MILLER'S SALES UP; IS IT DUE TO ADS OR PRICE CUTS?: BREWER VOWS AGGRESSIVE AD SUPPORT, WHILE COMPETITORS FEAR PRICE WAR

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Miller Brewing Co.'s core brands are seeing an uptick in sales this year, but there are questions about whether to credit aggressive marketing or aggressive pricing.

Through May 25, Miller's share of supermarket beer sales jumped to 25.1%, from 24.2% for the same period last year, according to PaineWebber.

After the failed launch of Miller Beer last year, executives at the Philip Morris Cos. unit said their decision to focus on the Lite and Genuine Draft brands is paying off. The strategy will carry over into next year, they added.

AGGRESSIVE SUPPORT

"We'll be looking to support the brands as aggressively" in 1998, said Jack Rooney, Miller VP-marketing.

Lite and Genuine Draft will eat up the bulk of the brewer's $200 million marketing budget this year. Spending on Lite hit $38.7 million in the first quarter, up 73% from the year-earlier period, according to Competitive Media Reporting. Spending on Genuine Draft skyrocketed 130% to $12.1 million.

Mr. Rooney said the brewer is happy with Fallon McElligott, Minneapolis, agency for Miller Lite, and Wieden & Kennedy, Portland, Ore., agency for Genuine Draft. Both were tapped as part of a shuffling of assignments last December, and both have produced campaigns that marked a departure for the brands.

Fallon's offbeat "Miller Time" ads for Lite, which are targeted at 21-to-28-year-old beer drinkers, have drawn fire from some who questioned whether their irreverent approach would hurt the brand.

LITE SALES UP 12%, MGD UP 7%

But supermarket sales of Lite rose 12% through May 25, while sales of Genuine Draft were up 7%, according to PaineWebber. Miller High Life, which will get renewed ad support next year, experienced a 16% sales increase in that period.

Still, some contend the sales increases have been driven not by marketing, but by generous discounting. Competitors said Miller is trying to instigate a price war, while some Miller wholesalers have expressed concern about tightening margins.

"Nobody understands their pricing philosophy," said one rival. "They're spending $200 million on two new ad campaigns, but they're simultaneously lowering prices dramatically."

Said one New England distributor: "It's the general feeling that we're doing better sales-wise, but we're concerned with the pricing being too low . . . if we move prices too low, we might not be able to push them up again."

PaineWebber analyst Emanuel Goldman said: "They're discounting more than they usually would, but they wanted to jump-start the business."

Through June 23, the average supermarket price for Miller brands was down 3.6% from a year earlier, according to figures from Beer Marketer's Insights.

TACTICAL PROMOTIONS

Miller CEO Jack MacDonough denied the brewer is trying to build share without concern for profits. Rather, the brewer has launched more tactical sales promotions than in the past and is more willing to strategically lower its price in some markets.

"We said, `Where's the right price point for such-and-such a market?"' he said.

Miller executives said earnings are ahead of schedule, but Mr. Goldman is forecasting the brewer's operating income will come in at $422 million for 1997, down 4% from '96, largely because of discounting.

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