Prepared Foods May 16, 2005 enewsletter

Just as the war over light beers has reached a fever pitch, Miller Brewing Co. has decided to open a new front in the economy beer segment.

Miller and other brewers have lost market share in the low-price category to market leader Anheuser-Busch, which accounted for 53% of the category in 2004, up from 48% in 1999, Miller said.

That amounts to $500 million in lost profits over five years, Miller says. That is money that could be spent fueling further growth in Miller Lite, which saw 10.5% growth in 2004, the fastest-growing mainstream brand in the U.S., the company claims

"If we have some success in this area, it's going to provide the fuel to invest in the brands that have a higher margin associated with them, whether it's Miller Lite, Genuine Draft, or other brands," said Miller spokesperson Pete Marino.

The brewer already has started to push ahead with its plan.

Last August, Miller revamped the logo on Milwaukee's Best, and in July, it plans to run humorous television spots for Milwaukee's Best Light, saying, "A man should act like a man and a light beer should taste like a beer." It will be the first time it will actively promote the low-price brand on television in nearly a decade.

Miller also said it is reviving its Girl in the Moon -- an image that has been on bottles of its former flagship beer High Life since 1907 -- in advertisements, replacing the "High Life Man."

A series of ads focusing on beer-drinking moments over the past 100 years will feature the Girl as a narrator, with the slender "Tall Blonde" clear glass bottle to appear prominently.

"Our goals are one, connect to consumers emotionally, and two, really try to elevate the brand," said Tom McLoughlin, the High Life brand director.

The campaigns are part of a turnaround effort by South African Breweries plc, which became SABMiller plc when it bought Miller in July 2002 as sales of Miller Lite were in steady decline.

Analysts said the strategy on low-price beers was shrewd because it focused on a category that most brewers had neglected in recent years in favor of higher-margin craft beers and imports.

"Over a third of their volume is in sub-premiums," said Beer Marketer's Insights Inc. editor Benj Steinman.

"Now that they've got Miller Lite going in the right direction again, it's become increasingly important to Miller to not give up so much of that sub-premium business," he said.

It also would help fight rising beer prices, which have encouraged consumers to switch to drinking wine and spirits, said Bump Williams, the executive vice president of the global beer, wine and spirits division of Information Resources Inc.

"Beer prices have risen faster than the rate of inflation, but the same can't be said of wine and spirits," Williams said. "The whole emphasis right now from the big three brewers is to lower price points at retail to stop the beer shopper from leaving the category."

However, distributors and retailers might be slow to follow suit.

While brewers benefit from increasing volume, distributors would rather ship high-margin beers, such as Corona, which can retail for double the price of an economy brand.

Retailers also are uneasy about how much cooler space to devote to beer, especially if it is lower priced, said Mark H. Rodman, the president of Beverage Distribution Consultants of Swampscott, Mass.

"I can't see convenience stores (who are) talking about reducing the amount of space allocated to beer suddenly fill it up on a low-margin item," he said.