MillerCoors Seeks Rebound After 'Toughest Quarter as a Company'

Brewer Plans New Ads, Packaging in Search of Momentum

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Slumping MillerCoors is banking on new packaging and advertising to help beat back what the brewer today characterized as the "toughest headwinds we've seen as a company."

The marketer's biggest problem remains Miller Lite, whose sales-to-retailers dropped by "mid-single digits" in the third quarter, following a similar decline in the second quarter. Sales for all brands slid 2% -- only a slight improvement from the previous quarter -- while net income fell 14.1% from the same quarter a year ago to $286.9 million, the company reported today. MillerCoors blamed the drop on a "weak economy, low consumer spending and commodity inflation."

"It's been our toughest quarter as a company," said CEO Tom Long. "We're not satisfied with our volume performance and are taking aggressive steps to strengthen our brand performance."

Changes include new "taste flow" cans for Miller Lite, which will debut next summer and feature a second opening on the can top designed to increase airflow and reduce "glug." The optional new hole can be opened with a key or other object. The feature is likely to be spotlighted as part of a new ad campaign in development for the brand by roster agency DraftFCB that is set to roll out next year. The current "Man Up" campaign relies on visual punch-lines to position the brand as the light beer with the most taste by mocking men who choose other brands. Under the leadership of Mr. Long, who took the helm in June, the marketer seems poised to embrace somewhat higher-brow humor, akin to what spirits brands have used.

Miller 64 bottle
Miller 64 bottle

Indeed, Mr. Long has repeatedly pointed to the growth of spirits brands as a new threat to beer, especially among younger drinkers. "All of our various agencies have been looking at the mindset of millennial drinkers and what's driving switching [to spirits]," he said on today's earnings call. "As we expand that view, I think you'll see that our positioning of beer becomes more competitive, more relevant and more enticing to folks that are interested in the total beverage-alcohol category."

Shorter term, MillerCoors is hoping to increase attention to its brands with new packaging. The low-calorie MGD 64 brand is being re-branded as "Miller 64" with new black-and-red color scheme, replacing the white-labeled cans and bottles now on shelves. The change will be accompanied by a new campaign this spring by roster agency Saatchi & Saatchi. Mr. Long described the packaging change as "much bolder" and "more design-oriented." The brand, which debuted nationally in 2008, could sure use the boost. Third-quarter sales to retailers dropped by double digits, the company reported today.

MillerCoors' bright spots remain Coors Light, which grew at a "low-single digit" clip in the quarter and its Tenth and Blake portfolio of imports and crafts, which accelerated by 17.2%, including double-digit gains by Blue Moon and Leinenkugel's. Mr. Long said MillerCoors intends to make its craft business "much, much bigger," noting that it needs to "transform to meet those consumers needs" of "these fuller, bigger-tasting beers."

The brewer is also giving a different look to Miller Genuine Draft with new, all-black labels.

Yet as is the case with all big brewers, MillerCoors fortunes remain linked to its bigger light-beer brands, which have suffered across the industry in the face of high unemployment among blue collar drinkers and new competition from craft beers. Asked about the future prospects of the category, Mr. Long said he remained bullish. "I do think the fundamental consumer reason to drink lighter beer [is ] driven almost entirely by the desire for refreshment and the desire for a light taste," he said. "And we see no diminution in those fundamental drivers of consumption."

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