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Miller Brewing Intensifies Competitive Summer Marketing

With Miller Lite gaining share over the Memorial Day weekend without discounting, Miller Brewing Company announced it would resume marketing efforts using direct comparisons with the nation's best-selling beer, Bud Light.

Miller also confirmed it had been out-executed in discounting activity by both Anheuser-Busch (AB)and Molson Coors over the recent holiday period, and vowed to adjust any relative pricing gaps where competitor discounts have impacted its sales. When comparing the important two-week Memorial Day weekend selling period ending June 4th versus the prior-year period, Miller actually increased average prices, while Molson Coors kept average prices flat and AB decreased average prices, according to Miller executives.

"We're pleased the Miller Lite brand was able to show so much strength with consumers, despite the fact that we did not fully execute our stated strategy as we intended," said Charlie Frenette, Miller interim chief marketing officer. "And as we manage the pricing issues versus our competitors, we also know we must continue sharpening the marketing messages of our brand."

New television commercials resume direct comparisons with Bud Light, following Miller Lite's recent "taste loss" spots, which did not make explicit comparisons to any specific competitor. With the theme, "The truth hurts" television spots will begin airing this weekend.

"It continues to be very beneficial for us to periodically make direct comparisons with Bud Light based on the functional attributes of the beers," said Frenette. "Bud Light is a massive brand that is becoming increasingly vulnerable to consumer reconsideration, and we'll continue to make the comparative argument for Miller Lite completely explicit.

"Bud Select appears to be meeting AB's objective of stabilizing the overall Bud franchise," said Frenette. "But more important for us, it's intensified the vulnerability of the mother ship, Bud Light, which is why we are dialing up the competitive dialogue."

Miller also said that results from the important Memorial Day weekend sales period indicated that its Miller Lite brand continued to perform strongly with consumers, picking up 0.1 of share during the holiday period versus the prior year, despite the recent pricing disadvantages.

During the two-week sales period covering the Memorial Day weekend, no significant share swings occurred, despite the aggressive pricing activity by Anheuser-Busch, Miller and Molson Coors, according to Miller Brewing officials.

Miller acknowledged that it was not satisfied with the execution of its stated strategy to protect its share position in the face of significant price cuts by Anheuser-Busch.

On an average revenue-per-case basis during the two-week Memorial Day sales period, Miller increased prices by +1.1% versus the same prior-year period, while AB decreased prices by 0.2 percent and Molson Coors held their prices flat, according to Miller data. The Bud franchise increased the breadth of its national discounting by 3.0 ACV points, while Coors Light increased by 6.0 ACV points. Miller Lite increased by 0.5 ACV points (ACV is all commodity volume, which measures all volume sold in grocery stores nationally, and is a common measurement of marketplace penetration).

After reviewing the Memorial Day weekend data, Miller said that it underestimated both the depth and breadth of AB's price cuts, and did not move as strongly as either AB or Molson Coors.

"We said that we would not lead the discounting," said Doug Brodman, Miller's senior vice president for sales. "But we initially underestimated A- B's aggressiveness, and were not able to move quickly enough to address their cuts. That means we left them with some relative pricing advantages we didn't intend to let them have. But our strategy remains the same, and we're making the adjustments required to eliminate disadvantages that occurred over Memorial Day."

The Memorial Day weekend sales period represents the first major test of the Anheuser-Busch strategy to restore sales and share momentum through discounting, according to Miller executives.

AB announced in April that it would use significant discounting over the summer to stop the share loss it began experiencing in 2004. In response, Miller said it does not view discounting as a sound means for restoring momentum in the American beer category, but also made it clear that it would make strategically appropriate pricing moves required to deny any price-driven loss of share to AB.

Pointing to the strong performance of higher-priced imports, Miller president and CEO Norman Adami reiterated the company's doubts about the ability of discounting to restore growth momentum. Repeating a theme from an industry conference in mid-April, he said the industry's long-term health depended largely on the ability of the leading brewers to develop great marketing behind their large brands.

"The results indicate that pricing is not the answer. We are going to play solid defense on the pricing front, but our focus will be aggressive offense on the marketing front," said Adami.

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