Beer battles to come: A-B won the domestic beer wars of the 1990s, but now faces new, more agile opponents

Modern Brewery Age, March 31, 2003

SAB faces a huge turnaround task with Miller. The Milwaukee company is not the powerful, confident Miller of the late 1980s and early 1990s. It is a much-diminished company that bears some uncomfortable resemblances to Stroh, albeit on a longer timeline.

The purchase of Miller by South African Breweries marks the next phase of the internationalization of the U.S. beer industry.

Stroh was a regional that got big but didn't have the resources to compete at its new higher level. Miller was also a regional, before PM pumped it up and it entered the top-tier of the industry. Miller had the resources to compete in the 1990s, but misallocated them (catastrophic advertising, failed brand introductions).

When Miller became a contract brewer, it completed the picture of Miller as a latter-day Stroh, a company that couldn't fill its breweries with its own volume. Becoming a contract brewer is not the kiss of death, but it has some uncomfortable connotations. It doesn't help when most of the contract volume is from Pabst, a company with a mission to gradually exit the U.S. beer business.

South African Breweries may be the consummate turnaround artist of the world brewing industry. In the past, however, SAB turnarounds involved fixing up a third world or Eastern European brewery with a healthy dose of production, packaging and logistics technology. Suddenly, the third-world patient performs like champ.

Miller is sick, but it's hard to define what the illness is. The company makes very good beer in state-of-the-art breweries. It has a strong though long-suffering wholesaler corps. Sure, Miller advertising has been lousy for years. (One of Stroh's swan songs was the Swedish bikini team. You know things are bad when "Catfight" represents the great leap forward in Miller advertising).

It might come down to something in the water at Highland Boulevard. The corporate culture at Miller was always somewhat different than that found in breweries located in St. Louis or Golden. At Anheuser-Busch and Coors, there is a top down commitment to beer and brewing. The patriarchs of the founding Busch and Coors families have never let the focus diminish.

In the 1990s, Anheuser-Busch had the best management suite in the business. Hardnosed managers like August Busch m and Pat Stokes drove growth, and it turned out that August IV was not a weak link. He is not the product-centered exec that his father was, but his passion has been multi-media advertising, with noticeable results. Today's mainstream beer business is more advertising-driyen than ever before, and A-B's is the best in the business.

At Coors, the culture is casual, but the dedication to the technology of brewing comes down right from the top.

At Miller, they always wore the best suits, but there was an essential disconnect from the beer business. Being an under-performing division in a huge multinational conglomerate didn't help.

The best thing that SAB could do at Miller is transform the corporate culture. Miller has been selling 12-packs of beer like they were large blocks of Kraft pasteurized processed cheese food product. By making Miller a brewer again, SAB will do a service for every American.