Miller says it will continue aggressive marketing plan

Modern Brewery Age, June 20, 2005

Miller Brewing Co. says it will resume direct attacks on Bud Light in an effort to keep Lite's momentum going. And, in an unusual public discussion of pricing and tactical performance, Miller executives said the company had been "out-executed" in discounting activity by both A-B and Molson Coors during the Memorial Day holiday. In response, Miller said it would "adjust relative pricing gaps where competitor discounts have impacted its sales."

In comparing the two-week Memorial Day weekend selling period ending June 4th versus the prior-year period, Miller said that it had actually increased its average prices, while Molson Coors kept prices flat and A-B cut prices.

"We're pleased the Miller Lite brand was able to show so much strength with consumers, despite the fact that we did not fully execute our stated strategy as we intended," said Charlie Frenette, Miller interim chief marketing officer. "As we manage the pricing issues versus our competitors, we know we must continue sharpening the marketing messages of our brand."

In that vein, Miller has announced that new television commercials will resume direct comparisons with Bud Light, following a spate of recent Lite ads that did not knock the competition.

With the theme, "The truth hurts," two new Ogilvy & Mather television spots will air during ABC's NBA Finals and ESPN's Sportscenter. In both spots, Bud Light drinkers are shown "discovering" that Miller Lite has more taste.

"It continues to be very beneficial for us to periodically make direct comparisons with Bud Light based on the functional attributes of the beers," said Frenette. "Bud Light is a massive brand that is becoming increasingly vulnerable to consumer reconsideration, and we'll continue to make the comparative argument for Miller Lite completely explicit."

Frenette said that Miller sees the Budweiser franchise as vulnerable, despite strong performance by Budweiser Select. "Bud Select appears to be meeting A-B's objective of stabilizing the overall Bud franchise," said Frenette. "But it's intensified the vulnerability of the mother ship, Bud Light, which is why we are dialing up the competitive dialogue."

Miller released ACNielsen Supermarket and C-Store Data for the week ending 06/04/05 to bolster its assertions.

"Results from the important Memorial Day weekend sales period indicated that Miller Lite continued to perform strongly with consumers," Miller said in statement, "Lite picked up 0.1 of share during the holiday period versus the prior year, despite the recent pricing disadvantages."

And Miller said Lite remains the fastest growing beer in the U.S., and fastest-growing top ten brand.

Also citing Nielsen data for the Memorial Day period, Miller said that no significant share swings occurred during the holiday weekend, despite "aggressive pricing activity" by A-B, Miller and Molson Coors.

The company said Miller Lite actually picked up +0.1 share, despite cycling against last year's growth of +1.1 share. The company noted that the overall Miller Brewing portfolio lost -0.2 share points, caused mainly by decreases of Miller Genuine Draft. Bud Select gained +1.9 share, allowing an overall Budweiser franchise expansion its share by +0.4, despite a -0.8 decline by Budweiser and a -0.6 decline by Bud Light.

Miller also pointed with some glee to drops in the Michelob franchise, which lost -0.8 share points, including a 0.6 share loss by Michelob Ultra. On a combined basis, the Budweiser and Michelob franchises lost -0.4 share points.

Coors Light recovered the -0.3 share it lost last Memorial Day by growing +0.3.

Again citing Nielsen data, Miller Brewing Co. delved into pricing activity in unusual detail. On an average revenue-per-case basis during the two-week Memorial Day sales period, Miller was shown to have increased prices by +1.1% versus the same prior-year period, while A-B decreased prices by 0.2% and Molson Coors held their prices flat. The Bud franchise increased the breadth of its national discounting by 3.0 All Commodity Volume (ACV) points, while Coors Light increased by 6.0 ACV points. Miller Lite increased by 0.5 ACV points.

In a sort of mea culpa to its wholesalers and retailers, Miller execs said they had underestimated the impact of A-B's pricing tactics. "We initially underestimated A- B's aggressiveness," said Doug Brodman, Miller's senior vice president for sales. "And were not able to move quickly enough to address their cuts. We left them with some relative pricing advantages we didn't intend to let them have. But our strategy remains the same, and we're making the adjustments required to eliminate disadvantages that occurred over Memorial Day."

In a statement, Miller Brewing said, "The Memorial Day weekend sales period represents the first major test of the Anheuser-Busch strategy to restore sales and share momentum through discounting. A-B announced in April that it would use significant discounting over the summer to stop the share loss it began experiencing in 2004. In response, Miller has said it does not view discounting as a sound means for restoring momentum in the American beer category, but also made it clear that it would make strategically appropriate pricing moves required to deny any price-driven loss of share to A-B."