Days before Anheuser-Busch Cos. (BUD) launched Budweiser Select last February, Miller Brewing Co. (SBMRY) distributors began wearing buttons that read: "I Created New Bud, Ask Me How." The message: Budweiser Select, with its low carb content and rich amber color, is just a Miller Lite wannabe. Led by Chief Executive Officer Norman Adami, Miller has been challenging the industry Goliath -- often with cheek -- in commercials, stores, and bars. Says Anheuser-Busch marketing chief Michael J. Owens: "Right now, Miller is not making the beer business fun."
Miller's stick-in-the-eye formula has worked wonders. Lite, the No. 2 light beer, was the fastest-growing mass-market brew last year. Meanwhile, Anheuser for the first time in nearly a decade failed to build its U.S. market share. Now, Adami has to keep Lite's fizz from going flat and pump new life into the rest of Miller.
Miller was a case study in lost momentum. The pioneer of the light-beer market in the '70s, Miller's U.S. market share fell from 23% in 1994 to 18% in 2003.
Enter South African Breweries PLC, which bought Miller from Philip Morris Cos. (MO) in 2002. Adami left his job as head of SAB's South African unit to run Miller, which accounts for 38% of the company's sales, and dug into everything from pricing strategies to bar promotions. "Because of Anheuser's ubiquity and size, we knew that we would have to bump into them to be successful."
Calling out the leader is a timeworn strategy for second-banana brands. But Miller has been especially good at it. Ads in 2003 pitched Miller Lite as the low-carb alternative to Bud Light and hailed Miller as the "President of Beers" in 2004, a foil to Bud's "King of Beers." Anheuser then taunted Lite as the "Queen of Carbs" in ads. That response validated the challenger. "Miller was high-fiving when Anheuser reacted that way," says Daniel J. Howard, a marketing professor at Southern Methodist University.
The payoff for Miller's scrappiness? In 2004, sales of Lite were up 10.5% by volume, compared with just 0.9% for the rest of the industry and 3.7% for Bud Lite.
"THIS ISN'T OVER"
But now Adami needs a second act. With just an 18.5% share of the U.S. market, compared with Anheuser's 49.4%, Adami can revel awhile in the challenger role. But some are skeptical that he can keep playing up Lite's little-guy image and a highly suspect taste advantage. Miller lacks a strong image or brand heritage to rival Bud's Clydesdales. "They've been smart to develop their message into something more than low carbs, but this isn't over, because nobody knows yet what taste means," says Goldman, Sachs & Co. (GS) beverage analyst Marc Cohen.
It's also not clear if Adami can rub some of the Miller Lite magic off on the rest of his tired portfolio. Miller Genuine Draft, Miller High Life, and Milwaukee's Best, which account for 30% of the Milwaukee brewer's sales by volume, have been steadily losing ground. Supermarket sales volume of Genuine Draft have dropped 9% in the past 12 months, High Life is off 7.6%, and Best is off 11.4%.
Beer brands are under pressure as young drinkers migrate from beer to spirits and baby boomers drink lighter brews. But Adami also inherited a bare new-product cupboard. Miller flubbed earlier forays into the sweet malt liquor game, though it's now testing one, Brutal Fruit. "The company has to get something going other than Miller Lite if they want to keep up this turnaround," says Benj Steinman, editor of Beer Marketer's Insights.
Adami is confident he will find the right formula for reviving Miller's other brands. It'll be awfully hard. But then again, no one thought he could bring Miller Lite back from the dead.
By Adrienne Carter in Milwaukee