As The Suds Churn: The Soap Opera At Miller

The recent history of Miller Brewing Co. can be distilled down to one word: Lite. The savvy marketing of Lite created a brand new niche and propelled Miller from a fifth-ranked regional brewer in 1973 to the No. 2 U. S. brewer today. The brand accounts for 46% of Miller's volume and more than half its $3.5 billion in sales. But Lite has gone flat, while more recent entrants into the low-calorie market are gaining ground (chart). Now, Miller needs to repeat its marketing miracle to prevent further erosion of the brand's share.

That's the likely first assignment for Warren H. Dunn, the front-runner to become Miller's next CEO. Charles W. Schmid, the brewer's senior vice-president for sales and marketing, was once a candidate to succeed Miller's current CEO, Leonard J. Goldstein. But Schmid's June 23 resignation leaves Dunn--a veteran of Miller's legal and administrative ranks--with a clear shot at the corner office. Yet Dunn, unlike previous Miller CEOs, has no hands-on marketing experience. A dramatic repositioning of Lite is under way, led by a new ad campaign, so he'll have to be a quick study.

The key word is "quick." BUSINESS WEEK has learned that Goldstein plans to retire in early February at 65. Executives at Miller and officials at its parent, Philip Morris Cos., say privately that Dunn, 56, will almost certainly be named Goldstein's successor before then. A Miller spokeswoman calls talk of Goldstein's retirement and Dunn's promotion "pure speculation," and both executives decline to comment. But Miller's powerful wholesalers are talking openly. "Warren is now the heir apparent," says Ronald L. Fowler, president of Mesa Distributing Co. in San Diego. "I'd be very surprised if he wasn't made CEO within the year."

LESS THRILLING. No wonder Miller's wholesalers, retailers, and ad agencies are abuzz. The next Miller braumeister will control a mammoth ad budget, estimated to reach $195 million in 1991. Much of that will be spent on Lite, which on July 9 is set to air ads that drop the 17-year-old "tastes great, less filling" slogan and launch a new campaign cooked up by Leo Burnett Co. The tag line: "Miller Lite. It's it. And that's that." The campaign, which will pit Lite head-to-head against Budweiser's "King of Beers," aims to revive Lite by pitching it as a brew for all beer drinkers, not just those who are counting their calories.

Although beer sales overall are flat, Miller can't blame industry doldrums for all its woes. Its first-quarter shipments fell an estimated 6.6%, according to Jerry Steinman, publisher of the newsletter Beer Marketer's Insights. Industry shipments declined 5.2%, largely because retailers and consumers had stocked up in the fourth quarter to dodge higher excise taxes. Even worse, Lite's supermarket sales dropped 10.5%. That's more than double the falloff for Coors Light and Bud Light.

Even the shrewdest marketer would have trouble repairing the damage. And Dunn is a newcomer to the field. Following a stint at the Federal Bureau of Investigation, Dunn joined Miller in 1966 as assistant counsel. In 1984, he became senior vice-president for administration. Schmid, 48, was brought in at the same level three years ago. But late last fall, Dunn was promoted to executive vice-president, with Schmid and the marketing group reporting to him. "It was a surprise to us," admits Robert Lenz, recently retired president of Lite's former advertising agency, Backer Spielvogel Bates Worldwide Inc. "People thought Chuck was going to get it."

LO-CAL HERO? Dunn is already making his mark. In the nine months that he has overseen marketing, Miller has made a major push to put life back into Lite. In mid-March, it yanked the $120 million Lite account from Backer and awarded it to Leo Burnett. Backer's "tastes great" campaign, concocted for the brand's 1975 rollout, "was so deeply imbedded in the American consciousness that it stopped having an impact five years ago," says Tom Pirko, president of industry consultant Bevmark Inc.

Burnett's new campaign targets younger drinkers. And Miller is wooing Coors' and Bud Light's young-adult crowd even more directly with a new product: Lite Ultra. Now in test markets, it has 77 calories, compared with 96 for Lite, 105 for Coors Light, and 110 for Bud Light. It's aimed at 21-to-30-year-olds, especially women.

Such brand extensions need distributor support. That helps explain why the reserved Dunn last winter donned a pair of bull's horns to amuse top wholesalers at a bash in Hawaii. "We'll do anything to sell a case of beer," he says. That includes taking a cram course in Marketing 101.

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