MillerCoors Makes its Case

FILED MARCH 26, 2010

Dear Client:

MillerCoors execs addressed their distributors this week in Las Vegas as your editor lurked in the shadows to bring you some highlights. Their theme: "Grow as one." To get it out of the way, ceo Leo Kiely, wearing a black sweater instead of his trademark blue, acknowledged up front that there are "public policy issues swirling around" the beer industry these days (evidently referring to the NBWA/BI rift), but he assured the crowd that MillerCoors is "unequivocably committed to the three-tier system" but that "we're not going to talk about or promote our opinions" on the rift in this forum. He said that the three-tier system is "irreplaceable" and that it has "health and vitality." "We're here to talk about selling beer. You okay with that? Right on!"

Selling beer? It's been a tough year, but Leo says "I am very confident in our future" and "the odds are in our favor." MillerCoors placed emphasis on several "big bets" including innovation, investing in the brands, doubling down on chains, improving talent, and execution. MillerCoors president Tom Long stressed that to grow globally in the beer business, "you have to grow in the US" and that it "can't be managed centrally."

MillerCoors acknowledged that they've had some supply chain hiccups as a result of spreading out production among their eight breweries. Eastern president Tom Cardella said the problems were mostly with Blue Moon and the Home Draft package (distributors unexpectedly picked up 30k points of new distribution, driving volume up 20%, for the Blue Moon family that put MC on its heels). But Tom maintains that 90% of the product moves are complete and most issues should be resolved before the Summer selling season. Tom advised distributors to beef up inventory so they can "hit it hard this Summer."

One new MillerCoors program that I thought was interesting involves the brewery and distributors co-recruit college graduates to spend two years at distributors before they go to work at the brewery. Tom said it should help transition the old adage of, "Hi, I'm from the brewery and I want to help" to "Hi, I'm from the brewery and I want to learn." The employee's salary will be paid by the brewery. MC will also initiate a college intern program.

Western president Ed McBrien highlighted the success of northern California distributor Elyxir, which gained 1.3 share points last year (ironically, MillerCoors attempted to terminate Elyxir last year, but they settled their differences). You know with Ed, it's all about distribution and execution. Elyxir did it by "world class execution", says Ed, putting signs up in the warehouse saying things like "We will not be out-displayed." Glenn Ely said that he'd never seen so many brewery executives come into his market without playing golf. Ed says that execution and distribution is the key to growth: "No single play has put more points on the scoreboard than distribution." That's why MillerCoors is creating the Distribution Cup, and offering a two cent a case incentive for reaching distribution goals for on-premise and c-stores. Ed also warned against out-of-stocks, which he says is a 7% drag on beer industry sales.

MillerCoors is making a big investment in their chain business, with more people and more money (+$5 million and 40 new people) behind category management. Kevin Doyle said MillerCoors went up 27 slots on a survey of their sales force by Canondale, and got vendor of the year for three years in the row from Buffalo Wild Wings.

Perhaps the creative work on Miller Lite was the most anticipated event of the meeting. MC unfurled several humorous new ads featuring attractive ladies telling guys to man-up in various ways. The ads were well-received with most distributors we spoke with. MillerCoors also coming out with the "vortex bottle" for Lite with grooves in the neck, as well as conducting field taste tests against Bud Light.

But one program that stole the show for distributors was a High Life veterans program, where MC will donate a quarter for every bottle cap or label sent to MillerCoors to the Iraq and Afghanistan Veterans of America, a group which helps soldiers adapt when they return home. That one got a standing o from distribs. Also look for new packaging on High Life, and new executions of the popular Wendel ads.

Coors Light sees more executions from the cold train, NFL and Nascar sponsorships, a new window on 12 packs so you can see the cold-activated cans, a gussied up new tap handle, a new Silver Bullet aluminum pint, and a c-store POS program.

Keystone Light, which was up 14% last year, is fronting a new "smooth" spokesman, Keith Stone, who is kind of a Zoolander meets Earl. The ads are funny, and MC plans to go national with them. New MGD 64 ads take direct aim at Michelob Ultra, even showing Ultra in the ads. And Coors Banquet fronted two new ads with voiceovers from a very long winded Sam Elliott.

For Blue Moon, look for new 12 pack cans coming to a store near you. The cans come with a peeler and a fold down tray for cutting oranges. Blue Moon was up 16% and up 5% in same stores. MillerCoors is increasing national support for the brand.

In an entertaining segment, Tom Long interviewed legendary beerman Bill Coors, who has been on the payroll for 71 years. "I don't work very hard," he said, "but I don't get paid very much either." He added, "The reason I don't use the teleprompter is because I can't see it. I can't read, I can't write, I can't drive, but I can still taste." Mr. Coors was instrumental in developing the aluminum can, which he shared with other companies in order to drive recycling. "Sixty years ago, the so-called metal beer can was doomed," he remembers. There were "ban the can" drives trying to make cans illegal since they inevitably became litter, and most brewers were "dead set against taking any responsibility for our used containers." So Bill developed a 7oz can, which has intrinsic value, and offered a penny a can for redemption. At the time, a competing brewer commissioned a report that showed that people wouldn't recycle, even as consumers in Denver were returning cans. Today it's the "most economical" package, says Bill.

CONGRATULATIONS to Gene Kloss, Mary Trichell, Richard Carey, Kevin Burke, and Vance Reed for becoming MillerCoors Legends. And to Valley Wide Beverage for winning the Founder's Award.

DOMESTIC BEER SHIPMENTS were down another 6.2% in February, according to estimates from Lester Jones at the Beer Institute. Jeez, we can't get a break. January was off 8%. So far this year we've lost about 2 million barrels. That's quiet a hole to have to dig out of.

Until tomorrow, Harry

"Most ball games are lost, not won."
-Casey Stengel

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