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Third-quarter earnings from Philip Morris Cos. offered little encouragement for Miller Brewing Co., mired in a sales slump.

The brewer's revenues for the third quarter, released last week, were down 3.9% over the same period last year, while total worldwide volume declined 6.5%. By comparison, top-ranked Anheuser-Busch Cos. last week reported beer sales up 2.7% for the period.


For Miller, the figures reflect more than 10 consecutive months of eroding supermarket sales for its key brands, the lackluster startup of would-be flagship Miller Beer and the severe dropoff of several brands, including Red Dog and Miller Genuine Draft Light.

Miller's supermarket sales for the first eight months of the year fell 5%, according to PaineWebber. Of Miller's competitors, Adolph Coors Co.'s volume was off 3%, while A-B posted 1% growth, buoyed by Bud Light.

All Miller brands except Lite have lost serious ground this year, according to Information Resources Inc. Sales of Red Dog, which made a big splash when introduced in 1994, are off 30%, while Lite Ice fell 43%. Genuine Draft, Genuine Draft Light and Milwaukee's Best also saw significant sales declines, according to IRI.

Ironically, Lite, the brand whose soft sales had spurred Miller's product development spree in recent years, has begun to rebound. Supermarket sales are up 0.4%. this year.

The brewer told wholesalers last month that the marketing mandate for 1997 was to re-focus on Lite, with increased spending to be put behind the brand (AA, Oct. 14). Leo Burnett USA, Chicago, is primary agency for Lite.

"We've committed our efforts behind our core brands. Miller Lite is our bread and butter," said Susan Henderson, marketing communications director.

Other brands will get increased support in key regions, such as Red Dog in the Northeast, Icehouse in the Southeast and Genuine Draft in the West, she said.

That's the opposite of the past few years, when the company essentially threw products at the market to see what would stick, said Jay Nelson, analyst for Brown Brothers Harriman.

Although some items succeeded in firing up short-term sales gains, "The problem is they trained people to be switchers," he said. "Those people who went from Genuine Draft to ice beer might be doing micros now. Or maybe they went to Red Dog, then woke up one day and got bored with Red Dog."


Additional support for the new Miller beer has been back-burnered. Three different campaigns have aired since it was introduced in April, from Scaros & Casselman, Stamford, Conn., and Bates USA and Angotti, Thomas, Hedge, both New York.

Miller executives had approached Fallon McElligott, Minneapolis, about taking a shot, but the project never materialized.

The problems have filtered down to marketing staff. Last week, Miller began the first wave of an announced 18% corporate-office downsizing. Tim Nelson, one of several brand managers for Miller Beer, is no longer with the company.

Franchise Director Jeff Carefoote now oversees Miller Beer and the brewer's trademark brands. Richard Lalley, group director, now will focus on Molson, Plank Road Brewery and non-Miller brands.

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