Thank goodness for the Green Bay Packers. The strong start by the NFL team has helped lift some of the gloom among the regulars at Jorgy's Tavern on State, a working-class bar in Milwaukee. Apart from the Packers, much of the talk centers on the problems up the road at Miller Brewing Co., where many of Jorgy's patrons work--or used to. Production workers are in the midst of their second layoff this year. And by mid-November, more than one-third of the office staff will be leaving.
It's a dramatic turn of events for the No.2 brewer, coming after a flurry of new-product introductions and a 72% surge in profits since 1992. But just as industry rivals No.1 Anheuser-Busch Cos. and No.3 Adolph Coors Co. are pulling out of their profit and volume slumps, Miller is going flat. Key brands are down sharply this year, offset by slight growth at Lite and by sales of the new Miller brand. Sanford C. Bernstein & Co. analyst Gary Black forecasts a 1% profit drop this year at Miller, the stepchild among high-performing units at parent Philip Morris Cos.
What has gone wrong? All the new products created confusion and churning as drinkers switched among Miller brands. The biggest disappointments have been the heavily hyped introductions of Red Dog in late '94 and would-be flagship Miller in February of this year. After some brief excitement, Red Dog, positioned as a quasi-microbrew, is dropping like a stone. Miller execs blame poor marketing for damaging the new Miller brand, which has had a disappointing showing so far. "There's been an identity crisis," says distributor Kevin R. Burke. "A lot of people thought it was repackaged Miller High Life or Genuine Draft." After three ad campaigns, it's likely Miller will embark on a fourth.
DILUTED STRENGTH. The idea behind the new products was to try to make up for the sales fall-off of once hot Miller Lite, the nation's third-ranking brand. "[Miller] thought it could compete with a hodgepodge of little brands," says Tom Pirko, president of consultant Bevmark Inc., who has worked for Miller and other brewers. The result, though, was that perhaps $150 million, by one rival's estimate, was diverted away from spending on larger brands.
The good news is that Lite, after sliding for five years, seems to be rebounding, with sales up slightly last year and again this year. Now, with Philip Morris demanding action, Lite is emerging as the cornerstone of a new strategy to get Miller back on track. Distributors and insiders say Miller Chairman John N. MacDonough is taking a page from his alma mater, Anheuser, where he was a senior marketing exec: Forget about steady product rollouts and instead spend to the hilt on a few core brands. "You can't afford to take your foot off the pedal on your core, premium-priced brands," says Robert C. Lachky, group vice-president of the Budweiser brands, who has been doling out big sums on Bud and Bud Light, the top two brands in the country.
MacDonough is scaling back new-product debuts and hiking spending even further on Lite. Other brands are likely to get heavy regional focus. A new 300-person marketing team will work directly with bar owners to try to boost sales. MacDonough also has let his ad agencies know he's not satisfied.
Distributors at least are heartened by what one calls "a new sense of urgency" at Miller. Whether the brewer can ever compete round for round with a reinvigorated Anheuser is another question. Maybe it will be enough to provide some cheer to the guys at Jorgy's--and impatient Philip Morris bosses.