A-B’s Aluminum Lawsuit Going to Settlement Conference

Set for July 31.

A nine-month old lawsuit brought by an aluminum supplier against Anheuser-Busch is slated to go to a settlement conference on July 31 and August 1, according to a report in an industry newsletter.

Novelis sued A-B in September 2006 for allegedly breaching provisions of a supply agreement. The supplier, which was squeezed by soaring aluminum costs, sought to reformulate its pricing mechanism.

From a report in Platts Commodity News:

"The judge dismissed Novelis' claim for nullification of the supply agreement but left standing Novelis' claim on an obligation to "meet to discuss a new pricing mechanism." Novelis has been trying to negotiate supply contracts with customers to eliminate price caps …"

Brew Blog previously covered the suit here.

The Platts Web site (subscription required) is here.

Talking Innovation with Minott Wessinger

Legendary innovator collaborating with Miller.

Minott Wessinger is one of the beer industry's great innovators.

The inventor of such brands as Sparks and Steel Reserve, he's shown an uncanny knack for creating brands that tap into consumer trends and demand. And he knows how to bring them to market.

Wessinger sat down with Brew Magazine to discuss his thoughts on innovation in the beer industry.

Here's an excerpt from the story:

"Minott Wessinger quit a job in advertising 20 years ago to do something the big brewers weren’t doing well: Create successful new brands.

“Innovation wasn’t a terribly high priority for the bigger brewers and it wasn’t necessarily in the skill set of the big brewers,” recalls Wessinger. “Their business models didn’t lend themselves to innovation.”

"To say it was a good move would be an understatement. Best known for Steel Reserve and Sparks, two brands that created and established leadership in new categories, Wessinger is one of the most successful innovators in industry history.

“The guy has the Midas touch,” Beer Business Daily publisher Harry Schuhmacher told the Milwaukee Journal Sentinel last year.

"Wessinger’s knack for creating new products that tap into consumer trends – and his determination to make sure they succeed in the market – explain why Miller Brewing Company struck a new product development deal with him last year when it acquired Sparks and Steel Reserve.

"Wessinger, 50, literally has the beer business and innovation in his veins. His great-great grandfather was Henry Weinhard. His father created Olde English and the Henry Weinhard’s Private Reserve brands. After years of working in advertising (at an agency that handled Anheuser-Busch, ironically enough), he decided to become a part of the tradition. He launched McKenzie River in 1987.

"At McKenzie River, Wessinger created a business model, and culture, that was geared toward taking risks. McKenzie River kept close tabs on popular culture and consumer trends in everything from music to art. It emphasized hand-selling account by account. It encouraged risk, rewarding people from anywhere in the company who came up with ideas to drive the business.

"And McKenzie River swiftly gained notice with brands such as Black Star and St. Ides. Steel Reserve was launched in 1997.

"The brand he’s most proud of, however, is Sparks. McKenzie River recognized the growing popularity of caffeinated beverages like Red Bull and how bartenders were mixing them with spirits to make cocktails.

"McKenzie demonstrated its cutting edge insight by seeing the Internet as a channel to promote the brand.

“We found the early adopters of Sparks were spending a significant amount of time on the Internet,” he says. “We saw that and embraced it. We spent a significant amount of budget on Internet-related activities. We invited consumers to comment on the Web site and post comments without editing them, creating a community of Sparks users who shared ideas and experiences.”

You can read the whole thing in the latest issue of Brew Magazine. To read it, click here.

If you'd like a free subscription to Brew Magazine, drop us an email with your name and mailing address here.

Can Innovation Drive Heineken?

Mini Keg gaining distribution.

Heineken, which has been struggling lately in supermarkets following a price increase, seems to be getting a boost from increased distribution of the 5-liter Heineken keg can.

Increased distribution of the can was a key reason that Heineken’s share held steady during the four weeks ended June 16, according to beer sales statistics from Nielsen.

The popularity of the can underscores the importance of innovation, the focus of the latest issue of Brew Magazine. Packaging innovation can get retailers and sales forces excited and pique consumer interest.

Near-flat pricing appears to be another factor in Heineken's performance. Both Heineken and Heineken Premium Light have been getting an increase in feature support for six pack cans and 18 packs of bottles.

Heineken’s share in supermarkets was flat for the latest four-week period, according to Nielsen. Heineken Premium Light, meanwhile, lost a tenth of a point of share.

To see the latest issue of Brew, click here (PDF).

To receive a free subscription to Brew Magazine, drop a line with your name and mailing address here.

Miller CMO Talks About Miller Chill

Gives lowdown on brand to BBD.

As Miller Brewing Company’s national rollout of Miller Chill nears completion, company CMO Randy Ransom sat down with Beer Business Daily to discuss the new brand’s performance.

Here are some highlights from the two-part conversation about Miller Chill, a light beer that’s brewed with a hint of lime and salt and inspired by the Mexican chelada.

On the potential seasonality of the brand:

"Look at the Bud Lights, Coors Lights, Miller Lites of the world; it’s surprising to me that they don’t have a higher seasonality curve than they do. We’re assuming it might have a little more of a seasonality curve than those, but there’s no reason to expect it to be a tremendous variation. We’ll have to wait and see."

On sources of volume:

"I would say a good 30 to 40% of the incremental volume is coming from outside the beer category. Within the beer category, we’re getting most of the volume coming from A-B brands, and we’re seeing that Miller Lite is not being affected to any great degree. It’s actually being affected less than we expected in those markets."

On Miller Chill’s higher price point, which positions it in the growing “worthmore” light category:

"One is that it makes people understand that it’s a better beer. And consumers are willing to pay more for their beer. The pricing is not slowing this brand down at all. But it adds a lot of value from an image standpoint to the brand because it does happen to have more to it than a lot of the brands that are sitting on that side of the shelf."

The latest issue of Brew Magazine, which focuses on the state of innovation in the beer industry, took a close look at the development of Miller Chill.

From the issue:

"Miller Chill was born out of the Miller new product development group’s drive to create a beer that would offer “a new kind of refreshment”.

"The group sought to capitalize on the growing popularity of flavors – a trend that holds across all types of beverages – and the continuing growth of light beer.

"After experimenting with a variety of concepts, the group found consumers responded most favorably to a beer with lime flavoring. The most popular concept was inspired by the Mexican chelada, a Mexican beer recipe that calls for lime juice and salt.

"It was a potentially powerful concept. It was refreshing and light. It fit in with the trading-up trend. Its taste profile could draw new consumers to the segment. And it also played into the growing Latinization of American culture, driven by demographic trends as well as the mainstreaming of Mexican culture (think Chipotle).

"Strategically, it fit in with Miller’s effort to increase its participation in the worthmore category. Miller believes the brand has broad enough appeal to move at mainstream velocity with above-premium pricing.
Perhaps the most challenging – and the most time-consuming – part of the project was developing the recipe. That required the brewery creating an entirely new beer that was low in calories and carbs. Then, it had to strike the right balance of flavors.

“Miller Chill utilizes a unique low calorie, low carbohydrate recipe specifically to complement the Chelada style concept,” says Dr. David Ryder, vice president of brewing, research & quality at Miller. “The recipe lends itself to the light/refreshing concept complemented by the lime top note.”

"It took at least six iterations before they hit the right combination, he says.

"The team also developed packaging that communicated the brand attributes. The green bottle signals it’s a premium product. And the beer shot and light green and yellow colors on the packs drive the refreshment message."

The entire issue can be seen here.

If you would like a free subscription to Brew Magazine, please drop an email with your name and mailing address here.

The Beer Business Daily coverage can be seen here and here (subscription required).

Miller to Brew Foster’s in U.S.

Cost savings to go to marketing and sales support.

Foster’s Group Limited and Miller Brewing Company today announced an agreement under which Miller will start brewing Foster’s Lager and Special Bitter for sale in the United States.

Currently, the Foster’s beers sold in the United States are made in Canada by Molson Coors Brewing Company. In November that production will shift to Miller's breweries in Ft. Worth, Texas, and Albany, Ga.

The move to domestic brewing will reduce freight time and expense. The savings will go toward marketing and sales support.

“The decision to shift Foster’s brewing to Miller builds a foundation for more robust growth in the United States,” says Scott Weiss, managing director of Foster’s Amricas.

Says Tom Long, president and CEO of Miller: “Today’s announcement is a critical step as we partner with Foster’s Group to position this brand as an appealing trade-up for mainstream beer drinkers who want a truly unique beer experience. Foster’s has great growth potential and we’re excited about the opportunity to maximize Foster’s growth in the U.S.”

The new brewing deal is a 10-year agreement.

Interestingly, August Busch IV touched on the topic of brewing foreign brands in the U.S. during a recent presentation to analysts.

From Beer Business Daily’s coverage of Busch’s remarks:

"August put forth the possibility of brewing imported beer brands at their breweries here in the U.S. (like they are currently doing, successfully, with Kirin, brewed in Los Angeles). August thinks it can be done. 'With the possible exception of Mexican and Canadian brands, I think imports could be brewed and made here in the US, just like Mercedes is made here. … .Question is, will the consumer buy into that proposition…… In ‘92 or ‘93 you never would have thought that those import cars would be made here.'"

The BBD coverage of Busch's remarks can be seen here (subscription required).

InBev Attacks Penn. Franchise Law

Seeks to overturn restrictions on out-of-state suppliers.

As reported by Beer Marketer’s Insights, InBev is challenging a Pennsylvania law that it contends treats out-of-state and local brewers differently in their relationships with distributors.

Pennsylvania law says out-of-state suppliers must have good cause to terminate arrangements with distributors and can’t unilaterally move brands. In-state brewers are exempted from these and other provisions.

Invoking the Supreme Court’s Granholm decision, as well as the Costco ruling in Washington state, InBev is arguing these laws are unconstitutionally discriminatory.

As reported by Beer Marketer’s Insights, the action springs from a legal dispute between a Pennsylvania distributor and InBev. InBev terminated the distributor in October 2006; A-B became a part of the suit after picking up the InBev brands.

This action comes in the wake of legal efforts by A-B to pick up distribution of InBev brands in other states. Brew Magazine explored this topic -- and the implication of brand shifts for distributors -- in April with a story called “OutBev." The story looked at A-B’s efforts to shift as much as 75 percent of InBev volume within a year.

To see the April issue of Brew Magazine, click here.

Beer Marketer's Insights' home page is here.

Absolut Auction

Fortune makes case as Swedish parliament OKs sale.

The Swedish Parliament on Wednesday voted to privatize Vin & Sprit, the state-owned distiller of Absolut vodka, paving the way for one of the most anticipated spirits sales in recent memory.

According to a story in the Chicago Tribune, Fortune Brands – which markets Jim Beam whiskey and has a joint-marketing deal with V&S in the U.S. – is making its case as the best buyer.

From the story:

"[CEO Norman] Wesley said Fortune Brands offers the Swedish company and its employees the best chance for continuing operations uninterrupted.

"As a partner and not a competitor, we believe Fortune Brands is in a unique position to maintain the momentum of V&S, protect the heritage of the brands and preserve jobs in Sweden," said Wesley."

But Fortune will face stiff competition. According to the Swedish government, three spirits giants are interested in V&S: Diageo, Pernod Ricard and privately held Bacardi Ltd.

The Trib story can be seen here.

Innovation Hits

Five innovations that have changed the beer industry.

Successful innovation -- the kind that drives sustained, incremental growth -- is notoriously difficult. Consider: Between 70 percent and 90 percent of the thousands of new products that hit store shelves in a year are gone within 12 months.

But marketers keep trying to innovate because the potential rewards are so great.

And, indeed, the beer industry looks a lot different than it did 30 years ago -- or even 10 years ago -- because of some major innovations.

The latest issue of Brew Magazine, "The Innovation Code," looks at five of the biggest innovations in the business over the past three decades.

Here they are, excerpted from the issue:

1. Light Beer. Miller Brewing Company changed the American beer industry forever in 1973 when it unveiled Lite Beer from Miller. The “tastes great, less filling” brew struck a nerve with consumers and the beer took off. Skeptical competitors pooh-poohed light beer until they saw the sales … and then rolled out their own. Light beer, including crafts and imports, now represents half of the beer volume in the country and continues to grow.

2. Corona Extra. Why the lime? There’s no definitive answer. But the lime ritual, along with “sun, beach and fun” advertising and the painted bottle have helped transform Corona Extra into a phenomenon. Corona Extra upset the old import paradigm in which brands traded on their (usually) European heritage. Instead, Corona was a passport to a Mexican beach. Once derided as a yuppie beer it’s now the biggest import – and the sixth-biggest beer brand, period – in the country.

3. Craft Beer. San Francisco’s Anchor Brewing is widely credited with sparking the craft beer renaissance in the 1970s. Jim Koch and Boston Beer Co. popularized it by rolling out Samuel Adams Boston Lager in the 1980s. After going through a rough patch, craft beer is back and growing faster than before. Craft brewers, from publicly traded companies like Boston Beer to local brewpubs, are capitalizing on consumers’ thirst for authenticity and strong flavors.

4. Flavored malt beverages. To be sure, flavored malt beverages have fallen off from their peak of a few years ago. But the brands, particularly Smirnoff Ice and Mike’s Hard Lemonade, still command shelf space at retail.And different suppliers continue to experiment with them. For instance, many of A-B’s new product ventures are flavored malt beverages. Flavored malt beverages may not have taken over the world, but they certainly have made their presence felt. According to Nielsen, flavored malt beverages have a 2.3 percent share of unit volume in supermarkets – and 3.9 percent share of dollar volume.

5. Packaging innovation. The container that holds the beer can be almost as big a selling point as what’s inside it. And over the past three decades, the brewers have constantly innovated on the packaging front. Sometimes the goal is to make the brand look cool, sometimes it’s to create packaging for specific environments, sometimes it’s to control costs. New packaging is “probably the safest and cleanest way to innovate with acceptable cost implications,” says C.J. DeCrescente, president of DeCrescente Distributing Co, in Mechanicville, N.Y. “Here is where we take the product that is successful and needs no introduction and we put some life into it.” Some highlights since the 1970s include the aluminum can, plastic bottles from Miller, aluminum bottles from Anheuser-Busch and keg-shaped cans for Heineken.

To receive a free subscription to Brew Magazine, send an email with your name and mailing address here.

To see a PDF version of the issue, go here.

The Innovation Code

Can the brewers unlock it?

Everyone talks about innovation.

What is it?

The latest issue of Brew Magazine, "The Innovation Code," provides an in-depth look at the current state of innovation in the beer industry.

New products are a part of it. So is new packaging and new media. Innovation takes many forms. But the most important part of innovation is that it generates sustainable growth.

The issue explores the opportunities and challenges the brewers face as they try to find new ways to appeal to today’s consumers.

To receive a free subscription to Brew Magazine, drop a line with your name and mailing address here.

From the issue:

Talking about “innovation” is easy.

But creating real innovation – the kind that drives sales and earnings growth – is not.

The big brewers are finding that out.

Long criticized for being innovation laggards compared to their wine and spirits rivals, the leading domestic brewers are in the middle of an unprecedented round of new product launches, new package initiatives and new media forays.

Anheuser-Busch has hit the market with dozens of new products. Coors Brewing Company has introduced “cold activation” bottle labels that turn blue at low temperature. And Miller Brewing Company is rolling out Miller Chill, a light beer brewed with lime and salt. These days, the leading domestic brewers can’t be faulted for trying new things.

But they still need to demonstrate this activity will lead to significant and sustainable incremental growth. Because ultimately only one kind of innovation matters: the kind that connects with consumers and moves cases.

“They will need to demonstrate that this activity leads to sustainable growth,” says Matthew Reilly, a beer industry analyst for Morningstar. “That’s the reason they’re doing all of this.”

It’s more important than ever that the brewers crack the code for real innovation. Beer has been losing share to wine and spirits for years. Some analysts predict most of the industry’s growth in the coming years will come from imports and crafts.

“The companies are realizing that growth will come through innovation,” says Minott Wessinger, a legendary innovator whose McKenzie River Corp. created Sparks, Steel Reserve and other brands. “Innovation has to be a significant component of their growth plans moving forward.”

Says Reilly: “They have to appeal to people that are outside their consumer base.”

Innovation can take many forms. New products and packaging. New marketing approaches. Programs pairing food and beer. New retail display strategies. It can even be figuring out how to communicate a brand’s core attributes in a way that reflects contemporary trends.

The leading brewers are going about innovation in different ways. Anheuser-Busch has been churning out new products to explore new niches – and has been looking beyond beer. Coors Brewing Company has emphasized packaging innovation. And Miller Brewing Company is focusing on a small number of high-potential innovations and partnering with experienced innovators.

A PDF of the issue can be seen here.

Does Michelob Ultra Have Momentum?

Price, distribution helping brand in supers.

Is Anheuser-Busch’s Michelob Ultra gaining traction in supermarkets?

Some trends in recent months suggest the answer could be “yes.”

Michelob Ultra, the low-carb driver of the Michelob franchise, has posted steady, modest growth since March, according to beer sales statistics from Nielsen. For the four weeks ended June 9, Mich Ultra gained a tenth of a point of case share in supermarkets.

The Michelob franchise was flat during that period.

What’s happening?

One potential factor is price. Mich Ultra's national weighted average price in supermarkets has been flat or below year-earlier prices since September 2006, according to beer market analysis by Nielsen.

Another likely factor is increased distribution since last April. That’s being driven by A-B’s bringing back Michelob’s tear-shaped bottle and rolling out Michelob Ultra flavor extensions.

Markets where Mich Ultra has seen significant distribution increases include Memphis, Nashville, Birmingham and St. Louis. These are historically high share A-B markets; could the increases serve as some sort of test by A-B to see if they can jump-start Michelob Ultra?

The Michelob franchise was down last year and in the first quarter of this year, so it’s obviously too early for A-B to declare victory. But these developments suggest that A-B is trying to tap into the premiumization trend with its Michelob franchise, just as it is by picking up distribution of imports and crafts.

To see previous Brew Blog coverage about Mich Ultra flavor extensions, go here.

Will HPL Slim Cans Mean Big Sales?

Heineken spending big to avoid sophomore slump for light brew.

Heineken USA this week breaks TV advertising touting the new 12-ounce slim can for Heineken Premium Light, according to a report in Brandweek.

From the story:

"The 12-oz. HPL can … is a key ingredient in the Dutch brewer’s mission to sell 270,000 more barrels of th low-calorie brew this year. HPL sold more than 570,000 barrels in 2006, the year it was introduced."

The ads from agency Berlin Cameron United will feature HPL cans in settings such as beaches and pools. Keeping with the use of hip music in previous HPL ads, the new ads feature the song “Can I Have It Like That” by Gwen Stefani and Pharrell Williams.

As reported previously, Heineken USA plans to spend $70 million marketing HPL this year.

HPL has seen sales in supermarkets slow recently, according to beer sales statistics from Nielsen. During the four weeks ended June 9, the brand lost a tenth of a point of case share in the channel. Volume declined by 12.1 percent.

The lead Heineken brand lost a tenth of a point of share in the same period and saw volume decline by 2.9 percent.

The Brandweek story can be seen here.

Previous Brew Blog coverage of HPL can be seen here.

The February issue of Brew Magazine explored how importers are making a run at the light beer category, the biggest grower in the American beer business. A PDF of that issue can be seen here.

Diageo Preparing Brazilian Cocktail

New Smirnoff drink inspired by Caipirinha.

Diageo North America appears to be readying a premixed cocktail inspired by the Caipirinha, the national cocktail of Brazil.

This spring Diageo filed a certificate of label approval application with the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau for Smirnoff Caipiroska.

The label describes the drink, which is made with Smirnoff vodka, natural lime flavors and certified colors, as a “Brazilian style lime cocktail.”

It has 21 percent alcohol-by-volume.

The classic Caipirinha is made cachaca, lime and sugar. There is vodka variant.

Diageo has been rolling out a series of premixed cocktails that involve Smirnoff vodka. Spirits marketers are trying to increase usage occasions, and this seems to fit in with that trend.

Diageo also appears to be trying to tap the growing trend of Latinization and mainstreaming of Latin culture, as it is also making a premixed Mojito. Miller Brewing Company is trying to tap into that same trend with Miller Chill, a light beer brewed with lime and salt that’s inspired by the Mexican chelada.

The label application can be seen here.

Brew Blog coverage of the Smirnoff Mojito can be seen here.

A wikipedia entry about the Caipirinha can be seen here.

A-B Sues Distributor

Seeks to confirm its right to nix sale to rival wholesaler.

Anheuser-Busch’s decision to disapprove a merger between an A-B wholesaler and an all-other distributor has landed in the courts.

A-B filed a suit in federal court in Florida seeking a ruling that it acted within its rights in nixing the sale of Eagle Brands to Gold Coast Beverage Distributors, according to a report in the Miami Herald.

A-B is making the move after Eagle demanded $62 million, plus consequential and punitive damages and payment of inventory, from the brewer, according to the filing.

The Miami Herald story includes an emailed statement from David Peacock, A-B’s vice president of business operations:

“This sale would have resulted in an anticompetitive situation that would not be in the best interest of Anheusr-Busch and local consumers of our beer and beverage brands.”

A-B argues that it was within its right to veto the deal.

From Beer Marketer’s Insights.

"AB seeks 'declaratory judgment' that it violated neither its own equity agreement nor Fla franchise law when it disapproved. …One focus of AB's complaint: clauses in AB equity agreement that demand wholesaler 'agrees to maximize sales' of AB products and 'devote greater effort' to AB brands than 'to any other products.'"

The Florida case had been closely watched amid much industry speculation about the eventual creation of a single distributor system. Under such a system, one distributor would handle all the beer brands in a single market.

Miller Brewing Company -- and apparently A-B -- are opposed to the creation of such a system.

The April issue of Brew Magazine explored this concept in depth.

As Brew Magazine reported, the single system is risky. It could invite regulatory intervention. It could trigger opposition from retailers. And it could weaken the three-tier system, as retailers might step up challenges of commerce laws that are essential to distributors’ businesses.

For its part, Miller believes healthy competition is the best way forward and recognizes it has a role to play in helping foster a financially strong distributor network.

The Miami Herald story can be seen here.

Beer Marketer's Insights homepage is here. Beer Business Daily's coverage of the story can be seen here (subscription required).

Previous Brew Blog coverage of the Florida situation and the single distributor model can be seen here.

The April issue of Brew can be seen here.

A-B Pricing Soft Going into the Summer?

Brewer lags Miller, Coors on pricing in supers during Memorial Day period.

Ever since Anheuser-Busch reset prices to fend off gains by Miller Lite, a big question has been whether A-B would again resort to pricing action to boost volume and share.

That question appears worth revisiting in wake of the Memorial Day.

During the two weeks ended June 2, A-B’s Budweiser franchise significantly lagged Miller Lite and Coors Light on pricing in supermarkets, according to beer sales statistics from Nielsen. During the period, Miller Lite’s weighted average case price was up 2.1 percent and Coors Light’s was up 2.8 percent.

The average weighted case prices for Budweiser and Bud Light, meanwhile, were practically flat, up only 0.7 percent. Bud Select was up only 0.8 percent.

Likely helped by soft pricing -- not to mention near-record levels of promotional execution and exceptional feature and display activity -- Bud Light “won” the two-week holiday period. A-B, despite concerns it’s getting distracted by new initiatives, clearly knows how to “stack ‘em high and watch ‘em fly.”

Bud Light gained nine-tenths of a point of case share during the period, according to Nielsen. Its dollar share increased by four tenths of a point of share.

Coors Light gained a tenth of a point.

Miller Lite lost a tenth of a point of case share in supermarkets. During the four weeks ended June 2, it gained a tenth of a point of share in supermarkets, however.

Miller’s share loss was driven by declines in a few key markets. Miller recorded share gains in most of its measured markets.

Despite the soft supermarket performance during the Memorial Day period, Miller’s total business -- including Miller Lite -- was up during the month of May.

Miller Chill National Rollout Gaining Steam

Wall Street Journal examines launch.

Miller Chill has been attracting increased media attention as its national rollout moves ahead.

Today the Wall Street Journal devoted the front page of its Marketplace section to the new chelada-inspired beer from Miller Brewing Company.

The story talks about Miller’s strategy of launching Miller Chill to tap into the growing Latinization of American culture and the popularity of light, refreshing beers.

The story cites its performance at a retail account in the test market of San Diego:

"Sales of Chill have been brisk at the Rockin' Baja Lobster restaurant and bar in San Diego's Gaslamp Quarter, says Bryce Shepherd, director of operations for the West Coast chain. 'People say it's refreshing,' he says."

In the story Miller Chief Marketing Officer Randy Ransom describes how the launch fits into Miller’s innovation strategy. Unlike Anheuser-Busch, which has been testing dozens of new products, Miller needs to focus on a few concepts.

From the story:

"We are not a company that can go out and throw out multiple brands and see if they stick to the wall," Mr. Ransom says. "What we need to do is get very focused and look for high-potential plays."

As noted by the story, Miller Chill has been sourcing volume from rival domestic beers. And according to Miller's research in test markets, about 50 percent of Chill’s volume is coming from wine, spirits and elsewhere outside the traditional beer category.

Since its national rollout started after Memorial Day, Miller Chill has been shipped to more than two-thirds of Miller Brewing Company’s market areas.

Miller Chill will be shipped to the rest of the markets by the end of the month and be at retail nationwide by early July. A national television advertising campaign kicks off the week of July 9.

The Wall Street Journal story can be seen here.

Brew Blog previously reported how Miller Chill's strength in test markets has given it two-tenths of a point of marketshare in supermarkets on a national basis. That story can be seen here.

Miller Taps New Innovation Chief

Hires veteran of Kellogg, S.C. Johnson.

Miller Brewing Company has hired a new innovation chief to lead its new product and packaging efforts.

Jeff Johansen joins Miller on July 9 as vice president of innovation. He brings to the job extensive experience in consumer products innovation. Most recently, he was Innovation Partner at S.C. Johnson, where he established a new product division to identify and commercialize new categories

Before that, he was at Kellogg, where he served as vice president – morning and wholesome snacks.

Miller is increasing its emphasis on innovation, as CEO Tom Long laid out in a presentation to analysts last month.

Among Miller’s innovation initiatives: pushing imports from parent SABMiller plc, including Peroni Nastro Azzurro and Pilsner Urquell; adding line extensions and varietals of existing brands, including Leinenkugel’s; acquiring innovative brands and collaborating with experienced innovators, namely McKenzie River Corp.; and rolling out high-potential new products such as Miller Chill.

“Bringing our strategy to life will require focused leadership to develop and optimize new and existing brand platforms that connect with the consumer, while driving continuous packaging innovation that brings 'new news' and relevance to our products at retail,” Miller Chief Marketing Officer Randy Ransom said in an internal memo last week.

“Jeff’s relentless focus on the consumer and demonstrated ability to build teams that deliver innovative products and packaging make him an ideal leader for Miller.”

High Life Rocking in C-Stores

Biggest share gainer in channel so far this year.

Miller High Life is leading all other beer brands in gaining case share in convenience stores so far this year, according to figures from Nielsen.

Miller High Life, which has racked up five consecutive months of share growth, has added three-tenths of a point of share year-to-date through May 19, according to beer sales statistics from Nielsen.

Miller High Life comes in second in terms of volume growth, behind only Bud Light, according to beer market analysis by Nielsen. Miller’s Steel Reserve comes in third by this measure. (Other Miller brands cracking the top 25: Sparks Plus, Olde English 800 and Icehouse.)

Driven by Miller High Life’s performance, Miller gained two tenths of a point of share in convenience stores for the four-week period ended May 19. Miller High LIfe grew in more than half of all measured markets during the period.

Anheuser-Busch, despite the growth of Bud Light, continues to suffer in a channel it has long dominated. It lost 1.2 points of case share during the four-week period, driven by weakness in Budweiser and Bud Select, and lost 1.6 points of dollar share.

Coors Brewing Company, meanwhile, gained half a point of case share during the period.

InBev-A-B Merger Rumors Surface Again

InBev execs see a deal as destiny, Belgian report says.

InBev executives believe that an eventual merger with Anheuser-Busch “belonged to the nature of things,” according to a report in a Belgian business magazine.

From the Reuters report on the story, which appeared in the Belgian weekly Trends:

"Trends magazine said on Thursday that senior figures at Belgium's InBev believed a merger with Anheuser-Busch at some point 'belonged to the nature of things.'"

Recall in February that a Brazilian newspaper, citing an unnamed investment banker, said a merger had “big chances of happening one day.”

The Belgian report becomes the latest bit of speculation that outside parties are interested in acquiring the country’s biggest brewer. Hedge fund manager Eddie Lampert has been rumored to be interested in the company. Rumors about hedge fund manager William Ackoff’s interest surfaced this week.

The Reuters story can be seen here.

Beer Business Daily mentioned the report here (subscription required).

Snags for Single Distributor

Deals in Florida, Mississippi now off the table.

For months, there’s been speculation that the creation of a single distributor system -- a scheme in which one wholesaler would handle all the beer brands in a market -- was around the corner.

That’s on hold, at least for now.

As Beer Business Daily reported, Anheuser-Busch killed a proposed deal under which an “all other” distributor in Miami would have acquired an A-B distributor. Meanwhile, Miller did not approve an A-B distributor’s proposed purchase of two Miller distributors in Mississippi. Instead, the brewer facilitated deals with other Miller distributors.

As Beer Business Daily notes, Miller -- and apparently A-B -- are “against” a single system.

Pundits who predict the coming of a single-system argue that it makes sense for A-B to sponsor such a system. As the 50 share industry leader, it would be the biggest supplier – and potentially could get the most attention.

But, as reported in the April issue of Brew Magazine, a single system also has risks for A-B. A single distributor with a wide range of brands might pay less attention to long-flagging Budweiser than would a restricted distributor – and that inattention would have significant implications for A-B.

Indeed, as A-B funnels imports and crafts to its distributors it’s also been imploring them to keep focused on the core brands.

As Brew Magazine reported, the single system is risky. It could invite regulatory intervention. It could trigger opposition from retailers. And it could weaken the three-tier system, as retailers might step up challenges of commerce laws that are essential to distributors’ businesses.

For its part, Miller believes healthy competition is the best way forward and recognizes it has a role to play in helping foster a financially strong distributor network.

The Beer Business Daily story can be seen here (subscription required).

Is Hedge Fund Manager Aiming for A-B?

William Ackman reportedly interested in “iconic” company.

Hedge fund manager and activist shareholder William Ackman reportedly wants to invest in an iconic company -- potentially Anheuser-Busch.

The New York Post today reported that Ackman, general partner of Pershing Square Capital Management, has raised $2 billion to invest in an unnamed company with a market capitalization of $30 billion to $40 billion with three divisions.

A-B fits that bill. Other possible targets cited by the report: the hotel chains Starwood and Marriott as well as Kraft.

Notes Beer Business Daily:

“Ackman has a reputation for taking on major American brands like Wendy’s and McDonald’s and forcing aggressive share buybacks and divestiture of non-core assets (like SeaWorld, Busch Gardens, cannery?). “

Says Beer Marketers' Insights:

"But 2 financial sources had told us on Friday that Pershing Square reportedly buying AB shares. And Post article closes by noting big pickup in purchase of $55 options on AB stock yesterday. Options traded heavily May 31 too, said Bloomberg News followup, which attributed this morning's runup to Post article. Pershing Square has previously taken stakes in companies like McDonald's and Wendy's. Stay tuned."

This marks the third published A-B takeover rumor in the past eight months. Previous news reports have claimed hedge fund manager Eddie Lampert and InBev were interested in A-B. Nothing came of either rumor.

A-B’s stock was up 2.73 percent, or $1.47, to $54.62 at 11:25 a.m. EST.

Bloomberg's coverage can be seen here.

Beer Business Daily's report can be seen here (subscription required).

The Beer Marketers' Insights home page is here.

Fortune Exec Says Absolut Tie-Up “Logical,” Report Says

Exec recently met with key Vin & Sprit officials.

The top executive of Fortune Brands, which markets Jim Beam and other spirits brands, says acquiring Absolut distiller Vin & Spirit would be a “logical” move, according to a report in a Swedish publication.

Dagens Industri, a Swedish business newspaper, has reported that Fortune CEO Norm Wesley has met with “key persons in the sales process.”

The story quoted him as saying:

"'We have cooperated for a long time with Vin & Sprit ... It would be a natural and logical step after our close cooperation if we bought Vin & Sprit," Dagens Industri quoted him as saying."

Fortune, a conglomerate whose spirits arm is Beam Global Spirits & Wine, has been identified as a strong contender for V&S ever since speculation first surfaced that the Swedish government would sell the state-owned company.

Fortune and V&S already have a U.S. marketing alliance, and Fortune has the most to lose if another company acquires V&S. Also, Fortune has demonstrated an appetite for acquisition since it and Pernod Ricard carved up Allied Domecq a couple years ago.

A Reuters story about the Swedish newspaper report can be seen here.

Analysts See Miller Earnings Improvement

Sales improvements seen.

Miller Brewing Company’s earnings and sales are seen as back on track after a tough 2006, analysts and observers noted following Miller presentations to analysts last week.

In meetings in London and New York, Miller CEO Tom Long and SABMiller Americas CEO Norman Adami made the case why Miller should be on the rebound after a challenging year. Among the reasons: improved marketing for Miller Lite, increased focus on worthmore brands and cost-savings initiatives.

Analysts reacted positively to the message.

Merrill Lynch, while reducing Miller’s volume forecast, boosted its fiscal 2008 earnings before interest, taxes and amortization estimate to $405 million from $391 million, a 3.6 percent increase.

Stifel Nicolaus analyst Mark Swartzberg said it believed Miller’s EBITA decline in fiscal 2007 “is likely to be followed by stable to growing profits in fiscal 2008 and beyond.”

Cazenove Equities analyst Matthew Webb wrote: “Miller CEO Tom Long successfully challenged the conventional view that Miller’s category and relative price positioning condemns it to perpetual market share erosion. Although this remains a danger, a convincing case was made that Miller can stabilize its share in a growing market, thus producing positive (if modest) volume growth.”

With a positive pricing development, easing of commodity costs and company cost reductions, medium-term earnings growth of 8% is achievable – double that of the current Cazenove Equities forecast, Webb wrote.

Beer Marketer’s Insights and Beer Business Daily, meanwhile, both noted that Miller Lite sales to retailers are on the upswing after declining in fiscal 2007 and that Miller’s “exploit” brands -- including Peroni Nastro Azzurro, Leinenkugel’s and Sparks -- have grown at a double-digit clip.

Smirnoff Takes on the Mojito

Diageo introducing premixed vodka mojito.

A vodka mojito?

Diageo North America, the U.S. arm of the world’s largest spirits company, is trying to capitalize on the popularity of the mojito with a ready-to-serve Smirnoff Vodka Mojito.

The bottle describes it as “A perfect fusion of Smirnoff No. 21, the world’s number one premium vodka, Triple Sec Liqueur, and a dash of mint. A true cocktail experience inspired by the world’s great bartenders.”

The product fits in with Diageo’s efforts to build and extend the Smirnoff brand. Also the spirits industry is trying to increase usage occasions as it seeks to gain share of the total alcohol-beverage market. This premixed cocktail appears aimed at home consumption.

It also builds on Diageo’s foray into premixed cocktails. The marketer previously introduced the Smirnoff Grand Cosmopolitan and the Jose Cuervo Golden Margarita.

A certificate of label approval application filed with the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau can be seen here. An image of the bottle (from the North Carolina ABC Commission site) can be seen here.