Miller Brewing: It's Norman Time

Miller Brewing's turnaround is a tale of how a charismatic leader has motivated a complacent workforce

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It's 5 p.m. on a Friday, and Norman J. Adami is headed for the pub. Like most bars during happy hour, the wood-paneled lounge is packed. It's nearly impossible to find a spot on the oversize leather chairs and couches, and two bartenders scurry to serve patrons, who are three deep. With a pilsner glass in hand, the 5-ft.- 9-in., mustachioed Adami makes his way over to a group of women. Taking a drag from a Peter Stuyvesant cigarette, he taps a young blonde on the shoulder to get her attention.

If this were any other bar, some might think the middle-aged, slightly pudgy man in a less-than-stylish blazer was out of his league. But this is the bar Norman built, a 2,700-sq.-ft. pub in the Milwaukee headquarters of Miller Brewing Co. And Norman, a regular here, is president and chief executive.

The four smiling co-workers welcome Adami into their group and he jumps right into the conversation, peppering them with questions. He can't help himself. This is, after all, a man who lugs a laptop to a favorite Milwaukee restaurant, Calderone Club, to get the owners' opinions on new ads. Here in the pub, Adami can't pass up the chance to take an informal poll, looking for feedback on the Miller Lite marketing campaign, comments on the new Leinenkugel's Sunset Wheat beer, or odds on an upcoming PGA tournament.

Amid declining sales, management upheaval, and an uncertain outlook, Adami got plenty of criticism from staffers when he decided to turn some half-empty offices and storerooms into a bar for Miller's 900 headquarters employees in one of his first moves as CEO in 2003. But Adami considered opening Fred's Pub, named after company founder Frederick J. Miller, an essential step in overhauling a moribund culture. He envisioned the pub as a place where the chief marketing officer could chat with an hourly worker in bottling, or a brand manager could have a casual team meeting. Of course, when you're breaking down hierarchies, it doesn't hurt to serve beer (alongside soft drinks). "It makes people brave," jokes Adami.

In Their Face

Three years later, the scene at Fred's Pub is emblematic of a seismic cultural shift. Whereas the old Miller sought to manage the decline of a brand and avoid the wrath of long-dominant Anheuser-Busch Cos. (BUD ) (AB), Adami's Miller gets in the face of the self-proclaimed King of Beers. The new attitude is most visible in brassy marketing that takes on Anheuser-Busch in a rivalry reminiscent of the Cola Wars. But Miller's turnaround is really a story about its people. It's a tale of how a charismatic leader has motivated a long-complacent workforce and reinvigorated its independent distributors. With a style that is part teddy bear, part grizzly bear, Adami has transformed Miller from a besieged No. 2 to a scrappy underdog nipping at the heels of AB.

Adami's results have been remarkable. In three years he has managed to bring an end to a 15-year decline that threatened to relegate Miller to the dreary fate of once-mighty Milwaukee brewers Pabst and Schlitz. In 2004 sales of Miller Lite, accounting for 40% of the brewer's roughly $5 billion in sales, rose 12.5% by volume, according to Beer Marketer's Insights. And despite aggressive price cuts by AB in 2005, Miller Lite managed to grow 3.2%, compared with no growth for Bud Light and a slight drop for the industry at large.

Perhaps more impressive, Adami has helped knock Anheuser off its game. In 2005, Anheuser's operating income fell 22%, to $2.6 billion, its first such decline in a decade. Domestic volume dropped 1.8%, to 101 million barrels. "The arrival of Norman is a seminal moment," observes Bear Stearns (BSC ) analyst Anthony J. Bucalo. "He helped take away $10 billion to $12 billion in [AB's] market cap." Since Adami started at Miller, AB's stock has fallen 4%. In contrast, the stock of Miller parent SABMiller PLC (SAB), the world's second-largest brewer, is up 190%. Miller, SAB's U.S. operations, makes up 15% of its parent's earnings, which have been buoyed in recent years by acquisitions. AB declined to comment for the story.

"There Was a Lot of Fear"

Adami knows he has a difficult road ahead. He must keep Miller Lite chugging along, while breathing life into the rest of the portfolio. He's doing so by staking out distinct market segments for each of Miller's core brands. The imported Peroni, for instance, targets trendsetters. Milwaukee's Best Light is for the hard-working man. Icehouse is positioned as the beer for young guys to drink before going out. "The turnaround phase was a tough period," says Adami. "There was a lot of fear from people, trepidation. The next phase is just as tough."

Before the 51-year-old Adami stepped off the plane in Milwaukee in February, 2003, the only real time he had spent in the U.S. was as a high school exchange student in Dallas in the early 1970s. Back home in South Africa, where rhinos and zebras roam on his 4,000-acre game farm, it was 70F and summer. The bitterly cold Midwestern winter was a major shock, almost as alarming as the situation at Miller.

At first, Adami thought Miller, which South African Breweries PLC bought from Philip Morris in 2002 for $5.6 billion to form SABMiller PLC, would require only basic changes, such as tighter financial controls and a rigorous performance-management system. But "we were [stuck] in a downward cycle, a vicious cycle," he says, taking a long sip from a Miller Lite in the smokers' lounge at a company sales meeting. "We needed to fundamentally change the direction of the company."

So Adami got to work. His charm offensive, which includes touches like having flowers sent to his male executives' wives on birthdays, is paired with a demanding, no-BS management style. "Normanisms" are now part of the vernacular at Miller. A favorite: "If you're going to fight a crocodile, you don't do it in the water," a South African bush saying.

Adami has restocked much of the executive suite with consumer product heavyweights like chief marketing officer Tom Long from Coca-Cola Co. (KO ) and SAB recruits like Maurice Egan, Miller's new head of operations. Adami spent months recruiting Tom Cardella, now senior vice-president for international brands and market development, from competitor InBev. Adami's calls to Cardella at home became so frequent that Cardella started avoiding them. He recalls with a grin: "I told my three daughters that if a man named Norman with a funny accent calls, tell him I'm not at home."

Adami has also instilled his sense of urgency into Miller. He'll often pick up the phone in a meeting to get the latest statistic. And after seeing an AB commercial, he hustled to get a response ad launched within a week. "Everything's going to be slightly too slow for Norman," says Denise Smith, Miller's senior vice-president for human resources and another SAB import.

For all his intensity, though, Adami knows how to have fun. At Miller's 150th anniversary celebration, the event's emcee and MTV reality star Jamie Kennedy challenged Adami to a chugging contest. Adami won, putting the bottle upside down on his head to declare victory. His sense of humor can be mischievous. At a 2005 March Madness party at a dive bar in Kansas City, Mo., he got up on a rickety stool to rip down a Bud sign.

That kind of aggressiveness used to be part of Miller's DNA. The company pioneered the light-beer category, now the largest segment of beer drinks, with Miller Lite in 1975. The "Tastes Great, Less Filling" campaign, featuring athletes like Dick Butkus and John Madden, is still a Madison Avenue legend. Miller wasn't afraid to ruffle feathers. Then-President John Murphy, a hulking Irishman, had a hook rug with AB's iconic eagle under his desk so he'd constantly step on his rival.

But over the years, Miller lost its edge. Failed product launches like its 1993 Miller Clear (a colorless beer) and marketing flops took a toll. Distributor Don Faust Jr. recalls that when Miller unveiled the "It's It and That's That" advertisement at the 1991 sales convention, Bill Cosby, one of the special guests at the event, later joked to the crowd: "Which one of you idiots came up with that commercial?"

Back then, Miller simply wasn't a priority for its owner, Philip Morris (now Altria Inc. (MO )). Miller accounted for just 4% of the cigarette maker's revenues. In the 15 years prior to Adami's arrival, there were seven turnaround plans and almost as many management changes at the top. To make matters worse, Anheuser had become a marketing juggernaut with hit like the Spuds MacKenzie and "Whassup?!" spots. By 2003, Miller's slice of the industry had dropped to 17%, down from 23% in 1994. "Anheuser owned sophomoric humor. It rolled out campaigns like a machine, and its core business was running on eight cylinders," says John Bowlin, head of Miller just before Adami. "We were the troubled stepchild [of Altria]."

Share of Throat

It wasn't exactly the type of company Adami was used to running. The second-generation Lebanese South African, who grew up in the rural town of Kroonstad, 100 miles south of Johannesburg, joined SAB in 1979 after graduating from the University of Cape Town and getting an MBA from the University of Witwatersrand. But despite SAB's 90%-plus share of the South African beer industry, Adami developed a reputation for challenging convention. To keep staffers from becoming complacent, he informally changed one market metric to "share of throat," which includes not only beer but tea, water, and other drinks. By that measure, SAB had just a 5% share. Under Adami, SAB Ltd. (the parent's South African operation) expanded its share of the South African beer market to 98.3%.

At SAB, it was common practice to send task forces on fact-finding missions to study the practices of top global businesses like IBM (IBM ), Unilever, even Anheuser-Busch, on everything from brand marketing to information technology. "Coming from South Africa, we probably had a natural curiosity, almost an inferiority complex that we were from a developing country, and therefore there must be something better out there," says Adami.

To take on AB, Adami knew he needed to return Miller to its roots. The pub was one step. Beer University was another. In the one-day course, employees smell hops, discover the difference between pilsner and ale, and learn that the yeast used in today's beer descends from the batch brought over from Germany in 1855. "It's a way to build a passion and let people remember once again what we're all about: beer," says Miller director Virgis W. Colbert, former head of brewery operations.

Adami has made staff far more accountable with a performance system imported from SAB that rewards people for stepping up their game. The old system didn't challenge employees, says Adami, who once referred to the company as the "Socialist Republic of Miller." For example, in 2002, a year the business was in free-fall, 60% of managers got a four or five rating, the highest possible. Last year 50% of employees got a three on a six-point scale, meaning they met their goals.

Thinking Local

Adami has also worked tirelessly to improve Miller's relationship with its distributors, which are independent. As the Miller brand faded, the distributors began to add import beers, microbrews, and nonbeer drinks to their trucks. Many felt Miller executives didn't listen to them. Rey Perez, a sales manager at Chicago Beverage Systems, recalls an attempt by Miller to reach Hispanic consumers. Management pushed a Tejano music-based marketing strategy, similar to one that had succeeded in Texas. "We told them it wouldn't work," says Perez. "Tejano isn't as big among Mexicans in Chicago." It failed miserably.

Adami learned quickly how damaged distributor relationships were. He recalls being "summoned" to a Chicago hotel in his first weeks to meet informally with a dozen or so distributors. Since then, Miller's spent millions to support distributors' local marketing efforts, such as taste-test challenges in bars.

A hallmark of the Adami era is aggressive local market planning. Miller and its distributors now take a deep dive into 61 territories, tracking sales by channel and by package. Adami has dozens of distributors on speed-dial in his BlackBerry and calls frequently to see what's going on, run an idea past them, or just say hi. Some joke (sort of) that he can call too early, like 7 a.m. on a Saturday. But they love his quick response to problems. "Norman's been a godsend for wholesalers," says Bruce Watkins, owner of Gusto Distributing Co. in Great Falls, Mont.

Miller's cultural revolution is clearly getting AB's attention. In May, 2004, Anheuser's vice-president for sales at the time sent a memo to AB's distributors announcing a full-scale assault on Miller Lite. "I'm sure you have seen some of the desperate tactics Miller Lite is using," he wrote. "It's time to show the power of the AB team. Help us UNLEASH THE DAWGS!"

AB took the fight to a higher plane last summer with an all-out price war in light and economy brands. Despite the continued growth of Miller Lite, Miller took a beating in the economy segment, which accounts for 40% of volumes. As a result, Miller's sales to retailers fell by 1% in the last fiscal year.

Adami knows that he has awoken a sleeping giant in AB. But Miller's CEO remains unfazed. As he is fond of saying: "If you want to play with the big dogs, you can't piss like a puppy."

By Adrienne Carter

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