MILWAUKEE -- Miller Brewing Co. will test market three new versions of Miller Lite as the brewer tries to cash in on a growing consumer preference for craft beers, reported The Milwaukee Journal Sentinel.
Miller was expected to announce that it will test market the Miller Lite Brewers Collection in Minneapolis; Charlotte, N.C.; San Diego and Baltimore beginning in February. The three new versions of Miller Lite will be a blonde ale, an amber beer and a wheat beereach with fewer calories and carbs than a typical beer for that style.
They could help establish a new beer industry category, what Miller Chief Marketing Officer Randy Ransom calls "craft-style light."
"The brewer who can provide a more refreshing and drinkable craft style can stake out a whole new niche in the market," Ransom said in a statement cited by the newspaper. "That's what we intend to do."
Miller said the three new beers will target mainstream drinkers and capitalize on trends that favor light beer, greater variety of beer styles and a willingness to pay more for higher-quality beers.
Light beer makes up roughly one-third of U.S. beer sales volume and is the dominant category in the beer industry. Miller Lite is Miller's largest brand, accounting for 47% of the company's sales volume in 2006.
But craft beers, such as Samuel Adams Boston Lager and Sierra Nevada Pale Ale, are taking a growing share of sales, said the report. That niche accounted for only around 3% of sales in 2006 but enjoyed an 11.7% sales volume increase over 2005. That compares with industry-wide growth of 2%. Miller and other major brewers have been beefing up their craft portfolio.
Miller's main craft growth has come through its Jacob Leinenkugel Brewing Co. subsidiary, which has enjoyed strong sales over the past two years from its Sunset Wheat brand. Only a few craft brewers have rolled out light beers. The most notable has been Sam Adams Light, which has helped boost sales for its owner, Boston Beer Co.
Miller might be counting on Miller Lite's greater familiarity and broader distribution among mainstream drinkers to pull sales, the report said. The company said the three styles selected for test marketing are popular among beer drinkers looking to experiment with craft brews.
The three beers will initially be available in six-pack bottles and priced between mainstream light beers and typical craft beers, the company said.
Meanwhile, with the growth of craft beers, more craft brewers are developing annual plans, assessing markets and generally behaving more like the "mega-brewers" such as Anheuser-Busch and Molson Coors, said the Associated Press.
"When this industry started, it was started by a bunch of engineers and home brewers," said Alan Newman, CEO of South Burlington, Vt.-based Magic Hat Brewing Co. The brewers that have grown "are the ones that have either made the transition themselves to learn how to be more savvy business people or created a partnership with someone who does."
Smaller breweriesfrom the New Belgium Brewing Co., Fort Collins, Colo., to Pyramid Breweries Inc., Seattleare all becoming more knowledgeable about the business of brewing, sparking even more growth in what's now the fastest-growing beer category.
The business know-how is also helping brewers negotiate supply contracts for ingredients, a necessity in a period of sharp price increases for commodities and packaging materials.
Magic Hat is one brewery that has grown with the craft beer category. The brewery makes its trademark #9 brew as well as a hefeweizen called Circus Boy and a number of seasonal beers. The company, which has been in business since 1994, sells its beer mainly on the East Coast and has recently expanded to a number of new southern and Midwest markets.
In the first half of 2007, volume rose 11% and sales jumped 33% from the same period in 2006. The brewery also reported strong growth in new markets, including Michigan, Ohio, Virginia and North Carolina.
That growth, Newman said, is at least partly due to a decision he made to bring on a partner who knew business far better than he did. About three years ago, Newman hired Martin Kelly as a consultant to write a five-year plan for the company. Kelly had spent 12 years at Coca-Cola Co. and its bottler Coca-Cola Enterprises Inc. He had also served as a regional vice president for Miller Brewing Co.
After Kelly wrote the plan, Newman said he realized he didn't have the know-how to implement it well and asked Kelly to come on board at Magic Hat to run the business side of the company. Kelly is now its president.
Kelly's experience has created a far more business-oriented company, Newman said. While Newman runs mainly on intuition, Kelly depends more on data to help choose new markets and distributors. Armed with market research, the two can approach distributors with more informed predictions of demand, they said.
"We play the business in a way that the larger distributors need to have it played," Newman said.
The business focus also has helped the company sign cost-saving supply contracts for essentials like kegs. "The bigger breweries tend to be more efficiently run and they do better planning," Newman said. "They can estimate their needs a lot better."
But, he said, "because our business is well-planned out with a very detailed annual plan, we can communicate our needs to our keg supplier well ahead of time."
Peter V.K. Reid of Modern Brewing Age magazine said Newman's idea to bring on a more experienced business partner is becoming more and more common. Craft brewers, he said, have "attracted top-notch management people," Reid said. "The success of craft is attracting better people."
Hiring a partner with business expertise is one way brewers have become more business-savvy. Other brewers are learning the business themselves. For many, the shift has less to do with increasing distribution and more to do with survival.
The cost of barley, wheat and packaging materials has all gone up in the past year due to crop disease, drought and demand for alternative fuel ethanol which has enticed farmers to plant more acres of corn and less of everything else. In addition, hops is in short supply due to a drought. The higher costs and the hops shortage have caused many craft brewers to scramble to put together long-term contracts from suppliers to make sure they can afford the ingredients and make their beer. But suppliers typically need annual projections for demand and production to make the deal.
Brock Wagner, founder and CEO of Houston-based Saint Arnold Brewing Co., said the higher costs are teaching brewers quickly about the benefits of knowing the business side of their business. "One of the best educational tools is a crisis," Wagner said.
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