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    Anheuser-Busch Gets Into the Spirits

    Brewer pushes into liquor market with formation of spirits subsidiary, Long Tail Libations.

    NEW YORK -- Anheuser-Busch Inc., the largest U.S. brewer, formed a wholly owned spirits subsidiary called Long Tail Libations that is testing a two-part liqueur product in four U.S. markets, reported Reuters.

    Anheuser-Busch's move comes at a time of sluggish sales and profits for beer makers as consumer tastes have shifted toward cocktails and wine, forcing Anheuser-Busch to offer multiple discounts to try to drive volume higher, according to the report.

    The subsidiary Long Tail Libations, which was set up in September, has started testing Jekyll & Hyde in Orlando, Fla.; Columbia, Mo.; Denver, Colo.; and Las Vegas. The test marketing began on Nov. 1, Anheuser Busch told Reuters.

    "Consumers today are looking for more variety in their alcohol drinking experience and this allows us to meet those consumer needs," Mic Zavarella, director of innovation of Long Tail Libations, told Reuters in a telephone interview.

    The product is made up of two liqueur bottles. Jekyll is a scarlet red, sweet spirit tasting of wild berries, while Hyde is an herbal tasting, black spirit that floats on top when poured over the red-colored Jekyll. The two products are meant to be served together, although consumers can drink them separately as well, the company said in the report.

    The company's comments were a confirmation of a report by AG Edwards analyst Christopher Growe.

    "Clearly its efforts to date could be classified as "putting a toe in the water" in our view, with each move seemingly featuring a more brazen Anheuser-Busch willing to do what it takes to dominate not only the beer industry, but alcoholic beverages as a whole," Growe wrote in his report released on Monday, according to Reuters.

    Growe said in the report that an acquisition could be the next step for Anheuser-Busch, but he added that the company is likely to move slowly.

    Anheuser-Busch's Zavarella said the formation of the subsidiary allows the separation of its beer and non-beer products. He didn't reveal sales targets or a timeline for rolling out Jekyll & Hyde nationwide.

    Last month, the brewer reported a greater than expected drop in quarterly profit as price cuts on key brands hurt the company's bottom line. But the company said it planned to reverse its recent price cuts in 2006 in a bid to generate stronger revenue growth, according to the report.

    Price wars are a worry for an industry already suffering higher costs for glass and can manufacturing, which have been cutting into profits.

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