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Anheuser-Busch bets price hikes won't deter drinkers

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By Christopher Leonard
Associated Press
Published:
ST. LOUIS -- Anheuser-Busch Cos. thinks consumers are more than willing to pay a little extra for beer.
The nation's biggest brewer will continue raising prices to counter a rise in the cost of ingredients, Chief Financial Officer W. Randolph Baker told a group of stock analysts at a conference in New York Thursday.
Baker said consumers have accepted price increases on most products in 2007, sustaining profits for the maker of Budweiser, Bud Light and Michelob.
"Our object for the year was to find a way to cover (cost increases), and we did -- but just barely," Baker said. The cost of agricultural commodities like hops and barley has risen steeply, Baker said.
Baker highlighted a bright spot for Anheuser-Busch -- an apparent increase in consumer interest for domestic beers. Last year, beer industry shipment volume grew 2.1 percent, he said, the best annual performance since 1990. he said beer industry growth in 2007 has continued to exceed expectations, up 1.8 percent to date.
"We see the resurgence in interest in beer. With the momentum there, it's likely you're going to have strong demand for beer," Baker said.
Anheuser-Busch will boost advertising spending next year to strengthen demand for its flagship brands, Baker said. Much of the spending will be made on national television ads, with spending increasing by double digits in 2008, he said.
U.S. beer sales have lagged in recent years with the growing popularity of wine and cocktails. A report released Thursday by Goldman Sachs analysts Andrew Sawyer and Judy Hong said they're concerned the trend will be difficult to reverse.
"We are encouraged by the strategy to increase (Anheuser-Busch's) focus behind the core brands, but it remains to be seen whether these efforts will lead to stronger volume growth anytime soon," the report said.
International beer sales have outpaced domestic sales, and Anheuser-Busch has been disappointed in its mainstay brand Bud Light, Baker said.
In the third quarter this year, revenue for the U.S. beer segment rose 2 percent, while revenue from international markets jumped 8 percent.
"The biggest priority is accelerating the growth of Bud Light, with a focus on improving our domestic beer profitability and performance," Baker said.
Anheuser-Busch shares fell 63 cents, or 1.2 percent, to $51.26 Thursday.

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