MillerCoors said Wednesday that growing its premium light brands, including slumping flagship brew Miller Lite, will be key to its success.
MillerCoors Chief Executive Leo Kiely told a gathering of analysts that MillerCoors, a joint operation between Molson Coors Brewing Co. and SABMiller's U.S. unit, is cutting costs despite high input costs and a weak economy. MillerCoors, which started operating in July, is on track to meet its target of saving $500 million in costs by 2011.
But key to the company's long-term growth, he said in comments webcast from New York, will be expanding its top-selling light brands like Coors Light and Miller Lite, which compete in the light beer segment that dominates the U.S. market.
Coors Light has been growing steadily, while Miller Lite sales have been falling. Miller Lite sales to retailers dropped 7.5 percent in the three-month period ending in December, while Coors Light sales grew 1 percent.
Kiely said Miller Lite slumped because it relies heavily on sales in restaurants and bars — where recession-weary consumers are cutting their spending. He said Miller Lite's so-called on-premise business is one-third larger than Coors Light's.
"When that channel gets hit, Miller Lite gets hit," he said.
The company also shed unprofitable business with that brand and raised pricing, a move that costs volume but will strengthen the business in the long-term, he said.
MillerCoors shared its new Miller Lite ad campaign with investors, saying it will focus on the brand's taste to woo new consumers. One ad played for analysts touted the fact that brewers add hops to Miller Lite three times while it is being made. It also used a slogan familiar with its fans: "Great taste, less filling."
The company plans to show distributors at a meeting later this month how the taste message will affect every aspect of Miller Lite's marketing, Kiely said.
"Our long-term success depends on growing this great brand," he said.
Other executives spoke about growing Molson Coors business in Canada and Britain, two strongholds for the Denver-based brewer that are both hurting. In Britain, where the company's Carling brand is the market leader, business is also slumping due to excise taxes and a ban on smoking in pubs, which has been keeping customers away.
Last month Molson Coors reported a lower profit for its fourth quarter, saying higher beer prices weren't enough to safeguard it from the stronger dollar, high commodity costs and declining sales volumes.
But analysts have a favorable view of the company. They say consumers in general may be cutting their spending, but alcohol shoppers are trading down to less expensive options like beer, over pricier wine and spirits, which will benefit Molson Coors.
Chief Executive Peter Swinburn told analysts Wednesday the company has a solid foundation and is generating free cash, seeing savings from MillerCoors and building its branding around the world. That will make it easier to push through price increases to offset high input costs, he said.
"Pricing is not done in isolation," he said. "It can only be taken if you've got strong brands, and you only get strong brands if you invest in them in the long term."