Bud Light Lime coming to town.

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Brew Blog

Talking to distributors last fall about Miller Chill’s success, top Miller Brewing Company sales executive Tom Cardella made a prediction.

“We were first out the gate with a differentiated product that makes us all a lot of money,” said Cardella, executive vice president of sales and distribution. “[Anheuser-Busch] sees that and wants a piece of the action.”

Cardella’s prediction soon will come to pass as A-B prepares to push Bud Light Lime into stores in time for Cinco de Mayo. Ads already are airing for the brand.

The latest issue of Brew magazine took a look at A-B’s rollout of Bud Light Lime and how it’s introduction is laying the scene for fierce competition. If you would like a free subscription the print version of Brew, drop a line with your name and street mailing address here.

From the issue:

Cinco de Mayo is shaping up as one of the biggest scraps the beer business has seen in a while.

That’s the day Anheuser-Busch rolls out Bud Light Lime, a lime-flavored line extension. And it’s backing it with a $35 million marketing budget.

The beer is a clear shot at Miller Brewing Company’s Miller Chill, the chelada-style light beer that swiftly gained share and distribution during its national rollout last summer. And, Bud Light Lime’s May 5 rollout suggests to some that it’s also aimed at Corona Extra – somewhat ironically given that A-B has a 50 percent stake in Corona brewer Grupo Modelo.

A-B CEO August Busch IV predicted in February at a gathering of analysts and investors in Florida that Bud Light Lime “will be a big brand.”

Given the strength of the A-B distribution system, the huge marketing push behind it and the fact that A-B says it’s acting with “urgency,” most observers think Busch is right.

Indeed, Morgan Stanley analyst William Pecoriello estimates the brand could hit 1 million barrels or more. Miller – which already was looking to bolster Miller Chill this summer – isn’t going to yield an inch to the dominant industry leader. It’s breaking new advertising for the brand, pushing more sampling programs and introducing 12-ounce slim cans.

“We created a new category, we sold half a million barrels in less than a year, we have the industry leader scrambling to play catch-up, and we have a marketing plan that will build on the strong foundation we’ve laid for Miller Chill,” says Sharon McLenahan, director of emerging brands for Miller. “We all know this brand has the potential to be a major factor in the U.S. beer industry for years to come.”

Analysts also wonder how Corona will respond. It can’t be lost on Modelo that Bud Light Lime is hitting stores on a holiday long associated with Corona. As Credit Suisse analyst Carlos Laboy noted in a report: “We are hard pressed to conjure a more confrontational challenge for Corona.”

A bigger question is: Will it help A-B? A-B could sell a million barrels of Bud Light Lime – some of which certainly would come out of Miller Chill – but it’s not clear that it’s a fix for A-B’s earnings.

“We believe that A-B will experience countervailing forces in ’08 as the tradeup benefit of Bud Light with Lime will be offset by increased sub-premium mix,” Pecoriello wrote in February.

Ann Gilpin, who follows beer stocks for the research firm Morningstar, made a similar point. “Basically, it’s a copycat product,” she said. “I don’t think that’s going to turn the ship around. They need to do something bigger than that.”

Whatever happens, the fireworks begin May 5.

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