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Numbers raise hopes that long decline can be reversed

Cheers: Mainstream beer on the rebound

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MILWAUKEE - In an era that has seen the ascension of light beers, strong growth for craft brews and imports, and a veritable 12-pack of new niche malt drinks, spiked with everything from caffeine to lime juice, U.S. brewery executives figure they're doing OK if they can just slow down the rate of decline for that most unhip of beer industry segments: Full-calorie, mainstream, premium-priced beer, a group led by Budweiser, Miller Genuine Draft and Coors Banquet.

So industry observers were surprised by the recent news that Coors Banquet, the original beer behind Coors Brewing Co., but now an also-ran to the more popular Coors Light, actually recorded a sales increase.

"The good news is, even a long, long decline can get reversed," said Eric Shepherd, editor of Beer Marketer's Insights, a trade publication.

It's not known whether a similar reversal can be engineered for Genuine Draft, one of Miller Brewing Co.'s largest brands. But the recent success of Coors Banquet could provide some clues for Miller, which is planning to combine its operations with Coors Brewing in 2008.

Coors Banquet, Genuine Draft, Budweiser and other full-calorie, mainstream beers have seen their sales drop steeply over several years.

A major factor is the surging popularity of light beers, with Bud Light, Miller Lite and Coors Light the nation's three best-selling brews.

Meanwhile, craft beers, such as Samuel Adams Boston Lager and Sierra Nevada Pale Ale, along with Corona, Heineken and other imports, are taking a greater share of the U.S. beer market. Other hot-selling drinks include the new Miller Chill, a light beer that includes hints of lime and salt, and Sparks, a caffeinated malt beverage that Miller acquired in 2006.

As a result, mainstream, full-calorie beers are no longer attracting younger drinkers.

"This segment has been struggling for many, many years," said Sarah Ross, Coors Banquet brand manager.

The slide has affected dozens of brands, including bargain beers, such as Milwaukee's Best, Schlitz, Keystone and Busch. But it's been especially hard on those mainstream brews that have held their prices at a premium level.

Budweiser takes a hit

In terms of raw numbers, the biggest loser has been Budweiser, once the nation's largest brand and the self-proclaimed "King of Beers." Its volume sales in 2006 were 25.8 million barrels, down from 32.7 million barrels in 2002, according to Beer Marketer's Insights. That amounts to a 21 percent slide.

During the same span, Genuine Draft sales fell from 5.1 million barrels to 3.45 million barrels, and Coors Banquet sales dropped from 1.64 million barrels to 1.14 million barrels. Those are drops of 32 percent and 30 percent, respectively.

But retro packaging for Coors Banquet, and new TV spots that literally sing the praises of not changing, are credited with increasing sales during this year's second and third quarters.

For the three months that ended Sept. 30, Coors Banquet grew at what the company called a high single-digit rate. That probably means anywhere from 7 percent to 9 percent.

Coors Banquet is being marketed as a beer that's always been brewed with Rocky Mountain water. New TV spots play up the brand's heritage, saying the beer remains the same even as the world changes.

"We refuse to brew this anywhere but in Golden, Colorado," Ross said. Presumably, that would continue even if Coors Brewing and Miller complete their proposed joint venture-a move that would consolidate company offices, but not close any breweries.

Also, Coors Banquet went back to its yellow label, with a design that "really pops off the shelf," Ross said.

Back to a classic label

That yellow label was featured on the truckload of Coors Banquet that Burt Reynolds smuggled across state lines in the 1977 movie "Smokey and the Bandit." The movie capitalized on the Rocky Mountain mystique of Coors Banquet, which at that time was only sold in 16 Western states. The beer was first sold east of the Mississippi River in 1981, and wasn't available in all 50 states until 1991.

While the reversed decline is noteworthy, the relatively small size of Coors Banquet gives it an advantage compared with Budweiser and Genuine Draft, said Shepherd, of Beer Marketer's Insights.

"I guess it shows you that a brand can get so small that it can finally find its base," Shepherd said.

At Anheuser-Busch, executives recently told the company's wholesale distributors of plans to boost ad spending for Budweiser in 2008, including TV spots that emphasize the brand's heritage and brewing process, according to Beer Marketer's Insights. Anheuser-Busch believes Budweiser is "not a damaged brand," and can again grow, that report says.

Miller has tried for several years to stem the decline of Genuine Draft, its fourth-largest brand.

Last year, Miller launched a marketing campaign with the theme of "Beer. Grown Up." It included TV spots that sold Genuine Draft as a beer with "mainstream sophistication." Those spots were designed to reach drinkers who are older than the beer's industry core customers: men in their early and mid-20s.

But that campaign was dropped after about six months. Since then, Miller has fallen back to selling Genuine Draft on its "cold filtered" process that the company says results in a smoother, better-tasting beer. In an earnings report last week, Miller said Genuine Draft's sales volume dropped 9.3 percent during the six months that ended Sept. 30.

Miller's strategy of marketing Genuine Draft as a more sophisticated beer is the right approach, said company spokesman Julian Green. He said the 2006 spots amount to a poor execution of a good idea.

"Once we zero in on the right marketing message, Genuine Draft will stabilize," Green said.

Miller apparently found the right message for another mainstream, full-calorie brand, Miller High Life. Its sales grew 1 percent during the period ending Sept. 30, with the brand benefiting from new TV ads that sell High Life as an unpretentious beer.

High Life's sales have declined over the past five years, although at a much lower rate -10 percent - compared with Genuine Draft's slide.

However, High Life is sold at a lower price level, positioned between Genuine Draft and Miller's economy brand, Milwaukee's Best. At Avenue Wine and Liquor, on Milwaukee's south side, Genuine Draft and Coors Banquet were recently selling at $4.99 for a six-pack of bottles, compared with $4.39 for a six-pack of High Life.

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