Mega-Brands Lifecycle?
Long Says that's insane

FILED JULY 1, 2010

Dear Client:

Beer Business Daily sat down with outgoing Beer Institute chairman and MillerCoors chief Tom Long for a few minutes at a Pfister Hotel smoky back room in Milwaukee to discuss a few issues that were on our mind. You, my friends, are a fly on the wall.

BBD: The contention that all beer brands have life cycles is taking hold in the industry. Is there any research that shows that this cycle is broken today and that this is a temporary shift? Or are we seeing a permanent shift away from premium regular and premium lights?

Tom Long: I think that's an insane idea. There are brands that are relevant, and brands that are not. That's all. You write one day about this brand lifecycle theory, then you see Pabst and High Life and Coors Banquet come back, it kinda seems like selective facts. You put it in context and what you see are enormous puts and takes in the industry right now. Sure, you've got consumers moving to some below premiums, and some trading up because there's a great deal of fragmentation in the industry. But the longterm health of premium light beers is secure. We're very confident in that. The reason is the single biggest consumer trend in the last decade is the desire for refreshment. Consumers are becoming more conscious of their lifestyle. They select beers for every occasion. And while we're sure they'll drink more different types of beers -- that's why we created a new division -- we're also quite certain that premium lights satisfy more types of occasions than any other kind of beer. For that reason we think that the light beer category will continue to do quite well. When you think about it, Harry, today -- not yesterday -- but today, and tomorrow, consumers will drink more light beers than all other kinds of beers combined. We need to frame that appropriately, because that's the reality. I think light beers will continue to lead the industry for quite a long time, particularly premium light beers.

BBD: Can you get both Miller Lite and Coors Light growing together?

TL: The promise of the joint venture was to take share in premium lights, and to grow in the above premium segment. Now, historically we have kind of swapped growth between Miller Lite and Coors Light, and that's a long term tradition. But we have to grow both of these beers. The math is the math, and the promise is the promise. On the above-premium side, we created a new division under a great beer leader, Tom Cardella, to keep that second promise in the joint venture. We're resolute in keeping all of our promises.

BBD: Is your new craft/import unit a bit of a hedge against the notion that light beers may be on the wane?

TL: Well, no. It's not a hedge. It's a strategy that we put forth in the original documents that we drafted when we created the joint venture -- that we wanted to grow in the above premium segment. And to do that, you have to create a separate organization that competes effectively. The first order of business was to set up the GM model and get that working. The second major order of business is to establish this new structure to focus on the top end of the business. You know, Harry, we have a big business there. It's a $600 million business. It's not chump change. We can grow it faster and better, and now we're ready to.

BBD: What's your view on above-the-line marketing on above-premium, particularly Blue Moon?

TL: We want to be very careful about marketing and growing these brands, so that they grow at a pace that is sustainable. Each of those brands needs to be marketed in their own way. Advertising Blue Moon has been extremely effective. And so our challenge is to grow it intelligently and carefully, so that we're growing the sustainable drinker base year after year. That means, don't go too fast, and don't go too slow. I think we're getting at the right balance there.

BBD: You recently had another distributor council meeting in Chicago. How do you think the relationship with distributors is going today versus a year ago?

TL: We have an extremely open relationship with our distributors. Our Distributor Council dialogs are open and constructive. We listen with intent to hear their point of view and act with purpose. The relationship always gets easier when we're growing and the profits are up, and they always get a little tougher when business is down. So we just need to make sure we've got open relationships and keep our promises and vice-versa.

BBD: Do you think that premium beer is still a value versus other beverages and other beer categories? Are price gaps where they should be?

TL: It's just a fact that the price gaps have changed between the sectors, and to expect that that doesn't change the consumer dynamics is unreasonable. So you see some cause and effect there. But I can't talk about pricing. We seek to price our beers at what they're worth.

BBD: Your role as BI Chairman just came to a close at this meeting. You have been Chairman through arguably the most interesting time in the BI's history. How would you characterize your tenure as Chairman and what did you set out to accomplish?

TL: Any chairman's first order of duty to is to ensure the leadership of the institution, and the second order of duty is to ensure that communication between the board and the management team, and the governance process, is strong. Those are the two things that I'm most proud of, Harry. Bringing Joe McClain aboard, and ensuring that the BI board communicates effectively with the management and the membership were our major accomplishments. I think it's fair to say, that the BI board has never been more aligned, and never had as much communication on the issues as we are today.

BBD: Any comments on the Care Act?

TL: Our position has been consistent and clear on that. It's the unintended consequences that scare me. The fact is, we have so many opponents and challenges out there, and it's so complex, that we really don't even know all of them or when or where they'll pop up. You look at Washington State and that situation, you can't tell me that's not eccentric behavior? Giving the states carte blanche may cause a rash of problems that we haven't even contemplated. No, I think to fight these things we just need to stay unified as an industry.

CARE ACT GETS BOOST FROM CIVIL RIGHTS GROUPS

It seems everybody is throwing in their two cents. Several civil rights and activist groups released a letter to House Judiciary Committee Chairman John Conyers (D-MI) announcing their support of passage of H.R. 5034. The groups included the League of United Latin American Citizens, A. Philip Randolph Institute, National Congress of Black Women, National Coalition of Latino Clergy and Christian Leaders, National Association for Equal Opportunity in Higher Education, Afro-Latino Development Alliance, Healthy Kinder, Inc, Labor Council for Latin American Advancement, League of Rural Voters, and MANA, A National Latina Organization.

The letter cites "numerous studies show that limitations on alcohol sales protect the lives and health of teens and minors. In countries such as the United Kingdom where the sale of alcohol has been deregulated, there has been a substantial increase in youth health and safety problems." The letter goes on to say that big retailers and "foreign owned liquor" companies have "launched a nationwide campaign to deregulate the sale of alcohol much in the same way the UK has done." The letter goes on to declare that "without these laws, shopping malls, department stores and discount retail outlets could effectively transform into bars, providing teens easier access to alcohol at almost any hour of the day. As in the U.K., the deregulation of alcohol would foment public disorder and violence, spark underage drinking, increase drunk-driving accidents, and cause a dangerous spike in alcohol-related disease."

OLD BRANDS, OR JUST OLD MARKETERS?

At the BI meeting I had a long offline conversation with the head of a larger brewer who agreed with Tom that there aren't stale brands, just stale marketing. The proof is that there are still many large brands that are growing despite the economy. When you look outside of beer, there's the story of Old Spice after shave. Old Spice was a tired brand, ridiculed as a relic of the 1970s and getting dwarfed by newcomers like Axe and Tag body sprays. Then came a brilliant and hilarious commercial from Wieden + Kennedy -- which quickly became a YouTube viral hit (11 million views and counting), featuring ex-football player Isaiah Mustafa. Yesterday a new spot hit the internet (watch it here: http://www.youtube.com/watch?v=uLTIowBF0kE&feature=player_embedded )

But it's been a long time coming. P&G's global deodorants general manager, a 42 year old woman named Alex Keith, had her eye on Old Spice's success for several years before this campaign was a twinkle in Wieden's eye. Says Fast Company last year: "Keith's goal is to fend off her rival and push Old Spice into the pantheon of P&G blockbusters. 'I don't see any reason why Old Spice can't become a billion-dollar brand,' she says." She adds, "Old Spice has broad megabrand legs." So yes, old brands can be turned around. We just don't have too many examples to point to in the beer industry. The past is riddled with dead mega-brands that were left to rot in their own stale beer. We'll see if in this newer more sophisticated age in the beer industry if our own mega-brands can reinvent themselves like Old Spice.


ABITA ISSUES SOS BEER FOR RELIEF IN GULF OIL SPILL

New Orleans craft brewer Abita Brewing, along with the Louisiana Seafood Promotion & Marketing Board, announced the launch of a charitable fund and nationwide fundraising effort to assist those impacted by the oil spill disaster. "We feel compelled as one of Louisiana's most cherished brands to help our neighbors and coastal families as they struggle to survive," said Abita chief David Blossman in a release.

The fund is called 'SOS - A Charitable Fund'. Abita will create a new beer in a 22oz bottle called Abita SOS, A Charitable Pilsner. Dave will generate 75 cents for every bottle sold for the fund. All of merchandise net proceeds will go to the fund. Label illustrations of pelicans, fish, shrimp and fishing boats are arranged in the pattern of the distress symbol: S-O-S. It is expected to hit the markets in mid July. The beer is an unfiltered Weizen Pils.

Until tomorrow, Harry

"Camping is nature's way of promoting the motel business."
-Dave Berry

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