MILLER FORESEES HUGE SPECIALTY BEER GROWTH

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Miller Brewing Co. is the latest major brewer to step into the burgeoning specialty beer market, buying a majority stake in tiny Austin, Texas-based Celis Brewery.

Celis, which brews a wheat-based beer called Celis White as well as Celis Pale Bock, Grand Cru and Celis Raspberry, last year produced just 16,000 barrels and at that is near capacity. But Miller plans a major expansion.

"We will be expanding rapidly," said Scott Barnum, the former premium products manager who was named general manager of Miller's new American Specialty/Craft Beer Co. subsidiary.

Miller will move its Midwest Leinenkugel's and its national Reserve brands into the subsidiary, but Mr. Barnum hopes for more.

"The whole end of the market is growing rapidly," he said. "There is rapid acceptance of the European style of beer, and this is a significant initiative for us."

In Celis, Miller hopes to take advantage of a brewery with a national reputation and well-known brewer Pierre Celis, who founded Celis in 1992. Mr. Celis earlier revived Hoegaarden White at his De Kluis Brewery in Belgium before selling out in 1987.

Miller will rely on Mr. Celis to oversee the brewing, so it won't make Celis beers at its other breweries.

In establishing a venture with a smaller brewer, Miller is following the path of some of its rivals.

Anheuser-Busch has a contract with Seattle's Redhook Ale Brewery to distribute Redhook beers outside the Pacific Northwest, and is marketing its specialty beers under the Elk Mountain label.

Adolph Coors Co. set up a specialty company to expand its Winterfest into a variety of specialty beers sold throughout the year. Coors also is using the company to market specialty imports and U.S.-made brews like Castlemaine XXXX.

Stroh Brewery Co. has a deal with McKenzie River Brewing Corp. that gives Stroh the option of taking over marketing of some McKenzie brands nationally.

Miller has had mixed results so far with its specialty products.

While Leinenkugel's remains a strong brand in the Midwest, efforts to take it elsewhere have not proven particularly effective. Miller Reserve has failed to find a strong following, so much so that Miller dropped advertising for the brand.

"Leine's is over 100,000 barrels and expanding, but Reserve has not been as successful as we had hoped," Mr. Barnum said. "Part of it is in the name and marketing of the brand. With Celis on a roll, we have a superior position and good reputation that we are now building on for further expansion."

Mr. Barnum said Miller's organization of specialty operations as a separate unit means the business will get the attention it deserves.

"There are lot of things that start small and grow. This segment is growing the fastest and it is highly profitable," he said.

Ironically, while Miller is just creating a specialty beer operation, it has claimed to have one for more than a year. Miller's Icehouse and Red Dog beers both claim in marketing to be made by the Plank Road Brewery, another name for Miller.

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