US: Analyst attacks beer price discounting war
Legg Mason has attacked the ongoing price discounting in the US beer market. The comments follow a statement issued by Miller Brewing Company yesterday (15 June) saying that it intended to follow Anheuser-Busch (A-B) in implementing further discounts.
"We consider this a net negative for category profit trends and category equity in the minds of consumers," Legg Mason analyst Mark Swartzberg said in a note to clients.
"We also believe A-B continues to overestimate discounting's ability to restore sustained volume momentum, largely because Miller is ready to fight back more aggressively and effectively than it has in other periods of intensifying price competition."
In reiterating Legg Mason's "Sell" recommendation on A-B's shares, Swartzberg said that the competitive response to the brewer's discounting will bring 2005 earnings down, "and repeat purchases of A-B's new product, Budweiser Select, are potentially disappointing."
Although Miller yesterday reiterated its doubts about the ability of discounting to restore growth momentum, the brewer said: "We are going to play solid defense on the pricing front."
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