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Thursday, May 15, 2008
Cash-strapped Drinkers Downgrade to Economy Beers
Associated Press
MILWAUKEE--Cash-strapped drinkers are starting to trade down to economy beers, the chief executive of Miller Brewing Co. said Thursday.
The Milwaukee-based brewer saw some shift between higher-priced, premium beers and economy beers such as Miller High Life and Milwaukee's Best starting in January, Tom Long told reporters on a conference call.
"We think it's primarily driven by decline of disposable income and pocket money that American consumers are feeling right now," he said.
Long said the volume of beers sold remains stable, but the company expects to sell more lower-priced beers this year if gas prices continue to rise.
Americans also are spending less in bars and restaurants, and Long said Miller is seeing declines in sales to those businesses.
Miller's parent, London-based SABMiller PLC, announced Thursday its full-year profits rose 22.7% and the growth rate for lager volumes doubled.
In the U.S., Miller's revenue rose 4.8% to $5.1 billion. Earnings before interest, taxes and amoritization rose 27% to $477 million, though that includes a gain of $33 million from a settlement of a dispute.
Sales of flagship brand Miller Lite was up 1.1%, as were sales of Miller High Life. That brand's performance, on the strength of its humorous ad campaign urging people to "Take Back The High Life" reversed a three-year decline.
But other brands didn't fare so well. Miller Geniune Draft's sales were down 10.6%, as the domestic premium brand continued to struggle. Economy brew Milwaukee's Best also saw declines.
SABMiller did not break out fourth-quarter results. The brewer, the world's third-largest, said overall revenue was up 15% to $21.4 billion.
Long didn't offer any new information about the proposed joint venture between Miller and Molson Coors Brewing Co. That awaits governmental approval.
Miller, the nation's second biggest brewer, and Coors, the third biggest, say the pairing -- to be called MillerCoors -- will help them better compete against industry leader Anheuser-Busch Cos. Inc., the maker of Budweiser.
FOX Translator
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Think telemarketer. Except, it's much worse because you can't avoid this call. Instead, when you get one, it's time to pay up, because the bet you placed with borrowed money is eating itself.
Buying stocks on margin is risky because you're essentially "playing" with someone else's money. If the shares you purchased tank, your losses will likely be more than if you had bought the shares with your own cash. This is why the New York Stock Exchange and the Nasdaq impose certain restrictions on the practice.
Initially, you¿re only allowed to borrow half of the money from your broker when buying on margin. You set up a margin account and from then on must keep a maintenance balance of at least 25% of the market value of your stocks.
If the market value of your investment falls below this minimum, you're required to make up the difference by either depositing money into your account or selling some of the stock. If your broker notifies you that you've dipped below this minimum, it's called a margin call.
If you fail to adjust your account accordingly, the broker is authorized to sell shares in your account to make up the difference. The broker can even sell other stock in your margin account to make up for the loss that selling the shares didn't cover.
As an example, say you buy $8,000 in stocks of any given company. You borrow the maximum $4,000 from your broker and pay the rest yourself. Now, if and when the total value of these shares changes, you must make sure you maintain at least $2,000 (25%) in equity. In other words, if the total value were to drop below $6,000, you¿d be in trouble since you only put in $4,000 of your own money to begin with.
