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North America

For the first time since 1998, Miller Brewing Company posted growth in retail sales and domestic shipments.


Financial summary
Turnover 4,892 4,778 2
EBITA* 497 424 17
EBITA margin (%)* 10.2 8.9  
Sales volume (hls 000s)      
    – Lager    – excluding contract brewing 47,380 47,258
                     – contract brewing 10,583 10,593
    – Carbonated soft drinks (CSDs) 75 70 8
Lager   – domestic sales to retailers (STRs) 44,380 43,997 1
* Before exceptional credits of US$7 million being exceptional profit on the sale of Tumwater brewery of US$4 million, Tumwater brewery closure costs reversal of US$1 million and integration and restructuring cost reversal of US$2 million (2004: exceptional charges of US$14 million being integration and restructuring costs of US$13 million, Tumwater brewery closure costs reversal of US$4 million and asset impairment of US$5 million).

This growth was achieved in a challenging competitive and economic environment.

Substantial increases in fuel costs have had a marked impact on consumers’ disposable income and spending patterns, whilst US beer industry sales were also impacted by more favourable sales trends for the competing wine and spirit categories. These two factors, coupled with variable weather conditions, make this performance all the more pleasing. Domestic market share grew to 18.5% on a financial year basis.

Domestic beer sales to wholesalers increased by 0.7% during the year whilst wholesaler inventories at year end were one day lower than the prior year. Wholesaler sales to retailers (STRs) increased by 0.9% over the prior year. In the second half, STRs were unchanged versus the prior year on a comparable selling day basis.

Miller Lite has achieved strong growth during the year despite challenging comparatives in the second half of the prior year, and was the fastest growing beer brand in US supermarkets for our financial year just ended, as determined by ACNielsen. The decline in Miller Genuine Draft has slowed somewhat compared with the previous year; however Miller remains dissatisfied with the brand’s performance and further investment will be made behind this brand in the coming financial year.

Increased focus is being applied to the Miller High Life and Milwaukee’s Best brand franchises by both the company and its distributors, and the decline in these brands has slowed. During the year, Olde English and Mickey’s returned to volume growth.

In the worthmore segment, Pilsner Urquell has continued to grow whilst Peroni Nastro Azzurro was launched during the fourth quarter. The early signs for this brand are promising. Brutal Fruit was trial launched in three areas of the country late in the financial year whilst shipments of both SKYY Blue and SKYY Sport were discontinued during the year.

Internationally, volumes experienced varying performance across the territories. During the year Miller’s licensing arrangements with its UK partner were renegotiated. Contract brewing volumes were in line with the prior year.

Total turnover for the year increased by 2.4%, and within this, US domestic turnover excluding contract brewing grew by 3.2%. The level of promotions increased in the fourth quarter as a result of the intensified competition in the market place, and this pricing activity is expected to continue into the coming financial year. Strong gains in both operating efficiency and overall waste reductions have been made in Miller’s breweries. However, during the fourth quarter the first impacts of the significant increases in world commodity prices, particularly aluminium and energy costs, were felt.

Total marketing expenditure was higher than in the prior year, driven by increased spending in the second half. The mix of marketing expenditure continued to shift away from overhead and fixed costs towards consumer-facing media placements and local market activation programmes. Increased resources were also deployed in the sales and marketing departments, and in improving the talent level, training and development programmes as well as depth of cover in all functions of the company. Miller is in the early stages of implementing world-class manufacturing standards in some of its breweries. Progress against cost leadership goals has been in line with expectations and the resulting productivity gains have been reinvested in the core strategic focus areas of the business. These include an expanded sales organisation, with the recruitment of nearly 200 specialised sales force team members, funding of local market initiatives in all areas, the expansion of the on-premise taste challenge with millions of consumer intercepts being achieved, improved brand marketing capability and an increase in marketing expenditure on Miller’s key brands.

EBITA for the year grew 17% to US$497 million despite the challenging competitive and economic environment. Following this strong performance, Miller’s target of achieving a double-digit EBITA margin by the end of its three-year turnaround programme was met earlier than expected, at 10.2% for the year. Capital expenditure was ahead of the prior year and is expected to grow in the short and medium term as increased investments are made behind key focus areas.

The extremely competitive environment coupled with a difficult economic landscape and higher world commodity prices make the next financial year a difficult year to forecast. Industry fundamentals, primarily volume and pricing, are expected to be more challenging, and since February the pricing environment has become increasingly difficult. However, further growth in Miller Lite sales volumes, albeit at a slower rate, is expected to be achieved, together with an improvement in the balance of the portfolio. Miller intends to continue to invest strongly behind its brands, its people and its processes in order to ensure that it remains a strong and viable competitor over the long term.

Milwaukee’s Best Light
Country USA
Beer type American style light lager
Alcohol content by volume 4.5% ABV
Miller’s leading low-calorie brand in the economy segment. It is considered an ‘unwind’ beer and is mostly purchased off-premise and consumed during at-home drinking occasions.

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North America Review of Operations