Miller's struggle takes toll on agencies

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Miller Brewing Co.'s decision this week to shake up creative assignments for its two biggest brands stems less from the agencies' failures than a need to reverse a history of brand-management missteps, say beer industry observers. Miller is moving the $100 million Miller Lite account from Leo Burnett USA, Chicago, to Fallon McElligott, Minneapolis, with creative on the $40 million Miller Genuine Draft account going from Bates USA, New York, to Wieden & Kennedy, Portland, Ore.


Media buying and planning for spot TV and sports, worth more than $200 million in billings, moved from Bates to Burnett. That action removes Bates from the roster of Miller, a key client since 1979. The moves reflect increasing pressure on Miller's senior management, particularly Chairman-CEO Jack MacDonough, to jumpstart sales of its leading brands. Mr. MacDonough joined Miller in late 1992, defecting from rival Anheuser-Busch. "This is Jack MacDonough's last card in the deck," said one beer advertising veteran. "They are putting money on the longest-odds bet you can make in the beer business. The week before Christmas, on two huge brands, to be at ground zero with new agencies means they need to be 100% right and 100% executed by the first of March. [It's] nothing short of spooky."


Genuine Draft's supermarket sales for the year ending Oct. 4 totaled $188 million, down 2.5% from the prior 12-month period, according to Information Resources Inc. Although sales for Lite were up 3%, to $377.2 million, they continued to lag behind the overall beer industry average and significantly trailed category leader Bud Light. Distributors have been grumbling for some time about Miller's marketing woes. "I'm pleased" by the agency changes, said Barry Andrews, president of Miller of Dallas, one of the nation's biggest Miller distributors. "The creative needed to be looked at." When told that Genuine Draft ads will now be done by Wieden, best known for its Nike work, he responded: "Oh, God. If we could come even close to that kind of success."


The renewed focus on core brands by Miller's top people is reassuring, said Ron Fowler, president-CEO of Mesa Distributing Co., San Diego. "At one point they had too many people [in marketing] going in too many directions at once," he said. Mr. MacDonough's growth strategy depended on going in many directions, including an emphasis on new products. Many of those ventures, such as ice beers and the 1995 rollout of Red Dog yielded either disappointing or fleeting gains. Though initially a success, Red Dog cannibalized sales from both Lite and Genuine Draft and cost the brewer $57.6 million in advertising in 1995, according to Competitive Media Reporting. This year, when support was trimmed back, sales dropped dramatically.


A year ago, Miller realized it was time to refocus. But instead of pushing one of its core brands, it harnessed the company's hopes to a new brew with the Miller Beer name. Three agencies--Scaros & Casselman, Stamford, Conn.; Angotti, Thomas, Hedge, New York; and Bates--took stabs at the advertising, but none helped the brand achieve lift-off. Wieden and Fallon also were asked to present creative on the brand earlier this fall, but none of that work was produced. Minimal advertising on this brand is planned for '97. For both Fallon and Wieden, though, the Miller Beer meetings turned out to be rewarding first steps. Impressed by their presentations, the brewer invited the shops to try their hands at campaigns for Lite and Genuine Draft, respectively. Burnett had presented a new campaign all the way up to Geoffrey Bible, chairman-CEO of Philip Morris Cos., Miller's parent. The shop received approval and began shooting it several weeks ago. When Fallon came up with a campaign Mr. MacDonough and VP-Marketing Neil Harrison liked better, it also was presented to Mr. Bible.


Once the marketer decided to move the creative, it had to resolve a very big problem. Burnett and Philip Morris have one of advertising's strongest relationships, dating 42 years. The solution: move media, which generates more revenue than Lite creative, from Bates to Burnett. Fallon and Wieden have until late February to put the finishing touches on their campaigns, prior to the spring distributors convention in New Orleans. And the clock also is ticking for Mr. MacDonough and his team.


"MacDonough is a good executive who knows the beer industry," said Jay Nelson, analyst with Brown Brothers Harriman. "But the fact is, they've messed up the last couple of years. He needs some hits. It's not impossible [Philip Morris] would try to find somebody else." Miller acknowlegded the need for a turnaround but said accusations of desperation are unfounded. "This is not a company that is losing money," said Susan Henderson, director of marketing communications. "But because we have not met our own expectations, we have taken a total examination of all aspects of our business to be as competitive for the future as possible." Ms. Henderson said Miller's marketing budget--particularly for Lite and Genuine Draft--will increase "significantly" next year with spending emphasis in key markets, such as the West coast and the Upper Midwest.

Copyright December 1996, Crain Communications Inc.

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