During this heated election year, the beverage industry saw a challenger of its own rise up, go after the incumbent leader and pull off a surprising coup. This particular battle was among brewers rather than politicians, but with an irreverent stab at overthrowing “the king of beers” in favor of a “beer democracy,” Miller Brewing Co., Milwaukee, reversed its sliding sales trend, and gave the industry a reason to reconsider it as a serious contender.

When South African Breweries (SAB), based in London, entered the U.S. market by purchasing Miller in 2002, it indicated the company, which had steadily lost share during the previous few years, would require at least three years to turn sales around. This year, about a year and a half ahead of schedule, its flagship Miller Lite brand achieved double-digit growth, picked up a full market share point, and climbed back into the No. 2 spot in the light beer category, which had been taken over by Coors Light.

SAB has said it had several goals for Miller, one of which was to establish itself as a challenger. “We feel there’s a natural space for a strong second player in a market as big as the [United States], and that position should be occupied by ourselves,” SABMiller Chief Executive Officer Graham Mackay told Miller’s distributors during a meeting this year.

Other goals included creating a performance-driven corporate culture, mending wholesaler relationships, and reconnecting with consumers. Last year, SAB brought in new Chief Executive Officer Norman Adami, known to be a tough-talking, performance-oriented leader, from its South Africa business, and according to some, he has been instrumental in defining the company’s new attitude.

“Under the focused leadership of Norman Adami, the company has enjoyed real success in the United States over the last 18 months,” Bear, Stearns & Co. analyst Carlos Laboy wrote in a recent report. “Miller Lite has surged, and the company has taken on the cultural transformation of the previous sclerotic Miller Brewing into a leaner, meaner, world-class competitor.”

Bump Williams, executive vice president and general manager of global consulting at Information Resources Inc., and leader of IRI’s beer, wine and spirits business, says of Adami, “Norman is a very intelligent man, he is very charismatic, he’s great with wholesalers and retailers, and he’s great for the industry itself. He has reinvigorated and refocused the entire wholesaler team and leadership team in Milwaukee.”

To the world at large, the most visible of Miller’s initiatives has been reconnecting with consumers, and much of the credit for the company’s sales increase has been given to a new advertising campaign built around choice. The company fired its infamous Cat Fight girls, dropping the sex-based ads so familiar to the beer industry, and replaced them with humorous “attack” ads.

The company says the campaign was intended to remind consumers they had a choice in beers. It created an election-themed ad that told consumers “America is a democracy” and “beer needs a democracy, too.” Later in the year, it took a lesson from the 1970’s  Cola Wars, creating taste tests under the tagline “Good Call” to compete with Anheuser-Busch’s freshness advertising. By the end of next year, the company intends to hit five million consumers with on-premise taste challenges.

Tom Pirko, president of Bevmark LLC, says an aggressive position is a good one for Miller, and the irreverent humor has helped breathe life into tired brands.

“People were looking at these brands and saying, ‘They don’t have the kind of validity they had in another era. They’re looking old and like they really need to be restored.’ And what happened is that they were restored.

“The advertising has been central to what they’ve done,” he says. “A strategic realignment comes in large part because of the way consumers perceive the brands, and they’re now seeing these brands with a different personality. [Miller is] the Pepsi to Coke, the challenger, the irreverent, take-’em-on kind of thing. It’s the Daily Show. That’s a good position for them, and they shouldn’t forget it.”

IRI’s Williams believes good timing, which includes taking advantage of A-B’s Michelob Ultra and the focus it put on low-carb beer, also played into Miller Lite’s success. “The Miller Lite brand got a lot of support and additional business from consumers’ focus on health, wellness and obesity, and the appeal of light beer,” he says. “The new advertising that Miller came out with really took advantage of that strong consumer need.”

Williams says the ad campaign is just part of the company’s new attitude in favor of innovation. “Innovation could be anything from new sales tools for the field sales force or wholesalers, new types of analysis, new marketing tactics, new packaging,” he says. “It’s not just new products; it’s innovative ways of thinking, and that has been a really big success story for Miller Brewing Co. this year.”

Among other examples of innovation are this year’s packaging changes for Miller Lite, Miller Genuine Draft and Genuine Draft Light. Primary and secondary packaging received a face lift, including new embossed bottles, and the company became the first brewer to use the popular Fridge Pack multipack. It touted the package with a facetious commercial in which its “presidential candidate” reminisced about his humble beginnings in a house that had a refrigerator too small for a traditional multipack.

Of course, advertising alone does not a turnaround make. One of Miller’s biggest challenges has been to rebuild loyalty among its distributor customers, and that’s an endeavor that takes time.

“We know exactly what you mean to our success,” Mackay told distributors at its spring meeting. “That’s why we have worked so hard to earn your trust — and why we are so intent on building this new relationship... The fact is that historically, Miller didn’t put itself in a position where they really could claim your support — and we think we’re doing that now.”
On the distributor front, Pirko says progress has been made, but there is still a ways to go.

“They’ve had some success under SAB because they’ve been able to keep the ranks,” he says. “The distribution system, although not working at great efficiency yet, has become more enthused and a little more loyal to the parent company.”

According to Laboy, “Miller has already made great strides in its relationship with the wholesaler network.” He cites a jump from No. 6 to No. 2 in a Tamarron wholesaler study, and the sentiments of the Miller Wholesaler Council, a group of 11 key distributors, as indications of the warming relationship between the brewer and its distributors.

“Wholesalers indicated that they had not felt this good about Miller in a generation, and that the rebirth of Miller Lite and the repackaging and rebranding efforts against Milwaukee’s Best and High Life are creating real traction in the market,” Laboy says.

But Citigroup analyst Bonnie Herzog believes the road to repairing those relationships may be a bit longer. She recently reported results of a beer wholesaler survey, taken this summer, that indicate while 25 percent of Miller wholesalers believe Miller Lite’s success can be duplicated with MGD and Miller High Life, 75 percent expressed doubts.

According to Herzog’s report, “Even though Miller Lite has been a success, many wholesalers do not believe this success can be repeated with SABMiller’s other brands.”

But Pirko says the Lite effect is starting to shine on other brands as well. “They’ve gotten better about holding this Miller family together. They’ve gotten better about giving integrity to High Life and pulling back MGD, which was looking really beaten up, and giving both of these brands more integrity as part of the product portfolio,” he says.

In addition to Miller brands’ improved sales, the industry has been buzzing with talk of other big changes for the company, namely a possible merger with another big North American brewer, be it Coors, Molson — or now that it appears the two will gain approval for their merger — the combination of the two.

“Strategically, as you look at the consolidation map around the world, and if you look at how business is done in North America, SABMiller and Coors need to be combined,” says Pirko. “Even though they’ve had recent success against A-B, long-term success depends on a lot of other fundamental business factors, starting with simple mass. They need more sales and they need to unite their distribution systems.

“The only way they’re going to hold and continue to grow against A-B is not with clever advertising strategies but with these fundamentals, and that only happens if they unite with Coors.”

In Pirko’s opinion, the deal would have been sweeter if SABMiller had gone after Coors only, rather than the combined company, but in a recent report, Citibank South Africa analyst Grant Swanepoel pointed to potential benefits in a Miller merger with Molson.

“[A] strong position in the Canadian beer market can leverage Miller brands,” he said of a Molson merger. “Coors and A-B are players in the market while Miller is left out in the cold... There is a market for Miller’s products, but not a delivery mechanism, and a deal with Molson could facilitate this.”

It also could boost Miller’s presence in the U.S. import market, he said. But a strong import portfolio also is possible through SAB, which owns dozens of brands in many corners of the world. The company has indicated the United States can expect to see more from these brands in the future.

“Within the SABMiller family, we have brands such as Pilsner Urquell and Peroni, which we firmly believe to have the ability to compete on the international stage,” Mackay told Miller’s distributors.

According to industry-watchers, Miller stands to gain more ground in the year to come if it is able to keep its aggressive stance and continue to build the trust of its distributor partners. IRI’s Williams points to several goals for the company, including keeping wholesalers focused on fundamentals, keeping advertising fresh, continuing innovation, managing pricing, and keeping an eye on the spirits and wine trends that are giving the entire brewing industry a run for its money. “If Miller arms its wholesaler network with insights into total beverage alcohol, and uses tools like store-level data, we’re going to see that momentum continue to grow and snowball,” he says.

And Pirko says, “They need to learn the lessons of why they turned around. They turned around because beer took on a different meaning with consumers. They found a secret formula in terms of the way they communicate, and they can’t forget that.

“They also need to take advantage of the new, renewed confidence with their distributors and retailers, and that means making certain they stay happy,” he says. “They can’t go to war with them like they did in the past. There are new relationships out there that are based on a lot of optimism so they need to keep those systems intact.” BI