AB optimistic it will hit key goal of 12% earnings per share increase for 2001, group veep Randy Baker told analysts, as strong beer biz fundamentals "indicate a better situation going forward." Although profit margins for domestic beer biz flat in 1st qtr, AB expects them to improve as year goes on. AB reduced expectation for its volume gain (to 1.5-2% for shipments and STRs), but stickin’ by 2.2%-2.7% "guidance" for rev per bbl increase in 2001, whether or not there’s a fall price hike. AB’s rev per bbl up 2.6% in 1st qtr. Other expectations for 2001: cost of goods sold, including significant increase for energy, up 1.5-2% per bbl; mktg, gen and admin costs/bbl up 3%; domestic beer ad spending up 3%+. AB corporate hit double-digit profits gain in 1st qtr even tho domestic beer profits up 5% to $674 mil, as AB’s intl beer biz profits more than doubled to $11.4 mil, packaging profits more than tripled, equity income from Modelo up $9 mil, 24% to $48 mil. More 1st qtr details: in Calif, AB STRs up "just slightly"; in Tex, STRs up more than natl avg of 0.3%, but "not outstanding"; in Fla, AB STRs up "quite a bit more" than 0.3%. Where was AB softest? "Particularly weak" in PA, MD, thru Ill, Ind, Mich, said Randy, and "a bit weak in the south versus our expectations." And with STRs up just 0.3%, "really none of our brand families did well relative to trends" in past few yrs. Bud family up more than 0.3%. Bud Light not up 10%, but high-single-digits (7% we hear). Michelob family down, Nat Light up slightly, Busch down. Randy stressed AB doesn’t view 1st qtr STR trends as "representative" of AB trends for yr.

Randy also told analysts that "even taking these recent [price discounting] actions into account, competition has followed both our October and February price increases at very high overall rates, in the 80-90% range.... We do not consider the current level of discounting to be a significant change." Randy did note "an increase in competitive discounting activity in several markets" in Apr, but "these actions have typically been limited to a single package in localized markets rather than across the board." Randy characterized 1st qtr pricing as "very, very good environment." AB promotion expenses, he said, down 10% in 1st qtr, and had been down 8% in 1st qtr 2000. Miller continues to eliminate price gaps between its brands and AB brands in some states, according to Randy. Pricing situation not "comparable" to 97 when there was "massive" rollout of 30-packs and "very widespread discounting." A final point: "We really have not seen, on an overall basis, trading down" from imports or from premium-price brands to popular-priced brands.

While Miller Lite total sales-to-retailers were down 0.3% in 2000, Miller Lite was up in 27 states and in 60% of distribs, prexy John Bowlin said. 57 distribs were up at double-digit rate on Miller Lite. Sr veep sales Jim Mortensen showed that in some key states, like NY and Calif, Miller Lite distribution at less than 70% of off-premise accounts. If some of these distribution gaps closed, assuming sales at only 50% of existing avg accounts, Miller would gain about 5 mil cases annually. Other brands had less good distribution. Jim detailed opportunities totaling, he said, 12 mil cases in all. Cut his estimate in half, Jim said, and Miller would still gain 1% from these efforts. Tho Jim acknowledged need for better "pull" from ads, he asked: "Isn’t it fair to think more is possible when it comes to distribution?" Miller focused lots on 7 key holidays that make up about 40% of beer consumption. Tho Miller lost share on Memorial Day and Jul 4th 2000, it held on Labor Day last yr. During Super Bowl 2001, Miller got displays in 66% of stores vs 71% for AB and 44% for Coors and "we were thrilled," said Jim. Miller has 21 share in convenience stores compared to 60 for AB, according to Jim. Recent convenience store study showed "return for space allocated": AB at $4.41 per foot, Miller at $3.50 and Coors at $1.55, "indicating" that Coors is "generally overspaced," said Jim.

"We will have to work through some bumps over the next few quarters," prexy John Bowlin said, like economic downturn, "spiralling" energy costs as well as Miller’s "unacceptable" volume results. Here are sales trends on Miller’s 5 key brands in 2000: Lite down 0.3%, Gen Draft down 6%, Miller High Life down 1.5%, Icehouse down 3.3% and Foster’s up 1.4%. Those 5 brands over 70% of volume and over 80% of margin contribution. John said Lite "has to do better" in Tex, Calif and Fla "where huge and growing numbers of young adult Hispanic drinkers reside." And "we need to regenerate Foster’s growth nationally." Here’s more new mktg info from sr veep mktg Bob Mikulay: Miller will return Miller Genuine Draft to natl advertising, outspend AB and Coors on ESPN, spend $50 mil media on entertainment programming, spend 2x competitors on Hispanic media, got exclusive rights for World Cup soccer in 2002 and more. John also reiterated: "temperature controlled warehouses are essential" and that Miller’s June 2002 "deadline" for Miller distribs to have these warehouses "is real and we’re not changing it." John concluded that Miller "turnaround" has been "harder and taken longer than I expected. There was a lot to fix." But "like you, I am here to win."

Miller debuted about 50 new tv ads at its natl sales conference and said it would up media spending by about $60 mil in 2001, including 35% hike on Miller Lite and 38% on Miller Genuine Draft. Prexy John Bowlin said: "We’ve made good progress on many fronts, with admittedly disappointing volume results.... Now we have to take our efforts to the next level." Miller is "not changing course," John said. Top execs discussed progress on pricing, packaging, advertising, sku reduction, etc. "I am convinced these were and are the right strategies.... It simply means that it’s going to take more time and more resources than we expected." Philip Morris COO Bill Webb said that PM’s way is to "invest behind strategies and give them time to work.... We believe the results will come." He said current pool of Miller ads "a big step forward" which will "continue to be improved. It is an evolving process and the blowtorch is being applied." Miller will have "more muscle." Spending this yr "will be $100 million more than it was just two years ago."

Miller strategy of "premium brands at premium prices," had "a bigger impact on volume than we expected," said prexy John, but "we’re sticking with that strategy because it’s the right thing to do.... Most of our price gaps have now been closed. And we have plans in place to close the remaining gaps." John added: "Now let’s not confuse tactical price promotions and competitive pricing actions with a change in our pricing strategy. They are two very different things." Sr veep sales Jim Mortensen said that competitors "may be planning to run deeper discounts this summer--in some markets. So we added money to our price promotion budget and we’re prepared to compete."

Miller/Coors Distribs "Only Option" in Most Mkts; Should Happen "Now," Sez Miller Sr Veep

There are 38 states where Miller’s share gap with AB is 20 points or greater, sr sales veep Jim Mortensen told 4000 folks at Miller’s natl sales conference. "In those 38 states," said Jim, "complementary consolidation (Miller/Coors combo) makes sense. Let’s be more blunt. It’s the only option." Miller guy should be buyer "most times," other times non-Miller distrib should be buyer; sometimes "a merger makes sense," said Jim. "We believe it is in our mutual interest to have the best operator... well-capitalized to compete with" AB distrib. "When should all of this happen? Well, right now!" Why? "The longer we wait the stronger the AB network will become and the less your businesses will be worth." Back in 1997, there were 149 shared Miller/Coors houses, today 191. "We expect that number to easily reach 200 this year and then accelerate.... That does not mean we consider Coors an ally. They remain a competitor and one we plan to beat and will beat."

Jim recalled that originally Miller had tried "reconfiguration" or "contiguous consolidation" (in neighboring territories) but it "just doesn’t go far enough to enhance distributor scale at least for" Miller system. Yet reconfiguration is "effective option for AB ... that they will pursue," Jim asserted. "Imagine AB with 500 or 600 distributors instead of 770 today. It’s not a question of if, it’s more a question of when," Jim continued. Smaller AB network "plays to a strength that AB has already, which is that AB and its network appear seamless to retailers. Chain retailers tell us time and time again that it’s easier to work with the AB network. Together, Miller and its network have more to do to better service the needs of chain retailers who are themselves consolidating and becoming more demanding." "Here’s the rub" on consolidation, Jim added. "The worry or even disagreement in the room may be coming more from Miller than the distributors. That’s because we are all concerned, myself included, with the f word... FOCUS." More suppliers and more brands equal less focus. But Miller "will discover new ways to operate within a consolidated network. We have to." Jim concluded: "We have to strike a better balance between requiring focus and earning focus." Prexy John Bowlin added: shared houses "does not mean we are no longer competitors with those other beers, especially Coors.... Coors has gained momentum" last few yrs and "one of the biggest factors in their success has been consolidation into the Miller system.... By going into Miller houses, Coors has been able to leverage your experience and your talents. Going forward, we aim to recapture your commitment to our brands."

US malt bev shipments up 350,000 bbls, 0.7% in 1st qtr, INSIGHTS estimates. That assumes decent Mar gain for imports, up 12% thru Feb. But following tuff 4th qtr 2000, US shipments at best even for 6 mos. Recent retail picture is softer still. Both AB and Coors reported better shipments trend than depletions for each of last 3 qtrs. And volume flat-to-down Jan-Mar in 2 biggest off-premise channels: supermkts and convenience stores.