Economics

Introduction:

When most people think about the attributes of beer, words like crisp and refreshing come to mind, or drinking a nice cold one on a hot summer day. According to Beer Serves America, the beer industry employs more than 890,000 Americans in virtually every corner of the U.S. These jobs help strengthen many sectors of the economy. Payroll exceeds $21 billion, with federal, state, and local governments receiving tax revenue in excess of $30 billion annually. (www.beerservesamerica.org). According to a January 2001 study by Standard & Poor's DRI, 44% of every Beer sold in the United States was consumed by taxes. The tax burden on beer is far higher than the average consumer good in the U.S. economy: total federal, state, and local taxes equal 31.7% of final sales of all products (GNP) in the U.S. The income generated by the beer industry manufacturers and related sales and distribution partners added $10.7 billion in Federal personal income, profit, and payroll revenues and $3.6 billion in similar state-local revenues.

Nearly a century and a half old, Anheuser-Busch Company, Inc. is the world's largest brewing company. The company operates fourteen breweries, twelve in the United States and two overseas. The focus of Anheuser-Busch's operations and resources is beer, adventure park entertainment and packaging, though the company has interest in other areas. Throughout its life span, Anheuser-Busch has been involved with aluminum beverage container recycling, malt production, rice milling, real estate development, turf farming, creative services, metalized paper label printing and transportation services. Above all other aspects, Anheuser-Busch is best known for its beer operations. We will attempt to uncover a number of reasons Anheuser-Busch is considered the world's leader in beer.

Anheuser-Busch Company, Inc. is the world's largest brewing company and has been operating for over 150 years. Anheuser-Busch established international operations in 1981 and currently sells beer in more than 80 countries. The company has been very successful since it's beginning, as several generations of Busch's have guided it throughout the past century and a half, currently is under the leadership of August A. Busch, III who has opened three additional breweries, acquired another one and has introduced numerous other beer products under his guidance. The company makes several brands of beer such as Budweiser, Bud Light, Busch, and Michelob, as is also well known for their specialty beers such as Red Wolf Lager, ZiegenBock Amber, and O'Doul's which is a non-alcoholic beer.

Knowing the history of Anheuser-Busch we will identify and analyze six economic indicators that contribute to or hamper the possibility of success in today's market. The six indicators that we have chosen are the inflation rate as it is measured by the consumer price index (CPI), personal income, the impact of the real GDP, unemployment rate, foreign exchange rate, and retail sales.

INFLATION RATE MEASURED BY CPI: (Consumer Price Index)

Inflation is a continual rise in the price level and the price level is an index of all prices in the economy. Therefore, the Consumer Price Index (CPI) is a measure of the average change in prices over time of goods and services purchased by households. The Bureau of Labor Statistics publishes CPIs for two population groups: (1) the CPI for Urban Wage Earners and Clerical Workers (CPI-W), which covers households of wage earners and clerical workers that comprise approximately 32 percent of the total population and (2) the CPI for All Urban Consumers (CPI-U) and the Chained CPI for All Urban Consumers (C-CPI-U), which cover approximately 87 percent of the total population and include in addition to wage earners and clerical worker households, groups such as professional, managerial, and technical workers, the self-employed, short-term workers, the unemployed, and retirees and others not in the labor force. (www.dol.gov)

The CPIs are based on prices of food, clothing, shelter, and fuels, transportation fares, charges for doctors' and dentists' services, drugs, and other goods and services that people buy for day-to-day living. All taxes directly associated with the purchase and use of these items are included in the index. In calculating the index, price changes for the various items in each location are averaged together with weights, which represent their importance in the spending of the appropriate population group. Local data is then combined to obtain a U.S. city average. (www.dol.gov)

US Consumer Price Index Product Past Present and Future

(Financial Forecast Center

(Market Vector)

According to the experts in the graphics shown above, the inflation rate is going to drop, while in the other one it is going to be stable. Through our evaluation process we are going to predict that the retail sales are going to increase, because the price of the product is not going to change and inflation will rise. The U. S. brewing industry is a dynamic part of our national economy, contributing billions of dollars in wages and taxes. An indication of beer's importance is its inclusion in the basket of goods the government uses to calculate the Consumer Price Index. In the expenditure category, alcoholic beverages had a relative importance in December, 2004 of .996; unadjusted indexes August, 2005 - 195.9, and September, 2005 at 195.9. The unadjusted percent change in September 2004 was 1.7 and August 2005 - .4. (www.dol.gov)

The CPI is the most widely used measure of inflation and is sometimes viewed as an indicator of the effectiveness of government economic policy. It provides information about price changes in the Nation's economy to government, business, labor, and private citizens and is used by them as a guide to making economic decisions. In addition, the President, Congress, and the Federal Reserve Board use trends in the CPI to aid in formulating fiscal and monetary policies. (www.bls.gov)

PERSONAL INCOME:

National income measures the income individuals receive for doing productive work, where as personal income measures all income actually received by individuals. Individuals receive other income they do not directly earn (for example, Social Security, payments, welfare payments, food stamps, and veterans' benefits). These payments from government