Miller Brewing Company Business Information, Profile, and History

History of Miller Brewing Company

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 fiberboard factory, and numerous gas wells. Beginning with a staff of 25, Miller now employs about 9,500 people. The company currently produces more than 40 million barrels of beer per year and is the second largest brewery in the United States.

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, 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 in 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 percent of the brewing company. The Miller stock was owned at that time by Mrs. Lorraine Mulberger and her family, descendants 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 canceled 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 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, soon led to increased sales.

By 1985 reduced calorie beers accounted for 20.5 percent 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 Dangerfield 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&mdashø which Miller owned the U.S. distribution rights. In an $11 million advertising campaign, Miller captured 10 percent 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.

Due to the phenomenal success of Miller Lite, Miller was in second place behind Anheuser-Busch by the early 1980s. But as Miller Lite sales were climbing, sales of Miller High Life began falling. Between 1981 and 1986, High Life sales dropped 60 percent. The decline was offset by Miller Lite and also by the introduction of Milwaukee's Best and Meister Brau, two lower-priced beers that grew to represent 16.9 percent of the company's output by 1988. Equally important in maintaining Miller's market share was the 1985 introduction of Miller Genuine Draft, one of the first premium unpasteurized beers to be made in the United States. Due to heavy advertising campaigns and a unique market position, production of Genuine Draft grew to 2.3 million barrels within the first two years.

Despite the success of Miller Lite and Genuine Draft, Miller was having a hard time capturing market share from Anheuser-Busch. In 1987, combined sales of Anheuser's Budweiser and Bud Light grew 23 percent while sales of all Miller products grew only 1 percent. Parent company Philip Morris began to grow nervous. Early in 1988, Miller's president and chief executive William Howell took an early retirement. He was replaced by Leonard J. Goldstein, a senior vice-president with considerable marketing expertise.

One of the first moves Goldstein made was to purchase the Jacob Leinenkeugle Brewing Company, a 120-year-old micro-brewery that would provide Miller with a foothold in the growing "boutique beer" market. Although the 1989 beer market was sluggish, Miller increased its market to 21 percent, against Anheuser's 41 percent. The following year, Goldstein was named chairman, succeeded by Warren Dunn as president and chief executive. Under the two, Miller's market share continued to increase. By 1991, it had grown to 23 percent, or 43.5 million barrels. Yet Miller's goal of unseating Anheuser-Busch from the number one position remained far off. Although the company was firmly in second place--with a 13 percent lead over Coors--Anheuser-Busch prevailed as the undisputed market leader, with 45.7 percent of the market.

By 1993, many in the U.S. beer industry felt the domestic market was stagnant. With the exception of Genuine Draft, sales of all Miller beers fell in 1992 and income dropped 13.6 percent to $260 million. Coors and Anheuser both cut their workforce in early 1993; by December Miller had followed suit, eliminating 13 percent of its workforce through closing a manufacturing plant in Fulton, New York, and trimming 300 white collar jobs from its headquarter operations.

That year, in an attempt to compete with Anheuser-Busch in the international market, Miller paid $273 million for U.S. distribution rights and a 20 percent stake in Canada's Molson Breweries. Some analysts questioned the move, noting that although Molson was the leading brewer in Canada, its imports to the United States declined in the year preceding Miller's purchase. However, Miller fared better than its competitors in 1993, due to the purchase of Molson, heavy discounting of its Miller High Life brand, and aggressive marketing outside the United States, where sales of Miller Genuine Draft climbed 29 percent. As growing consumer interest in small "boutique brands" continued to threaten Miller sales, the company further protected itself by purchasing the domestic distribution rights to Fosters Lager and other imported beers. Although the domestic beer market remained static, the company continued to see its sales increase through the first half of 1994, fueled by the introduction of Ice House ice-brewed beer, and Lite Ice.

Under parent Philip Morris, Miller's focus in the 1990s was to dislodge Anheuser-Busch as America's largest brewery. Yet by the middle of the decade the company still had a long way to go. Miller sold approximately 41 million barrels of beer a year and had a 21 percent market share, compared with Anheuser-Busch's 67.8 million barrels and 36.6 percent market share. Miller's growth between 1985 and 1995 was slow but steady. Like Anheuser, Miller saw its market share increase as smaller breweries continued to lose ground. The competition between the two largest breweries in the United States continued.