Miller to get new lease on life a SABMiller - South African Breweries to acquire Miller Brewing Co - Brief Article

Modern Brewery Age, June 10, 2002

Miller Brewing Co.'s purchase by a London-based beer maker could reinvigorate the No. 2 U.S. brewer as it steps out of the shadow of tobacco giant Philip Morris Cos., analysts say.

South African Breweries said it is buying Miller from Philip Morris for $3.6 billion in stock. Miller will be renamed SABMiller.

SAB also agreed to assume $2 billion in Miller debt, raising the acquisition's total value to $5.6 billion. SAB expects to complete the acquisition in July, pending shareholder and regulatory approval.

Philip Morris, which also produces Marlboro cigarettes and is parent company of Kraft foods, would get a 36 percent stake in SABMiller and intends to remain a long-term shareholder.

But analysts said South African Breweries can give Miller, maker of Miller High Life and Miller Lite, the attention the company needs in advertising and marketing around the world and also in domestic competition with No. 1 U.S. brewer Anheuser-Busch Cos. of St Louis.

At the same time, the buyout would lift SAB, the world's fourth-largest brewer by volume, into second place and make it a much tougher competitor for leading Anheuser-Busch.

"Obviously, if I was Anheuser-Busch I'd be concerned," said Frank Walters, director of research for the beer trade publication Impact. "They (SAB) must see something. They're not stupid people."

Miller, whose commercials often feature regular guys and the catch phrase "It's Miller Time," is used to being run by a company outside Milwaukee, said Eric Shepard, a writer for the industry publication Beer Marketer's Insights.

"I don't see any immediate harbinger of any major change," he said. "The bigger question is what can SAB bring that would help them succeed that Philip Morris didn't?"

The companies said much of what Miller is known for, its brand names and its Milwaukee roots dating back to 1855, will remain the same. Miller said no job cuts were planned at its seven breweries.

Miller's beer production will not change but it may begin importing SAB's Pilsner Urquell in the United States, while SABMiller promotes Miller Genuine Draft internationally, Miller spokesman Mike Brophy said. Other local signatures will remain the same, including its sponsorship of Miller Park, home to baseball's Milwaukee Brewers.

Mark Rodman, an analyst with Massachusetts-based Beverage Distribution Consultants, said SABMiller must design Miller's marketing campaign to revitalize sales of the brewer's signature brands. For years, Anheuser-Busch outspent Miller on advertising, he said.

SAB chief executive Graham Mackay said he wants to use Miller's domestic distribution system to deliver beers such as Pilsner Urquell around the United States. The deal reduces the company's dependency on earnings made in the rand, the weak South African currency.

Mackay said he also wants to pump up Miller's sales overseas. He declined to elaborate on any specific plans.

"It's not as if there are silver bullets available," Mackay said. "The fortunes of Miller are tied in its ability to reach the consumer through a better, more extensive marketing programs. We're looking to support improving advertising."

Miller was founded in Milwaukee, a city known for its brewing heritage, in 1855 and was long known for its Miller High Life brand.

Miller, purchased by Philip Morris in the early 1970s, was first to introduce a lower-calorie beer, Lite, in 1973 and first to turn to television advertising, but gradually fell farther behind St. Louis-based Anheuser-Busch in the race for top U.S. brewer.

Anheuser-Busch currently makes up 49.7 percent of the domestic market. Miller is second with a 19.4 percent share. Coors is third with 10.4 percent.

Tangia Stegall, 33, a brewery worker at Miller, said Thursday she thinks the sale will be good for the company.

"There's just a potential to get even bigger," Stegall said, adding she's not worried about losing her job.

"All the breweries are operating at capacity," she said. "I don't think they want to mess with that."

Rod Ripp, owner of Ripp's Bar in Waunakee, north of Madison, said it "kind of hurt a little" to hear that Miller is being purchased by a foreign brewer. "We're Wisconsinites and we do like to keep our breweries here, he said.

Still, Miller is only the second-biggest seller in his bar, behind Anheuser-Busch's s Budweiser--even though he tends to push the Miller products more, he said.

"It's still nice to have the company in Wisconsin," Ripp said.