When Miller married Coors, Milwaukee feared losing a favorite son. But in the wake of a rocky honeymoon, the couple just might find happily ever after – Brew City included.
This article appears in the August 2013 issue of Milwaukee Magazine.
In the early hours of a crisp May afternoon, Keith Villa rushes into the brewery and retreats with brewmaster John Legnard to the bowels of its 10-barrel brewhouse.
The place opened in 1995 and serves as an incubator for new products. Attached to the brewery is a taproom, and today, like many days, it’s filled with baseball fans. Most are Colorado Rockies fans, and they serve as taste-testers for some of those new and often seasonal beers. Not all beers will pass the test.
“One of the first beers we tried to test was a peanut butter ale,” Legnard says. “It didn’t go as well as it could have. We might have been ahead of the game on that one. People were afraid to try it.”
But then Legnard and his colleagues knocked it out of the park with their taproom testers, pouring what’s become their signature brew – Blue Moon Belgian White. “It wasn’t even called Blue Moon back then,” Legnard says. “It was called Bellyslide Belgian White.”
As Villa shares samples of Blue Moon’s latest concoctions – now brewed under the MillerCoors umbrella – large crowds gather outside for a game between the Rockies and the New York Yankees. Don’t bother looking for Milwaukee Brewers jerseys because this is The SandLot, a tiny facility inside Coors Field, lifeblood of Denver’s lower downtown area and home to Blue Moon Brewing Co.
Eighteen years ago, Villa created a beer and a brand for Coors that’s since become a driving force behind the overall financial health of MillerCoors, though it didn’t always look like that would be the case.
“[Coors] tried to kill us off numerous times,” says Villa, who was studying molecular biology at the University of Colorado when he came across a job for a fermentation researcher at Coors. He decided to forgo a career in medicine and eventually earned a doctorate in brewing from the University of Brussels.
Fifteen miles west of The SandLot sits Golden, Colo., a community of slightly less than 20,000 people nestled in the foothills of the Rocky Mountains. Before Miller and Coors became MillerCoors, Golden housed Coors’ lone brewery, which claims to be the world’s largest. It sits just a few blocks off a main thoroughfare leading into town, where a sign hanging over the road reads: “Howdy Folks! Welcome to Golden. Where the West Lives.”
This is certainly not Milwaukee. Not in location, not in dialect. But today, five years after the MillerCoors merger, Milwaukee and Denver share something that transcends both. They share beer.
Back in the Midwest, on Milwaukee’s West Side, the sweet smell of wort permeates the air surrounding the MillerCoors brewery on a sticky spring afternoon. Inside, production lines hum around the clock as vast quantities of beer – Miller Lite, High Life, Leinenkugel’s Summer Shandy and even Coors Light – are poured into bottles, cans and kegs.
This is a glimpse into the new life of Miller, the last major brewery standing in Milwaukee. But thanks to that MillerCoors merger, it no longer belongs to Milwaukee alone. These days, the city shares Miller with the three Cs – Coors, Colorado and Wisconsin’s southern neighbor, Chicago, home of MillerCoors headquarters.
When Miller Brewing Co. and Coors Brewing Co. joined forces in 2008, the local trepidation set in immediately. Fears arose that Miller would go the way of other once-prominent Cream City brewers such as Schlitz and Pabst. They disappeared from the city’s landscape, their former breweries in Downtown Milwaukee transformed over the years into offices, retail shops and hotel space. Worries deepened when MillerCoors picked Chicago, not Milwaukee, to house the joint venture’s HQ.
But the intervening five years have softened the initial scare, and MillerCoors remains a vital – even thriving – part of the local economy.
“We’re brewing more beer here in Milwaukee than we did at the onset of the joint venture,” MillerCoors Chief Executive Officer Tom Long says on the sun-drenched patio at the Frederick Miller Pub. It’s an employee watering hole in the company’s main office building along Highland Boulevard that overlooks the Milwaukee brewery.
Long is a former president of Coca-Cola Co.’s northwest Europe division. He has an MBA from Harvard and served as president of Miller Brewing prior to the merger. Now, he can confidently say that Miller-
Coors has ended up as a formidable competitor to its main and heated rival, the North American brewing industry’s St. Louis-based behemoth, Anheuser-Busch Cos. And Miller-Coors’ annual net income is up, too.
But the joint venture has come with challenges – the rise in craft beer, the struggle to sell Miller Lite, even the ability to brew Coors Light outside of Colorado. And there’s still that question of just how strong a commitment MillerCoors has when it comes to Milwaukee.
Most mornings, big crowds pile onto Amtrak’s Hiawatha train and head for Chicago. And on many mornings, you can spot Tom Long among them. Because even though he spends much of his work week in the Windy City (when he’s not traveling to other MillerCoors facilities, including the Milwaukee campus), Long still makes his home in the northern Milwaukee County suburb of Fox Point. Several MillerCoors employees, Long says, subscribe to that blueprint – live in Milwaukee, commute to Chicago.
“We’ve been able to keep the campus here strong and vibrant while establishing a headquarters in neutral territory,” he says.
Chicago was a natural choice for Miller-Coors HQ, Long says, because of the availability and diversity of talent, primarily in sales and marketing. And employment there has been expanding. As of April 2013, about 445 people worked in the high-rise on South Wacker Drive across from the Willis Tower, compared with about 310 at the end of 2009. Upward of 200 administrative jobs shifted from Milwaukee to Chicago after the launch of the joint venture. Dozens of other Miller positions were eliminated because they were redundant with Coors’ operations.
This left Miller with a seriously diminished white-collar workforce in Milwaukee, stoking community fears that the site’s office building would end up mostly vacant. But employment of office personnel has been rebounding here, too, and the number of employees at the Milwaukee campus is approaching the levels of five years ago.
Prior to the MillerCoors creation, the offices – home to corporate customer service, finance, human resources, engineering, packaging and brewing – held around 975 employees. As of July, there were 600 employees in the administrative offices. All told, the Milwaukee brewery employs about 750 workers.
Meanwhile, MillerCoors plans to add 240 positions in the Milwaukee office facility over the next year as part of what the company dubs a “business transformation” project. The initiative will streamline and standardize processes, improve decision-making through data and analytics, and establish cost-savings initiatives so that funds can be reinvested elsewhere.
“We’re continuing to adjust to changes in the American beer industry,” Long says. “When we put the joint venture together, we thought we’d create a stronger, more powerful brewer with a lot more opportunities to compete. Since that time, the earnings of the company have blossomed very nicely, far greater than the two companies separately would have done.”
Long is a North Carolina native who speaks with a noticeable southern drawl, and he admits to favoring Budweiser and other Anheuser-Busch brews in his younger years. These days, he touts MillerCoors’ improved profits, a more diverse portfolio of brands and various cost-savings efforts. Annual revenue has increased 3 percent to $7.76 billion since 2009.
In the first quarter of 2013, overall sales growth from other MillerCoors-owned brews – including the Blue Moon and Leinenkugel’s family of brands, along with newcomers like Redd’s Apple Ale and Third Shift Amber Lager – sparked a 1.1 percent boost in revenue to $2.057 billion, compared with $2.035 billion for the first three months of 2012. MillerCoors saw net income rise 19 percent in 2012 to $1.19 billion, compared with $1 billion in 2011. Sales for the year jumped 2.4 percent to $8.97 billion, compared with $8.76 billion in 2011.
In the same period, however, MillerCoors saw profit dip 1.2 percent to $271.9 million, compared with $275.3 million for the same period a year earlier. Coors Light, which had enjoyed an extended period of growth, saw its sales decline, catching some industry observers by surprise. And sales of Miller Lite also dropped, but given the performance of the brand in recent years, that was hardly a shock.
“The thing we haven’t fixed yet is Miller Lite, which has been in a 2 to 3 percent decline every year,” Long concedes. “It’s a huge beer with a very loyal drinker base. But we haven’t cracked the code on it yet.”
The struggles of Lite, which is the second-best selling MillerCoors brand behind Coors Light, continue to be top of mind for the company’s leaders. Miller Lite is strong with beer drinkers 35 years and older, but the brand hasn’t been successful in attracting drinkers from the millennial generation, those younger than 35, which has played a part in Lite’s decline. Other headwinds include an ongoing consumer shift to stronger craft brews.
Eric Shepard, executive editor of Beer Marketer’s Insights, a Suffern, N.Y.-based industry trade publication, says MillerCoors faces a problem in the market with Miller Lite going head-to-head with Coors Light.
“It’s harder to sell two competing light beers out of the same shop,” Shepard says. “Marketing for Miller Lite hasn’t done what the efforts have done for Coors Light.”
The joint venture has worked well for Miller and Coors from a purely financial perspective, he says, because it has generated considerable cost savings. But it hasn’t worked in reversing the ongoing decline in shipments of beer, which also has been an issue for competitors like Anheuser-Busch. “The numbers are pretty ugly,” Shepard says.
MillerCoors’ total shipments have declined 8.6 percent since 2008, from 64.5 million barrels to 58.9 million barrels in 2012, according to Beer Marketer’s Insights. Anheuser-Busch’s shipments over that same period fell more than 7 percent to 99.2 million barrels.
Shipments of Lite between 2008 and 2012 plummeted 17 percent to 14.7 million barrels, and Miller High Life shipments fell 12 percent to 4.5 million barrels. Meanwhile, Coors Light shipments jumped 5 percent to 18.7 million barrels in 2012 from 17.8 million barrels in 2008.
Breathing life back into Lite is crucial to the viability of the Milwaukee brewery.
“It’s two days a week of our production, so it’s still very, very important to us,” says Andy Moschea, vice president of the Milwaukee brewery. “It’s over half of our keg volume. Without Miller Lite, our keg line wouldn’t run half the time. It’s vital to this brewery.”
So the brand is getting a makeover. MillerCoors debuted a new Lite bottle, one wider at the top and narrower in the middle. Touted as having “broad shoulders” and a “contour grip,” it’s being sold exclusively at on-premise accounts, such as bars and restaurants, where Lite has struggled to gain traction. The Milwaukee brewery was the first in the Miller-Coors network to produce the redesigned bottle, which hit the market earlier this year.
“We’re really looking to get re-energized with a new generation of drinkers,” says Ryan Reis, senior brand director of Miller Lite. “We’ve been looking for that message that will click. It always comes down to capturing the imagination of drinkers.”
Look closely and the message appears in the new series of MillerCoors ads, created by New York advertising agency Saatchi & Saatchi. They feature celebrities such as actor Ken Jeong of The Hangover series, mixed martial arts legend Chuck Liddell and musician Questlove. It’s not exactly A-list talent, but that’s the way the company insists it wants things. Long and the marketing team are convinced that Jeong, Liddell and Questlove will resonate more with the “common” person. The strategy is opposite that of Anheuser-Busch, which tapped Justin Timberlake to promote Bud Light Platinum.
“We’re using folks that consumers recognize,” Long says. “It seems to bring a certain social currency to the beer. But the jury is still out on that.”
Miller Lite’s use of celebrities dates back to 1974, when the extremely successful “Tastes Great, Less Filling” campaign made its debut. The immensely popular spots used sports stars, including John Madden and longtime Brewers broadcaster Bob Uecker, as well as the likes of comedian Rodney Dangerfield and writer Mickey Spillane to tout the love of Lite, the first low-calorie beer to hit the nationwide market. Many of the commercials still enjoy nostalgic reruns on YouTube.
MillerCoors did enlist one A-lister for its latest campaign – actor Vince Vaughn. Although he didn’t film for the latest spots, one ad for Lite shows highlights of Vaughn’s recent movie, The Internship.
“It feels a little gimmicky and temporary,” says Felicia Miller, an assistant professor of marketing at Marquette University who worked in the brand management unit at Procter & Gamble Co. for nearly a decade. “It seems like MillerCoors is more focused on creating a buzz instead of taking a step back and seeing where Miller Lite truly fits into the overall portfolio.”
Long knows where it fits.
“We still like having our triangle of beers. Miller64 for low calories and low alcohol. Lite, where the focus is on its taste profile and low calories and carbs, and then there is refreshment with Coors Light,” he says. “We like having those pure plays. It’s why we’ve been able to take more share in the light beer category.”
Miller Lite remains the top-selling beer in the Milwaukee market and in Wisconsin, says Reis, whereas Coors Light has become the second-best selling beer brand in the country. Shipments of Lite, which ranks fourth among all U.S. beer brands, dropped by 3 percent from 2011-2012, while Coors Light climbed 2.4 percent during that same time period, according to Beer Marketer’s Insights.
“In the evolution of the American-style light lagers, Miller Lite has been a bigger national brand for years, along with Bud Light,” says Tom Cardella, the senior-most MillerCoors executive stationed in Milwaukee. “With Coors Light, it didn’t move east of the Mississippi until the early ’90s and didn’t establish itself on the East Coast until the mid-1990s. So you have a lot of organic growth that’s still occurring there. Because of the strength of Miller Lite, Coors Light remains extremely underdeveloped in the Upper Midwest.”
But that’s changing.
“Coors Light volume in this geography has skyrocketed,” Moschea says. Growing the Coors portfolio of brands, particularly Coors Light, in the Midwest has bolstered the Milwaukee brewery. As Coors Light gains popularity in the Midwest, production in Milwaukee expands.
“Coors Light has a core equity that really does resonate with consumers,” Cardella says. “That core equity is that it’s the most refreshing beer in America because it comes from the birthplace of the Rocky Mountains and all that imagery that is associated with it.
“With Miller Lite, we’re continuing to look for the messaging that’s going to provide stronger equity with the consumer.”
cardella has become the face of MillerCoors in the Milwaukee community, and he never seems to be at a loss for words when talking beer.
His official title is “president and beer merchant” of Tenth and Blake Beer Co., a MillerCoors division designed to better compete with craft brewers. Long calls its creation a major milestone in the joint venture’s five-year history.
“Giving that separate focus to create and build stronger, smaller brands is just what consumers are asking for,” Long says. “We’ve been able to lever the Blue Moon franchise, significantly grow the Jacob Leinenkugel brand and its Summer Shandy phenomenon, and it’s all because we were able to give that group a dedicated sales force and marketing arm, and give them a chance to go and incubate those brands with our distributors the way that so many other small breweries have been able to do.”
The Tenth and Blake name is derived from two sources: the small brewery on 10th Street near Downtown Milwaukee that produces beer for Chippewa Falls-based Leinenkugel, a longtime Miller Brewing subsidiary; and downtown Denver’s Blake Street, which runs alongside Coors Field, home to the Blue Moon Brewing Co. at the SandLot.
Tenth and Blake also oversees brands under the portfolios of AC Golden, Blitz-Weinhard Brewing Co., Crispin Cider Co. and Fox Barrel Cider.
“When we created the joint venture, I didn’t know that we’d need to or want to create Tenth and Blake, or need to or want to innovate the way we have,” Long says. “But the American beer drinker just keeps changing. The merger has given us the ability to be flexible.”
Tenth and Blake recently bought a 110,000-square-foot Milwaukee building at 918 W. Somers St. that once housed a Sara Lee bakery. It will be used to expand Tenth and Blake’s adjacent Milwaukee brewery.
“It will position the brewery as more of a craft-centric operation for smaller runs,” Cardella says. “We saw an opportunity with the property. We were renting space there to store materials. There are a lot of different options for expansion.”
The brewery now produces Leinenkugel’s Honey Weiss and Big Eddy beers, Cardella says, and likely will start producing some of Blue Moon Brewing Co.’s specialty beers.
Tenth and Blake has been working to build out a much deeper lineup for the Blue Moon franchise. Belgian White accounts for about 90 percent of Blue Moon’s business. It’s an important beer in the overall MillerCoors portfolio, thanks to its status as one of the “major gateways” for entry-level beer drinkers, Cardella says, who are “starting to migrate into the craft world.”
“We felt it was really important to build out Blue Moon so that we are providing more styles and even more intense flavors to keep consumers within the franchise,” Cardella says.
Tenth and Blake has experienced volume growth of roughly 15 percent in each of the three years since its inception, but its success isn’t limited to Blue Moon. Leinenkugel’s Summer Shandy, a wheat beer and lemonade mixture, is another success and is developing into “quite a sizable business.”
“Summer Shandy is really starting to see traction outside of the upper Midwest,” Cardella says. “We came off an unbelievable year last year when the business almost doubled.”
Trying to piggyback on Summer Shandy’s success, Leinenkugel’s introduced Lemonberry Shandy and Orange Shandy.
“We think shandy can become a subsegment of the beer category,” Cardella says.
Tom Cardella (left) and Tom Long at the Miller Inn on the Milwaukee brewery grounds. Photo by Adam Ryan Morris.
At the ripe age of 158, MillerCoors’ Milwaukee facility boasts the country’s oldest operational large-scale brewery (defined as producing at least 5 million barrels annually). The only brewery of any size that’s older is the D.G. Yeungling & Son facility in Pottsville, Pa., which dates back to 1829. So you might expect that the Miller facility needs some improvements.
“Our capital investment in the Milwaukee plant over the last two years has been two or threefold what it normally would be,” Moschea says. “There’s been significant capital investment in this plant to keep it competitive.”
It’s a reassuring sign for those who worried that Miller and Coors joining forces might mean no more Miller in Milwaukee. After all, this is where the Brewers play in Miller Park.
The Milwaukee brewery is spread across several buildings, many of the multistory variety, and across streets, creating a host of challenges in efforts to improve the facility’s efficiency.
“It isn’t necessarily conducive to modern manufacturing practices,” Moschea says. “It says something about our ability to not just be viable but to be a cutting-edge, entrepreneurial plant. We make no excuses.”
More than $100 million has been invested in upgrading the Milwaukee brewery since the merger, according to the company. Investments have included new mash mixers and new, smaller vertical fermenters.
Those vertical fermenters have allowed the brewery to produce brands that it couldn’t make previously. “It unleashed a whole separate list of capabilities and volume for this plant,” Moschea says.
MillerCoors recently completed construction of a new filtration building on the site. That building, which became operational earlier this year, is located off North 41st Street and “will allow us much greater flexibility in changing between brands while doing it more quickly and with less waste,” Moschea says.
Funds have also been committed to upgrading packaging lines. “There were two lines that barely ran, one a couple of months of the year and the other didn’t run at all,” Moschea says. “We retrofitted one to become a craft bottle line, but it can be used for mainstream brands, too. We retrofitted the other line so that it could produce tall, slim cans, mainly for the Keystone and Coors Light family of brands.”
The investment expanded the number of fully operational packaging lines at the brewery to eight from six.
Other projects have included improvements to the brewery’s powerhouse and the installation of a new cooling infrastructure.
“We’re viewed to be one of the most reliable breweries in the network, which says a lot,” Moschea says. “Basically, our warehouse only stores about a day’s worth of production. It doesn’t allow you a whole lot of room for error.”
Environmental sustainability efforts have been an area of focus at the Milwaukee brewery, which has dramatically reduced water usage over the last two years through improved practices by employees, better processes and a major investment in a pasteurizer water reclaim system, which is saving an estimated 75 million gallons of water each year. “We are getting close to world-class numbers,” Moschea says.
And with an eye toward the future, MillerCoors purchased another industrial building on West Wells Street adjacent to the Milwaukee campus. “We think it will play into our brewing strategy long term,” Moschea says.
All of these investments helped support a boost in activity at the Milwaukee brewery, which produced slightly less than 7 million barrels per year prior to the merger. Moschea says the forecast for this year is 8 million barrels, which will primarily serve an 11-state area, with Illinois customers accounting for about 31 percent of volume. Wisconsin ranks second at 21 percent, Moschea says, followed by Minnesota at 13 percent.
“The essence of the joint venture from an operations perspective has been to brew, package and ship the product as close to the consumer as possible,” Moschea says. “We sit in a fabulous beer market.”
Combining the Miller and Coors distribution networks has allowed the delivery of much fresher beer to wholesalers and retailers, Long says, because products are being shipped shorter distances. It’s another benefit of the Milwaukee brewery’s ability to produce Coors legacy brands, such as Coors Light.
But there were hiccups along the way, including a voluntary and temporary halt to production of Coors Light in Milwaukee in 2010. “Coors Light is a very fragile beer,” Long says. “The yeast strain is very fragile. You have to propagate the yeast locally. It just doesn’t transport well. We just had to get that right and learn how to do it.”
It was new territory for Miller folks. Frederick Miller carried the yeast strain for Miller High Life in his pocket while traveling by boat to the U.S. from Germany. “That same yeast strain from 1855 is still alive,” Long says. “We take great pride in the way we handle yeast, but we had a learning curve with Coors Light.”
Producing Coors Light in Milwaukee came down to a matter of volume. “Bottom line, we wanted to be self-sufficient in our ability to supply yeast,” Moschea says. “You have to generate a certain amount of volume based on vessel configuration. We never had a quality issue and we didn’t want to have an issue. In the need to put quality first, we said, ‘Let’s just back off a little bit.’”
MillerCoors invested in smaller fermenters for the Milwaukee brewery before restarting production of Coors Light in bottles and kegs there last year. Plans call for the Milwaukee brewery to start producing other Coors brands in the near future. But not Banquet, which will always be brewed in Colorado to maintain its promise of being made with “pure Rocky Mountain spring water.”
In a case of turnabout is fair play, many Miller legacy brands – such as Lite, High Life, Milwaukee’s Best, Milwaukee’s Best Light and Milwaukee’s Best Ice – are being made at the Golden brewery, where production dipped after the launch of the joint venture. That brewery, which relies on Coors Light for about 37 percent of its total production, has 917 hourly and 158 salaried employees. A voluntary buyout in 2010 helped reduce the Golden brewery’s workforce. There are also 592 administrative employees.
Faced with replacing numerous retirees, the Miller brewery has hired 83 people in 2013, including some ex-workers from the Golden Guernsey dairy plant in Waukesha, which closed in January, leaving 112 without jobs.
“The big question was, when everything consolidated and we moved to Chicago, what was going to happen to this campus,” Cardella says. “I’m not being facetious when I say we are now running out of space.”
Milwaukee’s MillerCoors campus has become home to MillerCoors University, a center for learning and professional development within the company. More than $1 million was invested into creating a state-of-the-art center inside the administrative offices. But a little more than two years later, that center is at capacity, prompting MillerCoors to invest another $1 million to expand it, according to Cardella.
“We’re building out the second floor, opening up a section and creating a large group meeting room that will hold nearly 300 people,” Cardella says.
The company says it pays out nearly $175 million in wages and benefits annually, along with $8 million in state and local taxes, while noting that MillerCoors purchased more than $700 million in goods and services from 1,600 Wisconsin companies last year.
“The impact that we have on this economy is nothing short of extraordinary,” Moschea says.
Cardella has served on the Metropolitan Milwaukee Association of Commerce’s board of directors for three years. He’s on the United Way of Greater Milwaukee board and served as co-chairman of the organization’s Community Campaign two years ago. He also recently joined the board of the Marcus Center for the Performing Arts and was honorary chairman for the United Performing Arts Fund’s Ride for the Arts, of which Miller Lite is the title sponsor.
“I’m making sure that not only do we have a voice but that we’re actively involved in working toward solutions to make Milwaukee a better place to live,” Cardella says.
MillerCoors seems to agree. It extended its partnership with the Milwaukee Brewers for another eight years. And Jim Kanter, MillerCoors’ director of strategy and business development for the Great Lakes region, notes that the Miller Lite Party Deck was added to Miller Park this season.
Sponsorship deals with the BMO Harris Bradley Center and the Milwaukee Bucks were recently renewed for 10 years. And MillerCoors maintains its sponsorship deals with Summerfest and the Wisconsin State Fair. A five-year commitment with Discovery World includes the THIRST Freshwater Innovation Lab, which offers visitors an interactive experience focused on fresh water. The lab also features a micro-scale brewery that illustrates water’s role in the brewing process.
“Milwaukee is still one of our most important markets from a pure business and consumer standpoint,” Kanter says.
The MillerCoors merger hasn’t changed that. In fact, Kanter says, the joint venture has led to “better thinking” in terms of strategy development, despite that initial trepidation.
“When you bring two fierce competitors together, it takes time,” Kanter says. “One minute, you are punching each other in the nose on the street, and the next minute, you are hugging each other because you’re reaching for the same goal.”
Milwaukee Mayor Tom Barrett, who lobbied hard to have MillerCoors choose Milwaukee for its corporate headquarters location, says the company has upheld the pledge it made five years ago to keep a large number of jobs in the community even after deciding to locate its home base elsewhere.
“It says to me that their commitment remains strong,” Barrett says. “The company is as much of an integral part of Milwaukee as it was before, if not more. I have not sensed any lack of commitment or enthusiasm for Milwaukee on the part of MillerCoors.”
Barrett is even holding out hope that the corporate headquarters someday will return to the Miller Valley.
“We are hoping they save the last dance for us,” he says. “When the lease runs out in Chicago, we’d like them to come back home.”