MILLER: CORE BRANDS STILL TOP PRIORITY -- ACQUISITION OF LABELS FROM STROH RISKS LOSS OF FOCUS ON LITE, MGD

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Miller Brewing Co. risks losing focus on its troubled Miller Lite and Genuine Draft brands as it grapples with the daunting task of acquiring four new labels and expanding its contract-brewing business.

Pending deals with Stroh Brewery Co. and Pabst Brewing Co. will give Miller a few points in market share, new revenues and an opportunity to use more of its brewing capacity. But over the past five years, Miller has let itself get distracted from core brands by ambitious initiatives, such as the failed 1996 launch of new Miller Beer.

SALES DECLINES

Both Lite and Genuine Draft posted sales declines last year, and both are due for new campaigns, expected to break in March. Fallon McElligott, Minneapolis, retained Lite in a recent review, and Wieden & Kennedy, Portland, Ore., handles Genuine Draft.

"There will rise the question of how much more complex their business will be in terms of focusing on new brands," Benj Steinman, associate publisher of Beer Marketer's Insights, said of the news last week that Miller was acquiring brands from Stroh. "They'll have to demonstrate they can hone in on their core brands."

Miller and Pabst will effectively split the sinking Stroh operation, the country's fourth-largest brewer, between them. Miller acquired the Henry Weinhard's and Mickey's brands from Stroh, while Pabst picked up the rest of Stroh's brands, including Old Milwaukee and Schlitz Malt Liquor.

In the deal, Miller also acquired the Hamm's and Old English 800 brands from Pabst and agreed to do more contract brewing for that company, which will be the new No. 4 brewer.

"The deal's great for Miller's operating efficiency. I don't know what it does for selling any more Miller beer," one wholesaler said.

Miller said it will maintain its focus.

"The priority here is to grow our core brands, and we continue to focus on that," a Miller spokesman said.

NEW FUNDS FOR MARKETING?

Indeed, Miller can use revenue from contract brewing to bolster marketing support for Lite and Genuine Draft, said Manny Goldman, an analyst for Merrill Lynch & Co.

Marketing plans for the acquired brands, which received negligible support from their previous owners, is yet to be determined, the Miller spokesman said.

The acquisitions boost Miller's market share to 22.5% from a little more than 21%, according to Beer Marketer's Insights. Pabst increases its share to 7% from about 3%.

Pabst, which handles advertising in-house, historically has supported its portfolio of subpremium and regional brands through discounting rather than advertising. But the marketer was conducting an agency review prior to the deal (AA, Oct. 12), and CEO Bill Bitting said he's exploring ideas for regional ad programs.

Pabst spent $652,000 on advertising through the first 11 months of 1998, according to Competitive Media Reporting.

Doner, Southfield, Mich., handled Stroh, which spent $4.5 million on advertising

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