Big Brew-Haha! The Battle Of The Beers

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It may sound like an obvious motivational tool, but not every beer boss is willing, as Miller Brewing CEO Norman Adami is, to tap a keg and chug a beer at a corporate gathering in front of several hundred cheering workers. There are probably even fewer at his level who are given to earthy battle cries like "If you want to run with the big dogs, you can't piss like a puppy" or "Never come to a gunfight with only a knife." But Adami surely needed all the fighting spirit he could muster when, almost 18 months ago, his longtime employer, South African Breweries (now known as SABMiller), dispatched him to Milwaukee, Wis., to help restore its floundering new subsidiary as a serious rival to behemoth Anheuser-Busch.

For a guy who spent the bulk of his career climbing the ladder at his native land's dominant brewer, Adami, 49, has quickly learned to relish the role of feisty American underdog. Since he took the helm in February 2003, eight months after SAB bought Miller for $5.6 billion, Adami and his team of transplanted South Africans have defied the skeptics by starting a remarkable turnaround at Miller. Over the past decade and a half, the company had been neglected, treated as an afterthought by its parent, food and tobacco giant Philip Morris. But thanks to an irreverent ad blitz that has presented Miller as a fresh alternative to the self-anointed "king of beers," Miller has drawn its rival into an unusually bitter media war and almost overnight "given itself a new identity," as beverage consultant Tom Pirko puts it. In its ubiquitous series of mock political commercials, Miller has mercilessly poked fun at Budweiser by declaring that a democracy should have a president, not a king. Taking a cue from the cola wars, Miller has launched its own version of the Pepsi challenge, engaging beer drinkers in blind taste tests, the results of which will form the basis for a new ad campaign Miller announced last week.

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Miller's resurgence has injected a much needed dose of excitement into the $70 billion U.S. beer business, where growth and creativity had gone stale. It comes at a time when hard liquor and wine have captured the imagination (and wallets) of growing numbers of pub crawlers and partygoers. Although Anheuser-Busch's roughly 50% share of the U.S. market still vastly outweighs Miller's 18%--and A-B's sheer size affords it huge advantages in distribution and marketing — Miller is no longer being dismissed as a dinosaur destined to fade away like Schlitz, another once popular Milwaukee beer. In the first quarter of 2004, Miller's volume grew a healthy 3.4%, while sales of its flagship brand and main profit driver, Miller Lite, have grown 18% so far this year. "A-B is a mean machine, with the competitive power of a Wal-Mart or a Microsoft. We can't overthrow the competition, so we have to restore the concept of choice in the marketplace," says Adami, whose stocky frame is well suited to his onetime passion, playing rugby. "Our mission is to be a strong No. 2."

As heated as it is, the escalating battle between Miller and A-B in the U.S. is only one part of a much wider heavyweight fight for beer drinkers around the globe. For decades the beer business has been relatively fragmented, dominated by local tastes and brewers. In recent years, multinational players like Anheuser-Busch, SABMiller, Heineken and Interbrew have embarked on a wave of consolidation, buying up smaller brands in Eastern Europe, Latin America and Asia. In May, SABMiller and A-B briefly engaged in a bidding war for Harbin, the fourth largest brewery in China, which is now the fastest growing and biggest beer market in the world. Though SAB lost out to Anheuser's higher offer, Miller's parent still holds a 49% stake in China Resources Breweries, the country's second largest brewery.