Anheuser-Busch profit falls in 1Q

ST. LOUIS — Anheuser-Busch Cos. Inc., the nation's biggest brewer, said Wednesday its profit slipped 1.3 percent in the first quarter as rising ingredient costs more than offset rising revenue.

President and chief executive August A. Busch IV said the maker of Budweiser, Bud Light and Michelob was fighting rising costs with price increases on most products.

"We have successfully implemented U.S. beer price increases and expect good revenue per barrel performance in 2008," Busch said in a statement. "Our cost reduction efforts are significantly mitigating the impact of industry-wide cost pressures."

Brewers around the world have been beset in recent months by a spike in the price of key ingredients like hops and barley. Anheuser-Busch chief financial officer W. Randolph Baker said the company responded by raising prices on more than 70 percent of its product line. During a conference call with analysts, he said the price increases varied by product and region, but didn't specify further.

It appears the company raised overall prices by about 2 percent, as reflected in the increase of revenue per barrel, said Benj Steinman, publisher of the Beer Marketer's Insights trade newsletter.

Still, rising ingredient costs continue to outstrip any profits that could be gained by price hikes, Steinman said.

Another worry for Anheuser-Busch is the lagging performance of its core brands, Budweiser and Bud light, Baker said. Sales of core brands fell by about 1.4 percent during the first quarter. The company is planning a major marketing push to increase interest in the brands, but the effort won't take effect until the second or third quarter, Baker said.

Steinman said lagging sales have afflicted Anheuser-Busch's core brands for years as customers have increasingly switched to cocktails, wine and craft beers. He said it will take time to see how well the brewer can reverse the trend through marketing.

"I think it takes time to turn around a big boat," he said.

The company earned $511 million, or 71 cents a share, for the January-March quarter, down from $518 million, or 67 cents a share, a year ago.

Overall revenue rose 5.4 percent to $4.6 billion from $4.4 billion last year. After excise taxes, net sales rose to $4.1 billion from $3.86 billion a year ago.

Its earnings per share rose even as net income slipped because there were fewer shares outstanding after the company purchased more than 9 million shares during the quarter.

Earnings per share still came in below Wall Street expectations of 72 cents per share. Its shares rose 32 cents Wednesday to close at $47.72.