E-Malt.com News article: United States: MillerCoors to invest in its Leinenkugel’s brand as part of support for craft beer

MillerCoors, US second-largest brewer, is “looking to invest in its Leinenkugel brewery in the next several years,” CEO Leo Kiely was quoted as saying by Chippewa.com on September, 3.

“The Leinenkugel’s brand is a very important part of our brands in this part of the country [Wisconsin],” he said.

“The beer business is a family kind of business. It’s people who want to be part of the business,” Kiely said.

“We have had invested here about $10 million in the last seven years, which is incredible for a brewery of our size,” Jake Leinenkugel, head of the Wisconsin brewery said.

That investment, both in brewing capacity and in marketing, is designed to increase the company’s share of the huge American beer market led by the Belgium-based AB InBev. The formation of MillerCoors was to give SABMiller and Molson Coors a better shot at cutting into the Anheuser-Busch’s market share through joint cost-sharing efforts.

That will mean expanding sales of the MillerCoors base brands of Miller Lite and Coors Light, plus the low-cost options such as Miller High Life.

Leinenkugel’s represents part of MillerCoors’ efforts in the craft brew market, which makes up just three percent of the overall American beer market, but which Kiely says is still an important part of the MillerCoors product portfolio.

“The fastest growing part of the beer business today is the top end — the craft end,” Kiely said. “They are the most expensive brands on the shelf, but value is determined in a different way.”

MillerCoors’ efforts to increase market share of its craft brews has led to the investment in Leinenkugel’s and will lead to more.

“Capacity in the business is defined by a lot of parameters,” said Kiely, asked whether an increase in brewing capacity was in the future at Leinie’s. “Good beer companies invest in their brands and their breweries.”

In Chippewa Falls, the brewery has the capacity to brew twice as much beer as it does now, Kiely said. The shortcoming is in the fermentation tanks. That remains in the future plans for Leinie’s.

Already under construction is a facility for new pasteurization tanks, a project Leinenkugel pointed out was undertaken even in rough economic times, which shows MillerCoors’ commitment to the brewery here, Leinenkugel said.

A major part of the company’s investment in Leinie’s continues to be in branding of Leinie’s products.

Kiely said MillerCoors backs strong marketing efforts because the craft end is so important, despite the small percentage of the overall market share.

“The place today most important is in the craft end of the beer business. It’s where you get your authenticity in the beer business,” Kiely said.

MillerCoors has a double effort in the craft end of the business. When the joint venture was formed, Coors brought along its own craft beers, with the best known being Blue Moon, the second-leading craft beer in the United States.

But just as he rejects the notion that Miller Lite and Coors Light compete with one another, Kiely doesn’t see a problem with MillerCoors having two craft beer branches.

“Us having two strong portfolios in the craft segment is not exactly crowding it,” he said.

Leinenkugel agreed, though the position of Blue Moon was one of the first things he thought of when the joint venture was announced. He noted that Leinie’s had been chasing Coors’ craft beers in some markets. Coors’ Killian Red led to the creation of Leinie’s Red, Leinenkugel said.

Now the two sides of the MillerCoors craft beer efforts are working together.

“We are learning together,” Leinenkugel said. “We look at it as all upside.”

For MillerCoors to catch Anheuser Busch is going to take more than carving out a larger share in the craft beer segment. By far the largest segment of the beer market is in light beers. MillerCoors needs both Miller Lite and Coors Light to advance their shares without just stealing customers from each other.

In the first half of this year, Coors Light picked up some and Miller Lite lost while Bud Light was even, which doesn’t show any real market gain for the new MillerCoors.

On the other hand, MillerCoors has shown double-digit profit growth, according to published accounts.

Kiely acknowledged that a major reason for that is the cost savings associated with the joint venture. Those extra profits, though, make the company stronger to invest in the strategies that will grow the company, Kiely said.

“People watch really closely to see what your motives are. It’s important to make the push that you save money so you can spend it,” Kiely said.

That gets back to that investment in Leinenkugel’s beers and other MillerCoors products.

“Beer is part of the fabric of American life. Not to make it too dramatic, but it adds some fun to life,” Kiely said.


04 September, 2009