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Slowly But Surely, Line Extensions Will Take Your Brand Off Course

Beer Category Shows Cannibalization of Core Brands

By Published on . 18

"Would you like to steer the ship?" is a question I used to hear in the Merchant Marine.

The helmsman on duty would tell the neophyte, "Just take the wheel and keep the compass reading at 180," or whatever the course called for.

Steering a ship is not like driving a car. The ship drifts to the left, so the neophyte turns the wheel to the right to try to correct the course. But the ship keeps turning left, so the neophyte figures maybe he needs to do the opposite, so he turns the wheel to the left ... and the ship turns to the right. Now he's convinced that he's got the hang of it, until the ship turns left again. After a while, the poor soul is convinced the wheel isn't connected to the rudder at all.

It takes time to turn a ship and it takes time to build a brand. If you want to turn a ship to the left, you turn the wheel to the left ... and then you wait and you wait and you wait. Finally the ship turns to the left.

Marketing is like steering a ship. If you don't wait long enough for a marketing effect to run its course, you can draw exactly the wrong conclusion.

Take the 1981 introduction of Bud Light by Anheuser-Busch, virtually the last major brewer to introduce a light version of its regular beer.

I asked management, "Won't that hurt sales of Budweiser regular? Instead, why don't you introduce a totally new brand?"

"Oh, no," came the reply. "We're not positioning Bud Light against Budweiser. We're going to take business from Miller Lite, Coors Light, Schlitz Light and all those other light beers out there.""

Sure enough, the 1981 introduction of Bud Light did not hurt the regular Budweiser brand. Year after year, sales of regular Budweiser went up.

1982 ... Budweiser was up 4.1%
1983 ... Budweiser was up 6%
1984 ... Budweiser was up 3.9%
1985 ... Budweiser regular was up 4.2%
1986 ... Budweiser regular was up 3%
1987 ... Budweiser regular was up 3.1%
1988 ... Budweiser regular was up 2%

Seven years of sales increases seemed to prove me wrong. "And you thought that Bud Light would hurt our regular Budweiser brand? Are you crazy?"

Then came 1989, which saw regular Budweiser down one-fifth of 1%, the start of the deluge.

As of today, Budweiser volume has fallen every year for 20 years in a row, to 23.5 million barrels in 2008 from 50.6 million barrels in 1988.

Does anyone have any doubt that regular Budweiser will someday become a marginal brand in the U.S. market? We call line extension the "hockey-stick effect." Short term, you get the blade and score a few goals. Long term, you get the shaft.

Oddly enough, what gave Anheuser-Busch confidence in its line-extension strategy was the track record of Miller Lite. Introduced nationally in 1975, Miller Lite also did not hurt sales in the short term of Miller High Life, the company's regular beer.

Year after year, Miller High Life climbed up the beer ladder, from 5 million barrels in 1971 to 20.8 million barrels in 1978, the most explosive growth ever recorded by a beer brand. That was the year Advertising Age named John Murphy, Miller president and CEO, "Adman of the Year."

What drove the brand to such heights?

"Miller Time," in my opinion the most effective advertising strategy ever developed for a beer brand.

The target market: cowboys in hard hats. The psychological hot button: a reward at the end of the day for blue-collar men doing rugged jobs in outdoor occupations. (What Miller Time did for men, McDonald's was doing for women with "You deserve a break today," a campaign which coincidentally was also launched in 1971, the same year as Miller Time.)

By 1979, the combination of Miller High Life and Miller Lite (34.8 million barrels) outsold Budweiser (30.0 million barrels) by a significant margin. No wonder Anheuser-Busch pushed the panic button.

Too bad. If they had had a little more patience they would have realized that line extensions are inherently unstable. A successful line extension almost always damages the core brand ... over the long haul.

It's like a teeter-totter. When one side goes up, the other side goes down.

For Miller Brewing, 1979 was a year of high hopes. That was the year Miller broke ground on a new $411 million brewery in Trenton, Ohio.

That was also the year Miller High Life started its long decline, from 23.6 million barrels in 1979 to 5 million barrels in 1992, where it remains today.

The Trenton brewery? It sat idle for almost a decade and didn't open until 1991.

We kept forgetting the teeter-totter principle. When Bud Light declined this year, its first decline in 27 years, all hell broke loose. There were stories in all the major media.

"Anheuser-Busch InBev NW plans to tweak its marketing campaign for Bud Light and ratchet up spending," reported The Wall Street Journal, "in the hopes of reviving a brand that is facing a rare slump."

What slump? Bud Light is up 5% this year, not down 2.5% as reported in the media.

How can that be when everybody else is reporting a decline? The difference is that we included Budweiser's lime extension in Bud Light's volume. Bud Light Lime is the fastest-growing beer in America, with 1.2% of the market, and naturally that success came at the expense of Bud Light.

Budweiser, Bud Light and Bud Light Lime are not three brands with three different marketing strategies. They're one brand with three different flavors and three different marketing strategies that often cause confusion.

Line extension is a loser's game. It doesn't usually work, but even if it does, it almost always damage the core brand.

On the other hand, there's the well-documented evidence that a line extension doesn't hurt a leading brand as much as it does an also-ran. Why is this so?

A leading brand has a very strong position. It's the leader. And nothing works as well in marketing as leadership. Google in search. Hertz in rent-a-cars. Hellmann's in mayonnaise. Heinz in ketchup. Campbell's in soup. Thomas' in English muffins.

Many No. 2 or No. 3 brands become successful by narrowing their focus to segment the market, either demographically or in some other way. Miller High Life targeted the blue-collar segment.

Bud Light didn't destroy Budweiser's leadership perception. But Miller Lite definitely undermined Miller High Life's blue-collar perception.

What's a Miller? Over time, Miller became known as a light beer. And the cowboys in hard hats weren't about to drink a light beer.

What's a Budweiser? It's still perceived as the leading beer, but now available in a number of different flavors.

In the years that followed the fall of High Life, Miller Brewing tried to inject new life into its Miller brand with a raft of line extensions including: Miller Genuine Draft, Miller Genuine Draft Light, Miller Genuine Draft 64, Miller Lite Ice, Miller Lite Ultra, Miller High Life Light, Miller Chill, Miller Genuine Red, Miller Reserve, Miller Reserve Light, Miller Reserve Amber Ale and Miller Clear.

They even spent $60 million introducing Miller "regular" beer.

All for naught. Today, Miller sells considerably less beer under the Miller name than they did in the glory days of 1979.

So it is in many marketing situations: What works in the short term often doesn't work in the long term.

Well, you might be thinking, what about the trend towards light beer? It's true that light beer is now the largest segment of the market, but regular beer still accounts for 44%.

Why not have your beer and drink it, too? Why not try to dominate both segments with two separate brand names? Like Toyota and Lexus. Or Black & Decker and DeWalt.

Or Hanes and L'eggs.

Marketing people are often sheep when it comes to categories. Once a line extension becomes a big success, all the competitors get in line and say, me too.

Without giving a second thought to the possibility of launching a new brand that could clearly define the new market as a separate category.

It happened in light beer. It happened in diet cola. It happened in lithium batteries. It has happened in many other categories.

In 1995, to pick one year at random, the top 40 brands of light beer all used "light" in their names -- even Amstel Light, a brand that didn't have a "regular" version.

Line extension is a teeter-totter, but not necessarily in the short term. In the short term, both sides often go up. It takes time to turn a ship. It takes time to kill a brand.

You can't know whether a marketing move is effective or not until enough time has passed. Yet many companies are driven by short-term thinking -- promotions, coupons, special offers and discounts. And line extensions.

If it took Bud Light seven years to damage the regular Budweiser brand, how long are you taking to measure the success of your programs?

A month? Three months? Six months? A year?

Marketing is messing with minds. Getting into minds and changing them is not for the faint-hearted or for the impatient. You need to launch a marketing program and then have the patience to wait and wait and wait.

Which reminds me.

Maybe my misspent youth will start to pay a dividend. The House of Representatives has just passed a bill providing a monthly stipend to those who served in the U.S. Merchant Marine.

Good things happen to those who have patience.

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