American beer drinkers see the Lite
To revolutionize an industry is a goal most companies can only dream of. For Miller Brewing Company, their decision to introduce light beer in 1975 had exactly this kind of impact. Barely on the radar in 1975, light beers made up only 1 per cent of beer consumption in the USA. By 1994, they accounted for 35 per cent of all domestic beer sold in the USA, some $16 billion in sales. Miller Lite, the brand that built the light beer category, was credited for this monumental shift in consumer purchasing. How did Miller make this happen?
Miller’s achievement can be attributed to two simple principles: segmented marketing and saturation advertising to reach the target market. Through consumer research, Miller realized there was a beer-drinking market segment of young men who were interested in a lower-calorie beer. This appeal for lower-calorie beer stemmed from trends toward health and fitness in the 1970s. Trends like these can have powerful effects on demand, and the beer market was no exception. And, unlike what had been assumed previously, men were just as interested in light beer as women were. In this section, we examine how Miller identified a new target market for its beer, how it appealed to that new market, and the results of its efforts.
A new target marketThere were a number of trends occurring in the mid-1970s. First, a nationwide health kick was in the works.
Second, in 1975, of the 76 million strong baby boomer population, nearly 20 million were in their mid- and late-twenties. The result of these two trends was a large but changing beer-drinking demographic, one increasingly concerned with its health.
Realizing that its customer demographics were changing, Miller Lite took action, conducting extensive consumer research to determine how best to appeal to its evolving target market. The research results were like music to Miller’s ears, despite the fact that brewers overall were suffering (along with distillers of hard liquor) from declining per capita consumption as health and fitness trends took hold.
The beer-drinking generation was made up predominantly of men – no change there – in their mid-twenties, a segment quite different from the late-teens/early twenties males who had traditionally attracted the lion’s share of beer marketers’ attention. The beauty of this demographic was that it was quite large (some 10 million in 1975) and it was growing. There were still 20 million male baby boomers yet to reach the legal drinking age. And all evidence suggested that the trend toward health and wellness would not be short-lived. If Miller could brew and market a beer that would appeal to this somewhat older, more health-conscious segment of the beer market, then the opportunity looked attractive. But would real men buy light beer?
Reaching its target marketMiller’s goal from the onset was making light beer a mainstream, acceptable choice for young, macho, albeit health-conscious, men. To appeal to this target segment, Miller focused its advertising predominantly on sports. As Miller’s Alan Easton said, ‘. . . the sports fan and the beer consumer are essentially the same’. Miller’s research also showed that this group of once-in-shape athletes was growing up and out of sports participation. Increasingly, they were becoming spectators whose beer guts replaced rippling six-pack stomachs. As Easton commented, ‘Once you’re into the demographics of sports, you are also into the total demographics of beer drinking. You get them all, from the couch-potato spectator to the high action, participating jocks – joggers, softball players, bowlers’.
But how could a beer company promoting something as prissy as low calorie beer attract this testosterone-fuelled group? Miller’s answer is now legendary. When they introduced Miller Lite in 1975, they had the wit to hire famous ex-athletes to endorse it in hilariously funny television commercials. Beefy ex-jocks, like football player Bubba Smith, who tore the cover off a Lite can, demolished the idea that real men didn’t drink light beer. And, like Miller’s target market, the athletes in the ads were all somewhat past their prime. ‘We try to choose the sort of guys you’d love to have a beer with’, said Bob Lenz, the ad executive who conceived of the Lite campaign. The idea was to show that low-calorie beer appeals to a man’s kind of man. The clear message was that this brew was not for sissies.
Sparkling results in a flat beer market
Throughout the 1950s and 1960s, two brewers, Anheuser-Busch and Joseph Schlitz, had dominated the American beer industry. In 1970, the fragmented industry comprised ten major brewers accounting for 69 per cent of the country’s beer production, and consumption was as flat as a day-old beer. Miller ranked seventh, with a 4 per cent share. But then things changed:
- By 1977, following its hugely successful introduction of Miller Lite, Miller had jumped from seventh to second place among US brewers and was threatening the long-time leader, Anheuser-Busch.
- By 1980, light beers accounted for 13 per cent of total US beer shipped, with Miller Lite the runaway leader.
- One year later, Miller Lite became the third largest selling beer in the USA after Budweiser and Miller High Life. Selling 12.5 million barrels, Miller Lite had more than 50 per cent of the low-calorie beer market.
- In 1985, Miller Lite, originally a brand extension, for the first time outsold its parent, Miller High Life, to become the company’s flagship brand.
Miller’s insights ten years earlier about trends in the American beer market had borne fruit beyond its wildest dreams. The target market Miller had spotted – consumers concerned with health and fitness who didn’t want to give up their beer – had proven far larger than Miller had imagined. ‘Americans’ taste appears to be turning lighter’, said Peter Reid, editor of Modern Brewery Age, an industry publication, in 1997. ‘Five of the top 10 beers are light and those are the only ones showing any kind of growth.' Light beer, once a niche product, now comprised 35 per cent of domestic beer consumption..
Lessons learned from Miller LiteEntrepreneurial behaviour, as the Miller Lite story shows, can occur within established firms, as well as in nascent start-ups. In a brutally competitive industry serving a stagnant market, Miller Brewing Company needed to find a way to grow. The company used consumer research to determine whether and where there was an unfilled or under-served need. Miller identified a large and growing market segment, the 10 million, 20- something male baby boomers interested in low-calorie beer.
Thus, before introducing its light beer, Miller knew it had a sizeable target market with needs that were not served currently and effectively by other brewers. Unlike iMode, which segmented its market behaviourally, Miller identified a demographically defined market segment, although it used its customers’ affinity for sports, a behavioural factor, in further targeting its marketing effort. Given the powerful demographic surge that lay ahead – with 20 million male baby boomers yet to reach drinking age – the segment had attractive potential for growth as well. As we shall see in more detail in the next chapter, demographic and other macro-trends can lead to the creation of new market segments waiting to be served by entrepreneurs whose customer insights uncover unserved or under-served needs that others have overlooked.
The Miller Lite story also shows that market niches sometimes turn out to be far larger than an entrepreneur might originally anticipate. From the 10 million males in its original target market, the light beer segment grew to encompass one-third of US beer consumption 20 years later – a $16 billion market. For entrepreneurs – especially those having resources more limited than Miller’s – niche markets aren’t bad places to begin.