In 2008, American media outlets unanimously reported that the world's best-selling beer crown had been taken by China's Snow Beer. This news caused a stir among American consumers, who had barely heard of the brand, as the vast majority of Snow Beer's sales came from China. The first and second places that Snow Beer knocked off the list were Bud Light and Budweiser, the sales champions familiar to Americans.

Budweiser was born in the United States and later acquired by a Belgian company, merging into Anheuser-Busch InBev. Most people have heard of Budweiser, but few know that the group also owns brands like Harbin Beer, Yandangshan Beer, and Nanchang Beer, which sound like local Chinese brands.

(▲ The Anheuser-Busch InBev brand family)

Since 2013, China's beer market has entered a stagnant phase, with annual sales remaining stable or even shrinking. The competitive landscape has gradually formed a stable monopoly by five giants: domestic brands Tsingtao, Snow, and Yanjing, and imported brands Budweiser and Carlsberg. These five giants now face two common problems: First, each brand dominates its own region but cannot break through geographically to achieve nationwide growth; second, the number of consumers of legal drinking age is declining, making it difficult to find new growth, and even existing volume is gradually shrinking.

Budweiser actually experienced a similar cycle in the U.S. market decades ago, and its failures and successes offer valuable lessons for today.

Incremental Market: From Local to National

From a regional brand to a national beer, Budweiser took 100 years to complete two steps, evolving both product capability and brand power.

Budweiser was born in the late 19th century in the United States. At that time, fresh beer contained yeast and bacteria, with a shelf life of only about 3 days at room temperature, which limited its transportation radius and prevented it from leaving the city. Thus, each locality had its own distinctive breweries, creating a fragmented market.

To produce beer that could last longer, Budweiser continuously researched preservation technology. In the early 20th century, it found two key solutions: First, using trains and ice to build the earliest cold chain; second, adopting pasteurization to extend shelf life to over 90 days.

Although we now take cold chain and pasteurization for granted, and even consider pasteurization as the culprit for weakening beer flavor, a hundred years ago, Budweiser was the first company to apply these methods to beer and even food, earlier than milk. This immediately gave it the capability to distribute nationwide.

But having product capability alone was not enough. To make Budweiser a national beer, it had to build emotional identification with consumers. This is where Budweiser's marketing skills came into play.

Starting in the 1970s, the heavy beer-drinking demographic in the U.S. began to shift, concentrating on male blue-collar workers aged 18-24.

(▲ Increase in share of main consumer group from 1960-1980)

To cater to these consumers, starting in 1978, Budweiser targeted hardworking laborers in its marketing. In advertisements, people from all walks of life, after a day's work, opened an ice-cold Budweiser to reward themselves. The tagline was "Budweiser, salute to all you do." Within 18 months of the first ad airing, Budweiser sales increased by 50-80%, selling an extra 10 million barrels of beer.

This ad campaign continued for 10 years. Throughout the 1980s, Budweiser's U.S. market share rose from 28% to 41%, and net profit margin grew from 5% to 10%, making it the undisputed leader in the American beer industry.

In 1988, to further strengthen emotional ties with consumers, Budweiser partnered with the American Red Cross. Due to climate reasons, the southeastern coastal areas of the U.S. frequently suffer hurricanes, while the Midwest often experiences tornadoes and floods, affecting residents' water supply. So Budweiser announced that its two breweries in Georgia and Colorado would regularly halt production each year to switch beer production lines to drinking water lines, providing emergency drinking water to disaster-stricken areas in the U.S.

Thus, during the 1997 Kentucky floods, the 2005 Hurricane Katrina, and even the 2020 Category 4 Hurricane Laura, in some disasters even the police fled, but Budweiser remained. These are the water bottles Budweiser delivered after Hurricane Katrina, now collected by the New Orleans Museum, earning Budweiser immense goodwill among Americans with its logo.

(▲ A treasured Budweiser water can)

To summarize, Budweiser's journey from regional to national was driven by technological innovation in cold chain and pasteurization, enabling nationwide distribution. Then, through targeted marketing to workers, and finally through disaster relief, it won the hearts of all Americans, becoming a true national brand in their eyes.

Stagnant Market: Finding New Frontiers

However, after finally conquering half of the American beer market, Budweiser faced an opponent it had nearly wiped out a hundred years ago: craft beer.

Let me briefly explain the difference between craft and industrial beer.

Craft beer uses only hops and malt as ingredients, undergoes deep fermentation for up to 2 months, and is neither pasteurized nor filtered. As a result, it has a rich, full-bodied flavor, with alcohol content reaching 10% or even 20%.

In contrast, industrial beer, represented by Budweiser, uses rice, corn, or starch to replace expensive malt, ferments for only a week, and is filtered and pasteurized before shipping. Thus, it has fewer malt sugars and flavor compounds, resulting in a very light taste, and it contains more fusel alcohols, which can cause headaches if the process is not good. The recently popular "Duoming Da Wusu" (Lethal Big Wusu) is a good example: due to its ingredients and process, it has excessive fusel alcohols and acetaldehyde, leading to the saying "one bottle NSNM" (meaning "you'll be knocked out").

(▲ WUSU upside down)

So, the difference between craft and industrial beer is vast.

Budweiser was able to mass-produce beer and sell it across the U.S., making local craft breweries unable to survive, thanks to its pioneering industrial brewing method that was cheap, efficient, and easy to preserve, allowing consumers everywhere to enjoy consistent quality beer.

But a hundred years later, industrial brewing technology has become widespread, and consumers have grown tired of uniform flavors, seeking more distinctive tastes.

Therefore, craft beer with rich flavors has regained favor, carving up the market of industrial beer giants. From 2007 to 2012, the annual sales of the top ten industrial beer brands in the U.S. decreased by 8.1%, while craft breweries flourished, reaching an all-time high in numbers.

Budweiser certainly struggled. In 2006, it acquired a 42% stake in a Chicago craft brand, but because its image as the "big brother of industrial beer" was too deeply ingrained at the time, this move not only failed to salvage its image but also provoked collective anger among craft beer enthusiasts. The American Brewers Association announced that it would remove the three craft brands Budweiser had acquired over the past decade from its craft beer list, a classic case of "throwing a stone at your own foot."

In 2008, due to poor management, Budweiser's parent company Anheuser-Busch sold itself to Belgian brewing giant InBev, with the condition that the family name be retained, thus creating the current beer giant Anheuser-Busch InBev.

Before the acquisition, although Anheuser-Busch had been in China for 13 years and had made equity investments in local brands like Tsingtao and Harbin, its own brand Budweiser had been selling lukewarmly.

After changing hands to InBev, Budweiser surprisingly became one of the top three best-selling brands in China, capturing 19.5% of the market and becoming synonymous with premium beer.

(▲ Budweiser ranks third in sales in China)

So how did Budweiser achieve rebirth under its new owner?

Before the acquisition, Budweiser's marketing strategy was sponsoring sports events, a proven traditional method, but it didn't suit Budweiser in China, because as a new foreign brand, it was competing on the same stage as traditional domestic brands; they had already started running while you were just stepping onto the field.

So, starting in 2014, Budweiser adjusted its approach and decided to sponsor and host electronic music festivals. Electronic music, like imported brands, was a novelty in China, so "newness" became Budweiser's advantage, allowing it to precisely target young people eager to try new things.

Moreover, at electronic music festivals where even bottled water sells for 20 yuan, consumers are less price-sensitive, making it more suitable for Budweiser's premium positioning.

Budweiser spared no expense, inviting international pop icons like Kesha, and world-renowned DJs such as Afrojack, Hardwell, Tiësto, and Don Diablo, among others... It was practically a Chinese version of Tomorrowland.

The Budweiser Storm Electronic Music Festival gradually became one of the most popular EDM festivals in Greater China, and as a result, Budweiser firmly became associated with fashion, premium, and trendiness.

From 2013 to 2018, Budweiser's share in China's premium and super-premium market rose from 40.2% to 46.6%. Meanwhile, Budweiser's sales in China surpassed those in the U.S., making China its most important market, with profits reaching $572 million.

It can be said that Budweiser as a company died, but as a brand, it was reborn in China.

Epilogue

Looking at Budweiser's development since the last century, it can be divided into two phases based on the U.S. consumer population: before and after the 1980s. In these two phases, Budweiser provided classic case studies of survival strategies in incremental and stagnant markets, respectively.

From the 1950s to the 1980s, the market Budweiser faced was itself growing rapidly.

From the 1940s to the 1960s, the U.S. experienced a 20-year baby boom due to post-war prosperity. The generation born during this period, known as baby boomers, reached drinking age in the 1970s and became the main force of American beer consumption. Per capita consumption grew from 15.4 gallons in 1960 to 23.1 in 1980, an increase of 50%.

(▲ U.S. per capita beer consumption rose from the 1960s to the 1980s)

At the same time, economic prosperity raised the standard of living for American families, who began purchasing large appliances like refrigerators. Thus, young people could store canned beer in the fridge and drink it at will, no longer needing to go to bars for draft beer. This trend favored Budweiser, which had canning technology and nationwide distribution, allowing it to defeat local breweries.

It can be said that the story of the incremental market is full of vitality; companies compete on the speed of claiming territory. As long as you can reach consumers before your competitors, you can get a bigger slice of the pie.

In contrast, the stagnant market appears gloomy and dull.

In 1980, as baby boomers turned 35 and lost interest in beer, U.S. per capita beer consumption peaked at 23.8 gallons and has never been surpassed since. The U.S. population growth rate also declined from the baby boom era. So from the mid-1980s, American beer consumption entered a slow decline.

When the market enters a stagnant phase, companies face two survival options: either develop new categories in the existing market to attract consumers through differentiation, or expand into new markets to attract new consumers.

Craft beer was Budweiser's attempt to broaden its category, but it failed because industrial beer had hurt craft enthusiasts too deeply;

Going overseas to China, however, was a successful market expansion. China's beer consumption surpassed the U.S. in 2003, becoming the world's largest beer market, and consumers' understanding of beer was still in its infancy, with no craft brewers competing. So Budweiser reaped significant benefits here.

But since 2013, China's beer market has also faced a shortage of young consumers, entering a stagnant competition.

Thus, in recent years, we have seen traditional giants acquiring local brands, various craft brands emerging, and domestic brands like Tsingtao going overseas. The script that played out for Budweiser may well be reenacted.

Source: Yuanchen Research on Going Global (ID: aotekuaitan) Author: Liu Yimin

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