| Mon 5 Apr 2004, 10:58 | | Besieged Bud opens window for Miller Lite |
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Besieged Bud opens window for Miller Lite
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By Tim Cohen
SABMiller is seeing light at the end of the tunnel for its huge US operation Miller Lite in particular.
The turnaround of the Miller unit is possibly the group's most critical challenge. Huge scepticism surrounded SAB's decision to buy Miller, a declining brand in the US.
But a funny thing happened on the way to the US beer market last week.
The Wall Street Journal described Bud Light, by far America's most popular beer, as a "besieged franchise".
The significance of this passing remark, and what it might imply about SABMiller's huge Miller unit, is hard to overstate.
Bud Light has been the US's top-selling brand for over a decade even though the "lite" beer concept was first introduced by Miller.
The innovation proved to be inspired for Miller and cemented its position in the top tier of US brewers on the back of Miller Lite, which remains by far its most popular brand.
But it has been more or less downhill ever since. Miller has been losing market share steadily for the past 20 years, and continued to do so after SAB bought the company a year-and-a-half ago.
But SABMiller now claims early signs of a turnaround are evident. The effect of small changes in volumes can have a dramatic influence on profits.
This change in prospects in the US was part of the reason SABMiller announced a few weeks ago that expectations of a 28%-30% increase in dollar earnings could shift up towards the 35%-37% range when results are announced next month.
Miller Lite has been boosted by the craze for low-carbohydrate diets sweeping the US, since it has fewer carbohydrates than many of its competitors.
Norman Adami, head of the Miller unit, acknowledges that the low-carb craze had created a "tailwind" for the brand. "But in this business you make your own luck," he said.
The craze coincided with a thorough review of Miller's marketing strategy, and the company "jumped on that tailwind" in order to make sure consumers were aware of the difference, he said.
The revitalisation of the brand co incided with some intense work on the company's relationship with its distributors. The overall result was that Miller Lite had been recording double-digit growth over the past few months and had regained growth leadership from rival Coors Lite, Adami said.
For market leader AnheuserBusch, which sells every second beer in the US, this has created an extremely unusual quandary.
Miller has for years been the one getting the poor press, and through some extraordinary marketing, Anheuser-Busch has won plaudits and market share.
But the tide does appear to be turning. Miller Lite has been gaining share since Miller began its comparative advertising on the carb issue.
"After years of declines, Miller Lite showed a 0,6% gain in 2003. In the first two months of 2004, Bud Lite lost 0,2 share points in supermarkets while Miller Lite gained 1,3 share points," the report said.
The report quotes Goldman Sachs analyst Marc Cohen saying: "What particularly rankles is that Bud Lite lowered its price and still lost market share
"We've seen a weakening of the Budweiser trademark."
But SABMiller is far from declaring victory. On a year-on-year basis, volumes for the group as a whole are still down.
Miller Lite's success has slowed the overall rate of decline.
But Adami is quietly confident. "For the first time in years, they are following us and we are not following them."
Business Day
