HALF OF STATES HAVE TAX INCREASES ON TABLE
And not a drop to drink.
That’s right. Twenty-five states have proposed increases in beer excise taxes, and increasing by the day. Hardly a day goes by that a state doesn’t debate alcohol taxes to help pay for the worst state government budget deficits since WWII.
Pennsylvania Gov. Ed Rendell proposed one of the most draconian hikes (met with boos from the gallery when he announced it), from 8 cents a gallon to a quarter a gallon, or about 45 cents a case. Utah lawmakers have passed a bill to raise the beer tax from $11 a barrel to $12.80. Idaho is considering more than doubling its tax to a nickel a can. Nevada Gov. Kenny Guinn wants to temporarily increase the state beer tax to 17 cents a gallon from 9 cents, and Arkansas lawmakers voted to renew a 3% tax hike on beer, passed two years ago to aid child education programs.
EXPERT ANALYSIS. Analyst Caroline Levy with UBS Warburg estimates in her modeling that in a worst-case scenario, beer pricing would have to be raised 1.75% on average, with volume dropping 0.9%. However, she notes that all three tiers would have to raise pricing by more than the tax hike in order to protect margin percentages, (what she calls piggy back pricing), so pricing could go up more with more risk to volume drops. With piggy back pricing of 2%, national PTCs would be up 3.5% with volume down 1.3% from where it normally would be.
TAXES WOULD HIT DISTRIBS HARDEST. With soft Q1 numbers and soft on premise sales going into summer, this is no bueno. Because let’s face it, without malternatives beer sales were essentially flat to down last year, so we don’t exactly have momentum going into summer 2003. And higher state taxes take away the ability to enact pure price increases in the future. As Caroline puts it, “Since price is worth two-times volume to brewers’ profits, and more than three times volume to distributor profits, a slow-down in price realization would lead to lower earnings growth for the industry,” hitting distributors the worst.
PAPER: A-B’S ADS APPEAL TO BROADER AUDIENCE. “This isn’t the Stone Age. Young adult consumers see men and women as equal. It’s easy to get away with cheap jokes. But if you do, you’re putting your brand at risk.” So says senior marketing v.p. Bob Lachkey, comparing A-B’s mildly tame conch shell ad with Miller’s raunchier fare.
USA Today says that A-B has been taking a “men are from Mars, women are from Venus” theme, with couples playing off their differences in funny ways. A-B wants to “put our best foot forward in a female environment,” particularly during the Academy Awards, which had a large female audience.
According to the USA Today Ad Track results, women actually like A-B’s spots more than men do: 43% vs. 41%. The spots also appealed broadly across age groups.MTD Sell Day: 6 Sell Days This Month: 22 Sell Days This Month Last Year: 22 YTD Over/Under Sell Days: 0 This Month Ends on a: Wed. Last Year This Month Ended on a: Tue.