North America
| |
Financial summary |
2004
US$m |
2003*
US$m |
| Turnover^ |
4,778 |
3,408 |
| EBITA** |
424 |
250 |
| EBITA margin (%)** |
8.9 |
7.3 |
| Sales volumes (hls 000s) |
|
|
| – Lager – excluding contract brewing |
47,258 |
33,852 |
| – contract brewing |
10,593 |
8,172 |
| – Carbonated soft drinks (CSDs) |
70 |
55 |
Total Miller shipment volumes, comprising domestic US and international sales, fell by 0.8% for the full year versus proforma fiscal 2003, as compared to a decline of 5.7% during the first half of the year. This improved full year performance was driven by more robust sales in the second half when total shipment volumes grew by 5.3%.
Miller’s US domestic shipments fell by just 0.4% for the year, again reflecting better second half volumes, which increased by 5.9%. Strong growth in Miller Lite sales in the second half was the prime contributor to this improved performance, offsetting declines in Miller Genuine Draft, certain economy brands and the flavoured malt beverage (FMB) brands.
Domestic US industry shipment volumes increased by approximately 1% for the fiscal year despite the influence of the continuing Iraq conflict and higher fuel prices. Miller’s US domestic sales to retailers (STRs) fell by 1.5% versus proforma fiscal 2003, but in the second six months STRs grew by 2% compared with the prior year.
Total turnover declined by 0.8% on a proforma1 basis, impacted by declines in contract brewing and international revenues. US domestic turnover (excluding contract brewing) increased by 0.3% on a proforma basis, reflecting growth in beer revenues largely offset by a decline in FMBs. Industry pricing throughout the year was solid, especially in the fourth quarter of the fiscal year. Miller Lite sales increases had a positive impact on brand mix. However, this was partially offset by adverse geographic and pack mix. Costs of goods sold increased at approximately the prevailing inflation rate.
EBITA for the year, before exceptional items of US$14 million, was US$424 million, an increase of 5.0% over the proforma adjusted prior year1 of US$404 million. EBITA for the second half increased by 18% to US$175 million reflecting the stronger performance described above.
In the past year, we have driven productivity across all functions of the business realising savings in excess of our original US$50 million target. This has been achieved by improving the operation of our breweries, better procurement, more effective marketing spend and a reduced overall headcount. The expected cost benefits from the closure of the Tumwater brewery have also been realised during the year. The current cost base of Miller reflects these changes and although incremental improvement is possible further large one-off savings are not expected. The costs of pensions, healthcare and labour increased above the prevailing inflation rate offsetting some of the benefits achieved through productivity improvement.
Capital expenditure was maintained at previous year’s levels. Projects included information systems upgrades, warehouse automation at the Albany and Eden breweries, ‘fridge pack’ packaging capability as well as a number of quality-focused investments.
Our more disciplined approach to brand marketing, focused on the attributes of our beers, began to deliver benefits in the second half. Our new advertising and promotions around the Miller name began in November 2003 and were followed by specific brand campaigns, first for Miller Lite beginning in December 2003 and subsequently for Miller Genuine Draft, in March 2004. New packaging linking Miller Lite and Miller Genuine Draft has also been launched to maximise the impact of the Miller name. The effect of these activities has been to cause consumers to reconsider Miller products and allowed us to engage with them about choice and taste. Revitalised campaigns will follow for our economy and worthmore brands.
During the year, we segmented the US market into 88 market areas and have developed detailed local market plans in each of our 33 high focus markets. These plans allow our sales efforts to be more appropriately directed, better supporting our wholesalers. We have deployed additional sales people and marketing funds at a local level to further enhance this process. Plans will be completed for the remaining markets in the current year, and we will continue to refine and improve the process. Furthermore, a marketing and sales integration project is under way to drive further improvement.
Good progress had been made towards improving the Miller organisation’s effectiveness. The organisation was restructured in August and approximately 200 new people have also been recruited, primarily in marketing and sales, while maintaining the overall net reduction in salaried staffing levels. Performance management processes are now entrenched across Miller, and work continues on upgrading our talent through ongoing development and recruitment.
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