Miller Brewing Company

views updated

Miller Brewing Company

3939 West Highland Boulevard
Milwaukee, Wisconsin 53201
U.S.A.

Wholly-owned subsidiary of Philip Morris, Inc.
Incorporated: 1888
Employees: 11,000
Sales: $2.92 billion

Between the establishment of the Miller Brewing Company in 1855 and the death of its founder in 1888, the firm’s annual productive capacity increased from 300 barrels to 80,000 barrels of beer. This impressive growth has continued to the present day: Miller now operates six breweries, five can manufacturing plants, four distributorships, a glass bottle production facility, a label and fiber-board factory, and numerous gas wells. Beginning with a staff of 25, Miller now employs some 11,000 people. The company currently produces more than 40 million barrels of beer per year and is the second largest brewery in the U.S.

The founder of the Miller Brewing Company, Frederick Miller, was born in Germany in 1824. As a young man he worked in the Royal Brewing Company at Sigmaringen, Hohenzollern. In 1850, however, at the age of 26, he emigrated to the United States. Miller wanted to start his own brewery and regarded Milwaukee as the most promising site, probably because of the large number of beer-drinking Germans living there.

In 1855 Miller bought the Plank Road Brewery from Charles Lorenz Best and his father. These two men had been slow to modernize their operation, but Miller’s innovative techniques made him successful, indeed famous, in the brewing industry.

The Bests had started a “cave-system” which provided storage for beer in a cool undisturbed place for several months after brewing. Yet these caves were small and in poor condition. Miller improved upon the Best’s system: his caves were built of brick, totaled 600 feet of tunnel, and had a capacity of 12,000 barrels. Miller used these until 1906 when, due to the company’s expansion and the availability of more modern technology, refrigerator facilities were built.

After his death, Miller’s sons Ernest, Emil, and Frederick A., along with their brother-in-law Carl, assumed control of the operation which was incorporated as the Frederick Miller Brewing Company. By 1919 production had increased to 500,000 barrels, but it was halted shortly thereafter by the enactment of Prohibition. The company managed to survive by producing cereal beverages, soft drinks, and malt-related products.

Ernest Miller died in 1922 and was succeeded as president by his brother Frederick A. Miller. Frederick A. remained president and chief executive until 1947 when his nephew, Frederick C., became head of the firm. Frederick C. instituted a program of expansion, and was instrumental in bringing major league baseball (the Braves) to Milwaukee, thus strengthening the relationship between the beer industry and the sporting world. The cultivation of this relationship led to increased sales for Miller. But tragedy struck when Frederick C. was killed in a plane crash in Milwaukee during 1954. At the time of his death, the Miller Brewing Company was ranked ninth among American brewers.

The expansion program initiated in 1947 was continued by Norman Klug who became president following Miller’s death. Under Klug’s management, Miller purchased the A. Gettelman Company in 1961, and four years later bought the General Brewing Corporation of Azusa, California. That same year, the firm purchased a Carling O’Keefe brewery in Fort Worth, Texas. By this time Miller had formed a can manufacturing company in Milwaukee with the Carnation Corporation. The plant produced approximately 150 million beer cans a year.

Just before Klug’s death, arrangements had been made for a diversified shipping firm, W.R. Grace, to acquire 53% of the brewing company. The Miller stock was owned at that time by Mrs. Lorraine Mulberger and her family, descendents of Frederick A. Miller. The Mulbergers were paid $36 million but Grace soon discovered that its purchase was significantly undervalued.

Because of its cash reserves and growing importance within the industry, Miller was a prime acquisition target; in 1969 management at Grace decided to sell its interest in Miller to PepsiCo for $120 million. Yet suddenly, and without warning, Grace cancelled the agreement and almost immediately sold its shares to Philip Morris for $130 million. PepsiCo filed suit in federal court to prevent this, but the suit failed.

Philip Morris purchased the remaining shares of Miller’s stock from the De Rance Foundation of Milwaukee in the following year (1970). In 1971 Miller extended its production activities in Fort Worth, obtained a tract of land in Delaware as a possible site for a new brewery, and also acquired Formosa Springs, a Canadian brewery. By 1972 Miller Brewing ranked seventh in the beer industry.

Under the Philip Morris management, Miller’s marketing strategies and advertising campaigns became more important than ever before. Aiming to replace Anheuser-Busch as the nation’s largest brewer, the company expanded its range of brands and penetrated all segments of the market. As a result, production rose from seven million barrels in 1973 to 31 million barrels in 1978.

Led by John Murphy, a Philip Morris executive trained as a lawyer and with notable marketing ability, the company began a thorough study of American beer drinking trends. Miller had been known previously as “The Champagne of Beers,” and its advertising campaigns were directed to appeal to a specific group of white-collar consumers. Murphy revised this strategy and reoriented it toward the large blue-collar market with an emphasis on the work-reward relationship. Miller’s new slogan was: “If you’ve got the time, we’ve got the beer.” This slogan, and the marketing plan behind it, led to increased sales.

By 1985 reduced calorie beers accounted for 20.5% of all beer sales. Miller has the distinction of initiating this market with its Miller Lite, which still remains the number one product in this category. Rather than marketing Miller Lite as a diet beer, the company emphasized its lower calorie content and its unique flavor. Once again it was clever advertising that accounted for Miller’s success. Television advertisements showed brawny men enjoying Miller Lite; the slogan proclaimed: “Everything you always wanted in a beer. And less.” The Miller Lite allstars, included such personalities as Rodney Danger-field and John Madden, have continued this approach in the beer’s award-winning commercials. In 1986 the tagline emphasized the beer’s uniqueness: “There’s only one Lite beer. Miller Lite.”

Miller’s rivals soon responded with low calorie beers of their own, and the company tried to prevent brewers such as Schlitz and Heileman from using the world “Light.” Fortunately for Miller’s rivals—and for the English language—the U.S. Supreme Court ruled that Miller did not have exclusive rights to the word.

Shortly after the introduction of Miller Lite, the company began to market a domestically brewed version of Löwenbräu—a German beer with a 600-year old history—to which Miller owned the U.S. distribution rights. In an $11 million advertising campaign, Miller captured 10% of Anheuser-Busch’s Michelob market. Anheuser-Busch promptly filed suit with the Federal Trade Commission accusing Miller of using deceptive packaging and advertising in order to convince consumers they were buying an imported beer. Later, when Anheuser-Busch introduced its “Natural Light” beer, Miller retaliated by pointing out that there was nothing natural about Anheuser-Busch’s product. The publicity garnered from these “beer wars” helped Miller to improve its standing within the brewing industry; by the early 1980’s, Miller was in second place behind Anheuser-Busch.

After Miller brew beer, it is filtered, aged, and finally packaged. Most packaged beers are pasteurized, but two Miller products are unique because they require no pasteurization; in effect, they are real draft beers in a bottle. Plank Road Original Draft and Miller Genuine Draft are made with special cold filtering process (purchased from Sapporo Breweries in 1985) that removes the yeast residue and allows the beer to be packaged without pasteurization (which, because it involves heating the beer, affects its flavor). Although the shelf life for these two items is the same as other packaged beer (approximately 120 days), consumers have noticed the difference in taste. Sales have skyrocketed since their introduction.

Miller’s presidents since Murphy—John Cullman, George Weisman, and the current president William Howell—have resolutely continued their company’s efforts to dislodge Anheuser-Busch as America’s largest brewery. Yet the company still has a long way to go. At present, Miller sells 40 million barrels of beer a year and has a 20% market share, as compared with Anheuser-Busch’s 67.8 million barrels and 36.6% market share. The competition between the two largest breweries in the U.S. continues.