USA: SABMiller wants to turn Miller Brewing Co into a redoubtable competitor for rival Anheuser Busch

SABMiller PLC is expected to report decent earnings November 09 but not because of Miller Brewing Co, The London-based company's U.S. unit, badly bruised by last year's price war with larger rival Anheuser-Busch Cos., is losing market share as consumers turn away from mainstream domestic beers, Moneyweb released November 06. That could put pressure on SABMiller to make some kind of strategic move to turn Miller into a more formidable competitor for Anheuser-Busch.

For the third quarter, according to Beer Marketer's Insights, Miller's sales to retailers were down about 5% - its worst showing since it was acquired by SABMiller in 2002.

The weakness has even spread to the company's leading brand: Miller Lite. In a statement on recent trading activity issued in the United Kingdom last month, Miller acknowledged that Lite sales volume had "declined marginally" while sales of its cheaper, economy brands were also off.

"Miller is in real trouble," says industry consultant Joe Thompson, president of Independent Beverage Group.

Prolonged weakness for Miller would be good news for Anheuser-Busch, which controls just under half the U.S. market, compared with Miller's 18%. A-B has already said it will increase prices come the first of the year, and a feeble Miller could encourage it to go even further.

Getting out of this box is the job of Miller Brewing's new chief executive, former Coke executive Tom Long.

Mr. Long is trying to make the brand more profitable for distributors, promising at a recent distributors' meeting "to make you money while you sleep." To help do this, Miller is offering distributors a new program to offset shipping costs, which have soared along with the price of gasoline.

Miller also is trying to blunt the incursion from imported beers by offering its distributors its own brands from SAB's stable of global beers. Beginning in January, Miller will begin importing Colombian beer Aguila and Peruvian brands Cristal and Cusquena. Miller will also expand distribution of Tyskie, the leading Polish brand that is now sold in Chicago and New York City. Imports generally sell for more money than domestic beers do and thus generate higher profits.

Most importantly, it has promised to restore Miller Lite to 5% annual growth by the end of the company's fiscal year in March. Sales of Lite have been hurt by, among other things, the introduction in the U.S. of Heineken's popular Premium Light beer.

If these steps don't work, Miller may have to buy its way out of the problem. Earlier this year it spent $215 million to buy Sparks, an "energy" beer, and another brand, Steel Reserve. But those aren't likely to move the needle much, raising the prospect that Miller may need to make a much bigger buy.

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .