Miller Brewing Co., known for its conventional slate of American beers, is hoping a brew with a Mexican twist can help pull it out of a sales slump.
The Milwaukee brewer is launching Miller Chill, a 110-calorie beer flavored with lime and salt, throughout the U.S. this summer after a successful test run in Texas and several other states. Chill is Miller's answer to the michelada, a drink popular at Mexican beach resorts usually consisting of beer, lime juice and ice in a salt-rimmed glass.
Miller, since 2002 the North American arm of London-based SABMiller PLC, plans to spend more than $30 million this year on television and print advertising for Chill. TV ads in local markets included the slogan, "Se habla Chill?" ("Do you speak Chill?"). Miller is counting on Chill to help it reverse a sales decline in North America and regain market share in the face of brutal competition.
In the U.S., beer giants Miller, Anheuser-Busch Cos. and Molson Coors Brewing Co. are struggling to increase sales of their flagship domestic beers, as beer drinkers increasingly reach for imports and small-batch "craft" brews. Miller's prowess in the American beer industry has been gradually slipping since the 1980s, when Miller Lite held the lead in the light-beer wars with its famed "Tastes Great, Less Filling," ad campaign.
Last year, Miller Lite lost market share to the best-selling U.S. beer, Bud Light. Miller's other brands, such as Miller High Life and Miller Genuine Draft, have stumbled for several years. In the year ended March 31, Miller's earnings before interest, taxes and amortization slid 17%, making it the worst-performing of SABMiller's regional divisions. North American sales fell 1% to $4.9 billion.
The brewer hopes Chill, which it calls a premium light lager, will appeal to light-beer drinkers seeking more flavor. Miller is targeting 21- to 35-year-olds with the new brand, says Randy Ransom, Miller's chief marketing officer. "Consumers are looking for new and different ways to experience beer, and they're willing to pay for it," he says. "The core objective of this brand is to take share from competitive mainstream brands by giving light-beer drinkers a compelling reason to trade up."
At stores, a six-pack of Chill, sold in lime-green long-neck bottles, sells for $6.50 to $7, about a dollar more than a six-pack of Miller Lite.
Miller isn't positioning Chill as an alternative to Grupo Modelo SA's Corona, the popular Mexican import often served with a wedge of lime, Mr. Ransom says, stressing that the two beers taste very different.
Beer-industry analysts say the introduction of Chill is an important move for the company. "They need a shot in the arm," says Benj Steinman, editor of the industry newsletter Beer Marketer's Insights. "This is a pretty big bet by Miller."
Miller began researching the possibility of a michelada-style beer about 18 months ago. Its focus groups suggested American beer drinkers would be willing to try it. "There's clearly a move toward Latinization if you've been watching the American consumer," says Mr. Ransom, citing hits such as the Mexican-food chain Chipotle Mexican Grill Inc.
Michelada ingredients can vary; they sometimes include hot sauce and Worcestershire sauce with a pinch of black pepper. Miller tested more than 20 recipes of Chill. It declines to discuss how the beer is made, citing competitive factors. The brewer began test-marketing Chill in March in San Diego as well as in Texas, Arizona, New Mexico and Florida. The beer did so well that Miller decided after four weeks to launch it nationally -- an unusually short trial period in the beer industry. Sales to retailers have been about 40% higher than the company's goals, according to a recent memo sent to the company's distributors.
However, U.S. brewers' past efforts at Mexican-style drinks haven't had big success. In 1999, for instance, Anheuser introduced Tequiza, a "specialty malt beverage" flavored with lime, agave nectar and tequila. Despite some initial success, Tequiza was unable to make a dent in sales of Corona, its main target.
Anheuser, which is known for testing new brands, since March has been trying out a beer called Chelada -- a combination of Bud or Bud Light with Cadbury Schweppes PLC's Clamato tomato-juice cocktail -- in California and Texas. Keith Levy, Anheuser's vice president of sales and retail marketing, says the response has been "overwhelming," particularly in the Latino market. But the company doesn't have plans for a national launch of Chelada, sold in tall 24-ounce cans. "If it continues to perform well, we'll look at further expansion," Mr. Levy says.
Miller's approach is different. "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."
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.
Max Wisniewski, a 46-year-old Milwaukee fireman, has been awaiting Chill's arrival in Miller's hometown since he and his wife bought a six-pack during a trip to Arizona earlier this year. "It was weird seeing Miller in a green bottle, but we really liked it," says Mr. Wisniewski, who usually drinks Miller Genuine Draft Light. "It was a light, summery, very flavorful beer."
Not everyone is a fan. Chill doesn't have "much of a beer taste," Nestor Martinez, a 21-year-old resident of Allegan, Mich., wrote in a posting on BeerAdvocate.com, a Web site for beer enthusiasts. "Tastes a lot like carbonated lime juice with salt."
The Chicago office of WPP Group PLC's Young and Rubicam ad agency is in charge of the campaign for Chill, which will be available throughout the U.S. by mid-July. Miller's $30 million ad budget for the drink compares with $145 million in U.S. ad spending for Miller Lite last year and a little more than $37 million for Miller Genuine Draft, according to TNS Media Intelligence, a research firm that tracks ad spending.
In other efforts to boost its sales, Miller is expanding its distribution of imports brewed by other units of its parent company, such as the Italian beer Peroni, and placing more emphasis on its U.S. craft-beer division, Jacob Leinenkugel Brewing Co. It also recently named a new advertising agency for Miller Lite: the New York office of Bartle Bogle Hegarty. The move came on the heels of a public fallout with its former ad agency, Crispin Porter + Bogusky, whose "Man Laws" ad campaign featuring boxer Oscar de la Hoya and actor Burt Reynolds failed to increase sales. Ironically, a key point of that campaign was that men should "never fruit the beer" -- exactly what Miller is doing with Chill.
"We're in a new era," says beer-industry consultant Joe Thompson, president of Independent Beverage Group. "A few years ago, I would have said, 'You don't want to add things to your beer,' but now consumers want to do that with so many other drinks, like [Energy Brands Inc.'s] Vitaminwater. So they have a good chance of hitting on pretty good timing."