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The Honolulu Advertiser
Posted on: Friday, May 18, 2007

It's getting lonely at 'Miller Time'

By Emily Fredrix
Associated Press

Sales of Miller Lite and Miller Genuine Draft were both down about 1 percent in 2006. Expect a new ad campaign soon, to replace the "Man Laws" series.

DAVID ZALUBOWSKI | Associated Press

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MILWAUKEE — Miller Brewing Co. saw another year of flat sales of its staple beer Miller Lite, as drinkers continue to trade "Miller Time" for pricier brews and wines.

Increased competition from imports in the growing light-beer market and hikes in aluminum costs also contributed to a 17 percent drop in North American profits, which were down to $375 million for the year ending March 31, parent company SABMiller PLC said yesterday.

Revenue in North America fell 1 percent to $4.9 billion, while SABMiller, which also makes Pilsner Urquell and Peroni, saw its overall revenue jump 22 percent to $18.6 billion. Profits rose 15 percent to $1.6 billion, from $1.4 billion the previous year.

Miller, like the other top industry players, Anheuser-Busch Cos. Inc. and Molson Coors Co., is struggling to gain share as drinkers move into imports, craft beer and wine, said Eric Shepard, executive editor of trade publication Beer Marketer's Insights.

Industrywide, imports and craft beers both grew in the double digits last year, while the overall market was up about 2 percent. Mainstream light beers were up about 3 percent or 4 percent, he said.

Miller faces a particular problem because nearly half of its sales are made up of Miller Lite, he said.

Sales of Miller Lite were down 1 percent last year, SABMiller reported. Sales of Miller High Life, a full-calorie mainstream brand, were down in the low single digits, while Miller Genuine Draft, in the same segment, similarly declined.

Total sales to retailers for all Miller products were down 3 percent, excluding the acquisition of two new brews — caffeine alcoholic drink Sparks and Steel Reserve, a slow-brewed lager. Miller bought the two brands from McKenzie River Corp. for $215 million cash last summer.

SABMiller executives told analysts on a conference call yesterday that Miller would be refocusing its efforts to sell Miller Lite and would promote more of its pricier brews, including the new Miller Chill. The lime-infused beer will cost 25 percent more than other mainstream brews, said Chief Executive Graham Mackay. It's slated for a nationwide release this summer.

"The overall focus is on strengthening the brand portfolio and migrating it into the higher-margin growth areas of the market," Mackay said.

Shepard said that's one area where Miller, with about 18 percent of the U.S. market, has lagged behind its competition.

"Anheuser-Busch has been fiercely competitive in that market," he said. "Miller doesn't participate in the high end as much as they would like to."

Mackay also said the company would work to mitigate increasing supply costs, such as aluminum used in cans.

Miller saw a $100 million increase in aluminum costs last year, while its competitors were able to hedge their purchases and lessen the impact, he said.

Shepard said the industry was waiting to see Miller's new ad campaign for Miller Lite, which is known for original ads like the "Man Laws" series, whose popularity didn't translate into the sales Miller had wanted.

The company announced yesterday it had selected a new ad agency for the light beer, BBH-New York, which will begin work immediately. Miami-based Crispin Porter & Bogusky announced in March it was resigning the Miller Lite account over strategic and creative differences. The agency had been responsible for the "Man Laws" campaign, which had celebrities debating what men are allowed and not allowed to do.