Anheuser-Busch InBev reported its first quarter results recently, and guess what? Just like in their third quarter of last year, and likely a bunch of other quarters besides, volume sales are down in North America.
Volumes dropped throughout the Americas, but especially in North America, which is the source of nearly half of ABIB’s profits and where sales volumes dropped 3.4% overall, with the Bud family taking a particularly big hit.
Bad news, right? Wrong!
Because just as in quarters past, ABIB is offsetting plummeting sales with price hikes, thus earning not a loss in North America, but a profit. Globally, sales increased to US$9 billion, up from US$8.33 billion in last year’s first quarter, despite global volumes being down o.4%.
In other words, screw the people still buying your product by making them pay more for it. Nice.
Information compiled from reports in the Wall Street Journal and Financial Times.
One of the more basic lessons in business school is how to avoid a situation where upping prices to compensate for declining sales further causes sales to decline, and prices to rise. Unlike most overblown business terms, this lovely little circle of failure is charmingly referred to as “The Death Spiral,” just to make sure no one forgets that it’s not a path to victory. Perhaps the ABI execs skipped that day of class.
It’s all right; I’m sure the purchase of Goose Island and attempting to self-distribute in Illinois will turn the ship around for ABI.
Death Spiral would be a good name for a band.
Yeah. Even I can see that’s a bad idea and I have the business acumen of a rock.
Unless we are speaking about a monopoly or a cartel, it’s not fair to say that increasing prices is screwing the client, it’s the client screwing themselves because buying that beer is their choice at the end of the day.
I don’t know about the specific case of ABIB, but I’ve heard of other breweries whose sales dropped, while their profits grew because they discontinued products that were not profitable.