From The Wire | AlterNet

From the Wire

Beer May Not Be Recession-Proof
Posted on May 15, 2008 at 11:01 PM.

Consumers still want different types of beers, but for a growing number with empty pockets, that means less expensive ones, the chief executive of Miller Brewing Co. said Thursday.

The Milwaukee-based brewer saw a small increase in sales of economy beers like Milwaukee's Best starting in January, at the expense of higher-priced brews, Tom Long told The Associated Press in an interview.

It's a direct result of people having less disposable income as they grapple with higher gas and food prices, he said.

"Thankfully, beers are still quite an affordable luxury, but yes, I think when people have less disposable income every week, something like beer is affected," Long said.

The beer industry has been stable during tough times in the past, but executives are watching carefully to see whether the shift toward cheaper beers continues, he said.

Americans also are spending less in bars and restaurants, and Long said Miller is starting to see a drop in sales to those businesses.

Long spoke as Miller's parent, London-based SABMiller PLC, announced its full-year results Thursday.

In the U.S., Miller's revenue rose 4.8 percent to $5.1 billion in the year that ended March 31. Earnings before interest, taxes and amortization rose 27 percent to $477 million, though that includes a gain of $33 million from a settlement of a dispute.

Sales of Miller's two biggest brands -- Miller Lite and Miller High Life -- were up 1.1 percent each. Miller Lite makes up nearly 46 percent of the company's sales, while Miller High Life accounts for just over 14 percent. That brand's performance, on the strength of its ad campaign urging people to "Take Back The High Life," reversed a three-year decline.

Sales of the company's portfolio of crafts, imports and more expensive beers also grew in the past year. Craft brand Leinenkugel's, Italian import Peroni Nastro Azzurro and caffeinated brew Sparks have each shown double digit growth.

But Miller Genuine Draft's sales were down 10.6 percent as the domestic premium brand continued to struggle. Economy brew Milwaukee's Best also saw declines.

Long noted that a new 64-calorie version of Miller Genuine Draft, called MGD 64, is selling well and will be released nationwide this year.

The company continues to seek new drinks and varieties to appeal to people's expanding palates, he said. Miller plans to ramp up marketing again this summer for lime-and-salt flavored Miller Chill, which saw strong sales during its release last year. With $100 million in revenue, Miller Chill had one of the most successful brand launches in company history, SABMiller said. Consumers still want different types of beers, but for a growing number with empty pockets, that means less expensive ones, the chief executive of Miller Brewing Co. said Thursday.

"We're trying to make sure across the portfolio, we've got something people are going to want to drink," Long said. "Whether they've got a pocket full or they're feeling a little bit pinched, that we have the right beer for them."

SABMiller did not break out fourth-quarter results. The brewer, the world's third-largest, said overall revenue was up 15 percent to $21.4 billion.

Lager volume rose 11 percent, driven partly by acquisitions in China and Europe. Most regions saw growth, including Latin America and Europe, though sales were flat in South Africa. That's where SABMiller lost its deal to brew and sell Heineken's Amstel brand.

The company said it was hoping to make up for lost market share with brands from Dutch brewer Royal Grolsch NV. SABMiller bought the brewer in February and said it plans to introduce the brand in a number of its markets over the next year. Miller will distribute Grolsch in the U.S.

Long said he's spending significant time preparing for the proposed joint venture between Miller and Molson Coors Brewing Co.

The nation's No. 2 and 3 brewers say the pairing -- to be called MillerCoors -- will help them compete against industry leader Anheuser-Busch.

The deal, announced late last year, is subject to governmental approval. Long said it was still on track to clear this summer. He said no decision had been made on where headquarters would be.

Molson Coors Chief Executive Leo Kiely will be the new CEO of MillerCoors. Long will be president and chief commercial officer. Pete Coors, vice chairman of Molson Coors, will serve as chairman of the new company.

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