The brewer's sales trends have improved from the dark days of 1996, when its focus was on new products and all lead Miller brands except Lite and Icehouse suffered declines. But despite hundreds of millions in ad support and aggressive price promotion, Lite's growth rate still lags its low-calorie rivals and Genuine Draft continues to languish.
Beer supermarket sales-which represent about 20% of industry volume-grew 2.7% to 410.4 million cases for the 52 weeks ended July 12, according to Information Resources Inc. In that time, Miller case sales climbed 2.6% for a 24.2% market share; Anheuser-Busch grew 4.5% for a 41.4% share; and Coors Brewing Co. climbed 3.1% for a 10.8% share.
"There hasn't been a whole lot of growth by Miller, and that's an issue they're going to have to face," said Manny Goldman, an analyst at PaineWebber.
"Miller is not having a great sales year in 1998," said Benj Steinman, associate publisher of industry newsletter Beer Marketer's Insights. "There are mixed aspects of [the core-brand strategy], but I don't think it's working as well as they would have liked."
Given the beer industry's flat sales trends and tough competitors ranging from No. 1 brewer A-B to fast-growing Mexican imports, Philip Morris Cos. unit Miller faces enormous challenges in building Lite and Genuine Draft. And some Miller wholesalers contend the brewer isn't reaching consumers with its young adult-oriented advertising, the quirky "Dick"-created campaign for Lite and the gritty b&w effort for Genuine Draft, both carrying the "Miller Time" umbrella.
The brewer maintains that its plan-and the advertising-is living up to expectations.
"We knew when we launched we were going to be in it for the long haul," said Miller VP-Marketing Jack Rooney. "At the end of 1998, when we look back on what we have accomplished, we will probably be about where we hoped we would be."
Mr. Rooney predicted Lite would post a sales increase in 1998 and Genuine Draft sales would flatten after declines that reach back to 1994.
Miller's battle plan is its core-brand strategy, announced in fall 1996 after the $50 million launch of Miller beer failed. Miller stopped product introductions and threw its weight behind Lite and Genuine Draft, as well as smaller brands including High Life, Milwaukee's Best, and the Foster's and Molson imports.
The centerpiece of the core-brand strategy has been the new, aggressive campaigns for Lite and Genuine Draft, which the brewer maintains have freshened the images of Lite and Genuine Draft for the young adult market after years of what Mr. Rooney called "deferred maintenance."
A North Carolina wholesaler disputed this.
"In our market, there are no sales numbers to justify any claim the advertising is moving the sales needle; our sales are flat," said the wholesaler, who added Miller should try to broaden the appeal of its ads beyond the twentysomething niche.
STAYING ON COURSE
For 1999, the brewer intends to stay the course, honing its Hispanic marketing, improving promotional efforts and developing the ad campaigns, Mr. Rooney said. The brewer is in the midst of planning right now.
"Next year strategically will be the same; executionally, we will continue to evolve," Mr. Rooney said.
Miller in 1996 tapped Fallon McElligott, Minneapolis, to handle Lite and Wieden & Kennedy, Portland, Ore., to handle Genuine Draft. Leo Burnett USA, Chicago, had been the incumbent on Lite and Bates USA, New York, on Genuine Draft.
The ads broke in January 1997 and Miller proceeded to boost Lite ad spending 48.9% to $149 million, Genuine Draft 243.3% to $73.8 million and overall spending 12.2% to $263.5 million, according to Competitive Media Reporting. For the first time in two decades it outspent A-B, which plowed $232.2 million into ads.
Miller also launched aggressive price discounts. The average price of a case of beer rose 1% in supermarkets during 1997, but the sticker for Lite dropped 2% and Genuine Draft 1%, according to IRI.
Miller bit into A-B's market share until the leading brewer responded with discounting of its own. By the end of last year, A-B's share of the U.S. beer market grew to 46.5% from 46.3% in 1996, according to Impact. Miller grew to 22.3% from 22.1%.
Lite grew 1.9% to 16.2 million barrels in '97, compared to 0.5% growth in 1996, according to Impact. Genuine Draft sales slipped 1.8% to 5.5 million barrels, compared to a 3.4% slide in '96.
A DIFFERENT MARKETPLACE
The marketplace has been different so far this year as A-B has outspent Miller on advertising-$167.2 million to $103.1 million-during the first five months of '98, according to CMR.
A-B said it intends to spend more than $300 million, while Miller said spending will be about the same as last year.
Prices have remained low, but that may change. A-B is looking to introduce hikes of about 2% in some markets during the fourth quarter. Whether any increases stick remains to be seen; Miller is weighing whether to follow.
During the 52 weeks ended July 12, Lite sales grew 3.2%, while Bud Light grew at a 14.4% clip and Coors Light gained 4.6%, according to IRI. Genuine Draft grew only 0.4%.
During the second quarter of 1998, the brewer's operating income grew 0.6% to $158 million from the year-earlier period, with Lite sales up 1.2% and Genuine Draft down slightly, according to Philip Morris Cos. A-B reported a 2% improvement to $659 million and Coors grew 7% to $64.7 million.
WHOLESALERS ARE DIVIDED
While most wholesalers prefer the focus on core brands to new-product efforts, they're divided over whether Miller's approach, particularly the advertising, is working. Some agree with Miller that the campaigns are giving the brands a hip, youthful luster that will pay dividends; others contend the spots are turning consumers off.
Geography goes a long way toward shaping perspective on whether a strategy is working because beer sales vary widely from one region to the next.
According to Beer Marketer's Insights, Miller sales are up 6.5% in Michigan. Not surprisingly a wholesaler there gives the plan support.
"I think it's been going pretty well," the wholesaler said. "Both brands have been up for us and you hear people talking about Lite."
In California, the popularity of Mexican imports, aging demographics and increasing health consciousness have hurt sales of all domestic brewers, but Miller has suffered more than others. Its sales there have fallen by about 9% in the first half of 1998, while A-B has slipped by up to 3% and Coors by 4%, according to Beer Marketer's Insights. Since 1990, A-B sales have fallen 24%, Miller 18% and Coors 21%.
FAILING TO `CONNECT'
The Miller strategy "has not worked," a California wholesaler said. "I think a lot of it has to do with the advertising. I don't think it has connected with the audience they want to reach."
Mr. Rooney identified California as a problem and said the brewer is trying to gain share there with Hispanic-focused marketing.
"Southern California has hurt us and that's no secret," he said.
Meanwhile, a wholesaler in Texas-where sales are down 5.8% for the first half of 1998-supports the effort but wants to see more consistent ad executions that will appeal to a broad audience.
While some of the more goofy Lite ads turn off the blue-collar consumers in his market, the recent Lite ad in which a man dances in front of the bottle after reading the "Twist to open" legend on the cap cracked people up, he said.
"Miller's finally hitting commercials that seem to be cutting through the clutter and that's encouraging," said the wholesaler, who added that Miller faces some tough decisions: "I would not want to be the person at Miller to decide in what direction we're going to head."