toward hard seltzers, flavored malt beverages, and spirits-based canned cocktails.

While it’s still throwing significant resources behind new beer products like Bud Light Next, ABI also realizes that it can’t afford not to invest heavily in other categories. The company’s North American CEO Brendan Whitworth told Beer Business Daily’s Beer Industry Summit in February that ABI has become “agnostic” about the category of products it creates, noting that its offerings need to attract drinkers who primarily purchase wine and spirits.

On the company’s first-quarter earnings call in early May, ABI executives made no mention of Bud Light Next, but did reference the U.S. launch of Budweiser Supreme, a Golden Lager brewed with honey malt that the company is testing in five markets: Ohio; New York; Washington, D.C.; Central California; and West Texas. Factoring much more prominently during the call was the success of ABI’s non-beer products like Cutwater, a line of spirits-based ready-to-drink (RTD) cocktails, as well as Nütrl, a vodka-based RTD that launched in Canada and expanded to the U.S. last fall. Michel Doukeris, CEO of ABI, called the beyond-beer space “the next wave of growth” for the company in the U.S.

CANNIBAL OR HANGER-ON?

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At the Beer Industry Summit in February, Whitworth said that ABI did not anticipate that Bud Light Next would “cannibalize” sales from Michelob Ultra, meaning that the company didn’t expect regular Michelob Ultra drinkers to abandon that brand in favor of Next. Yet the two brands are, on paper, similar in their appeal: low- or no-carb, low-calorie (95 calories for Ultra, 80 calories for Next), and straightforwardly beer-flavored.

But Michelob Ultra remains a juggernaut: Growth in that brand’s chain retail sales from mid-March to mid-April were +9.8%, while Bud Light Next’s sales growth in those same stores was -0.7% during the same period. Beer overall was +5.7% during that time.

At his store in Columbus, Ohio, Keyes hasn’t seen declines for Michelob Ultra since the debut of Next, though he describes their typical customers similarly: “From what I’ve heard initially, [Bud Light Next] is doing pretty well on the golf courses.”

He has, however, had to remove two other beer packages from his store’s coolers to make room for Bud Light Next: Bud Light Lemonade and one of several Pabst Blue Ribbon packages the store sells. Before deciding on those swaps, though, Keyes considered removing one of the flavored Michelob Ultra products the store carries.

Ultimately, he didn’t get rid of the Michelob Ultra pack. But his calculus illustrates the potentially costly bind that an underperforming ABI product places retailers in: They may remove a better-selling product from shelves to make room for Bud Light Next, which thus far hasn’t proven to be the game-changing beer it was lauded to be. Removing packages of a better-selling beer in favor of a slower-seller doesn’t make sense long-term, especially when factoring in Bud Light Next’s middle-of-the-road price point. Despite ABI initially saying that Bud Light Next would retail higher than Bud Light, Keyes says the two are priced comparably in his store. (This was also the case at a grocery store this writer visited in Missoula, Montana.)

Worst-case scenario: Retailers may—reading ABI’s enthusiasm for what was supposed to be a splashy new product—remove faster-moving, higher-priced brands off their shelves in favor of an untested new beer that consumers don’t appear to love. At least, not yet.

REPLY HAZY, TRY AGAIN

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Three months is likely not enough time to write off a brand entirely. But early momentum matters, especially in today’s fast-paced, innovation-driven, and highly competitive alcohol market. It took Michelob Ultra only two years to become the fastest-growing product in ABI history; within its first year, it sold 2.5 million barrels, roughly equivalent to the annual output of Boston Beer Company or Yuengling, the two largest Brewers Association-defined craft breweries in the U.S.

Just nine months after launching Cacti Agave Spiked Seltzer as “the future of hard seltzer,” ABI in December discontinued the brand when it failed to make a meaningful dent in the seltzer market. Brewbound managing editor Jess Infante told CODO Design’s Beer Branding Trends review that “consumers expect an unending stream of new flavors.” Infante was speaking about hard seltzer specifically, but this could just as easily be true of drinkers generally (also remember that Bud Light Next was intended to appeal to seltzer consumers).

The novelty of a new product with the Budweiser name on it is what Keyes says appears to be motivating most Bud Light Next purchases at his store. It’s not drawing drinkers from other categories, he says, but it is something new for the regular Bud Light or Budweiser drinker.

“I wouldn’t say I saw a lot of crossover people coming to try Next. It seems like our traditional Bud drinker,” he says. “But I still think we’re in the phase of ‘something new.’ It’s got the Bud name on it and there still exists that level of loyalty for people committed to Bud products.”

This is essentially the opposite of what ABI set out to accomplish with Next, which the company said would “break traditional beer” and appeal to drinkers looking for beer flavor but with the “sessionability and stats of a seltzer.” Instead, at least in Keyes’ store, it’s connecting with the same audience ABI already plays to.

Keyes says that if Bud Light Next sales stayed steady in his store, he would continue to stock it as just another supporting player in the Budweiser family. But given how high ABI’s hopes were for this beer, and the money the company invested in its launch, that has to feel like a consolation prize.

“Are we going to see big articles about how Next is dethroning seltzer? No. It’s not going to be on that level, but it’s doing well enough,” Keyes says. “I think it’s around for the long haul, if [ABI] wants it to be.”

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