May 18th, 2007

Anheuser Abandons Spykes Drink, Citing Sales and Rejecting Critics

By David Kesmodel
Wall Street Journal

Anheuser-Busch Cos. said it stopped making its Spykes malt beverage because of disappointing sales and “unfounded criticism” by advocacy groups, which accused the company of subtly marketing the product to underage drinkers.

The St. Louis brewer has steadfastly denied the allegation. The company’s decision, announced yesterday, came a week after about 30 state attorneys general sent a letter to Anheuser Chief Executive Officer August A. Busch IV to express their “serious concern” about the company’s promotion and sale of caffeine-infused alcoholic beverages.

Spykes drinks, which have been sold nationwide since January, come in two-ounce bottles. They include 12% alcohol by volume, caffeine, ginseng and guarana, and come in flavors such as “Spicy Lime” and “Hot Chocolate.” The Web site for Spykes says the drinks can be consumed “as a shot” or be used to “spice up your beer.”

In April, the Center for Science in the Public Interest, a nutrition-advocacy group, urged Anheuser to pull the drinks from the market, saying they are a “shameful ploy to market malt liquor to the Lunchables set,” referring to Kraft Foods Inc.’s children’s lunch kits.

Spykes “was unduly attacked by perennial antialcohol groups,” including CSPI, Michael J. Owens, Anheuser’s vice president of marketing, said in a statement. “Our commitment to deliver a variety of products to meet the changing demands of today’s adult consumers remains uncompromised.”

Mr. Owens said Spykes had the lowest alcohol content of any of the more than 50 products sold in its market segment. He said Spykes hasn’t met sales expectations since it first was introduced in test markets two years ago. The volume of alcohol in a bottle of Spykes is equivalent to the amount in a third of a glass of wine.

Mark Swartzberg, an analyst with Stifel Nicolaus, said Anheuser didn’t want to take “undue heat for something that doesn’t have significant potential.” The company “has invested a lot of hard dollars into promoting responsible consumption, and they don’t want a small product to threaten the reputation they’ve built.”

Mr. Busch announced the brewer’s decision during a panel discussion titled “Global Alcohol Strategies” at the National Alcohol Beverage Control Association annual conference in La Quinta, Calif., according to Lynn Walding, director of the Iowa Alcoholic Beverages Division, who moderated the discussion.

News of Mr. Busch’s comments appeared earlier on the Brew Blog, published by Anheuser rival Miller Brewing Co.

The Wall Street Journal reported last week that Anheuser temporarily halted production of all eight flavors of Spykes for one week in April after the U.S. government ruled their labeling violated federal law. Anheuser brought its labeling up to code, and wasn’t asked to recall products on store shelves.

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