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MillerCoors Looks To Balance Profit Growth With Volume And Share Gains

August 15, 2011

Chicago-based MillerCoors, the second-largest U.S. brewer with a market share of roughly 30%, has consistently reported net income gains and synergy savings since the 2008 joint venture between MolsonCoors and SABMiller was formed. Volume and significant share growth for the company, however, have remained elusive as the mainstream domestic beer category has been battered by the economic recession and high unemployment among its key consumers. Tom Long, who joined Miller Brewing in 2005 following a long tenure at Coca-Cola, succeeded Leo Kiely as CEO of MillerCoors in June. Shanken News Daily spoke recently with Long about the challenges facing the company and the U.S. beer industry.

SND: With just a few weeks of summer remaining, how would you describe the U.S. beer market’s performance so far this year?

Long: Due to the depth and breadth of the recession, beer hasn’t been as resilient as it has been historically in terms of volume. With unemployment so high, per-capita consumption and overall volume haven’t been strong. Nevertheless, beer remains a great place to be. Revenue in the beer industry remains solid and innovation in the beer category has been tremendous. There is probably more consumer interest in beer today than there has been in decades. So while many beer consumers today aren’t making big purchases, they are drinking beer and a significant portion are drinking more premium beers than they did before. They’re just not drinking nearly as many.

SND: Wine and distilled spirits, however, are not showing the recent volume declines that beer is. Are you concerned that beer is losing share?

Long: Sure we are, but if you look at the earnings of spirits and wine marketers, you get a different picture than volume.

SND: While profits are up at MillerCoors, volume is down about 3 percent for the first six months of the year, with Miller-branded labels continuing to falter. What is the strategy to try to stabilize Miller Lite in particular?

Long: We won’t be satisfied with our portfolio until Miller Lite is growing again. Our marketing will continue to evolve until Miller Lite is growing. We have a great marketing team and a strong agency partner, but we’re always looking to get stronger. With our overall portfolio, however, we’ve done a super job driving net revenue, and we’ve taken share in the light category. So we believe that our overall strategy is indeed working.

SND: Are we likely to see any significant changes to Miller Lite’s marketing platform in the near future?

Long: We have the responsibility to be sure we have the right resources and ideas in place. If you’re asking me if there will be changes to the way we express Miller Lite’s core positioning about taste and masculinity, the answer is yes.

SND: Coors Light, on the other hand, remains solid in a difficult market, and is expected to overtake Budweiser this year as the second-largest beer brand in the U.S. To what do you attribute the continued success of this brand?

Long: Coors Light’s “Rocky Mountain Cold” positioning has authenticity, and its brand positioning is stronger. If you look over the period of the joint venture, the relative price increases on Miller Lite have been higher than on Coors Light. But fundamentally, this is a marketing game. It comes down to great marketing.

SND: What is the plan to maintain the momentum behind Coors Light?

Long: For both Miller Lite and Coors Light, we’ll keep innovating on packaging and delivering refreshing news that is fun and excites consumers. A great example is the recent addition of Ice Cube to Coors Light’s advertising, a move that has been both socially relevant and fun for consumers.

SND: Your Tenth & Blake specialty division, meanwhile, is seeing good performances on brands like Blue Moon. What’s next for this group?

Long: Tenth & Blake is going from strength to strength. Most of the major brands in the craft beer category—such as Sam Adams, Blue Moon and Fat Tire—are in the introductory portion of the segment, or are well-known and asked-for brands. Other sectors are more experimental and occasional, but they are not brand-driven. We believe that to play in these sectors, you should build your core brands. That’s what we’re trying to do with Blue Moon and Leinenkugel, through their seasonal line extensions.

SND: The MillerCoors joint venture has been widely successful in terms of cutting costs and driving profits for the partner companies and shareholders. With that done, what is your key task going forward?

Long: Our key task is to grow organic revenue year over year. We’ve demonstrated that we have a great franchise. We just need to take as much share of the growth as we can, and be sure that these brands are around for decades to come.

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