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Ultra-low-calorie beer is creating a buzz

September 04, 2009|Mike Hughlett

Like the diet trade, the beer business has bred a lot of fads.

Remember "ice" beer's glory days, or how about "dry" beer? And what are either of them anyway?

Chicago-based MillerCoors is trying to prove that its new brew -- sort of a diet beer -- is no fad, and so far its sales momentum continues to increase. The company's MGD 64, which has just 64 calories, has been one of the biggest success stories in the beer world over the last year.

Archrival Anheuser-Busch has taken notice, this month launching Select 55, a 55-calorie brew that it touts as the world's lowest-calorie beer. The beer giant so far is just testing the super-low-cal market, debuting Select 55 in 15 metro areas. If it goes full-tilt with a national rollout, history indicates Bud is the best bet to eventually lead the low-cal market.

But the absence of an immediate national blitz for Select 55 may stem from wariness that the brew might eat too much into the sales of other lower-calorie Anheuser-Busch brews, beer industry analysts say. And they say that's exactly what's happened at MillerCoors with MGD 64

"Yes it has been a success, but at what cost?" said Ann Gilpin, an analyst at Morningstar Inc. "Where does the [MGD 64] consumer come from and what is this consumer not drinking? The answer is Miller Lite," she said, pointing to Lite's sinking sales in recent quarters.

Other analysts, while concerned about MGD 64 cannibalizing Lite, credit the new brew for bringing new customers to MillerCoors. And MillerCoors dismissed the idea that MGD 64 is hurting Lite, one of its flagship products.

Most of MGD 64's sales come from consumers who normally don't drink much beer but are drinking more now because they can choose an ultra-low-calorie brew, said Sharon McLenahan, MillerCoors' senior director of heritage brands. "The vast majority of the [sales] volume has been incremental."

MGD stands for Miller Genuine Draft and 64 replaced the weak-selling Miller Genuine Draft Light, a conventional light beer. MGD 64 has 32 fewer calories than Miller Lite and 79 fewer calories than Miller Genuine Draft. It also has less alcohol: 2.8% compared with 4.2% for Lite.

MillerCoors launched the super-low-cal brew in September, aiming it at consumers who "are watching what they are eating or drinking" and "live an active lifestyle," McLenahan said. While acknowledging MGD 64 might particularly appeal to women, "it's not really a gender deal." Ads for the beer focus on its low calorie count.

By early August, MGD 64 had racked up $100 million in sales, and that figure from market researcher Information Resources Inc. only covers conventional supermarkets, convenience stores and drugstores, not liquor stores and big discounters like Wal-Mart.

For the 13 weeks ended Aug. 9, MGD 64 had a 1.1% share of the domestic premium beer market, according to IRI, not far below the 1.8% held by Miller Genuine Draft, a well-established brand.

But during those same 13 weeks, Miller Lite sales fell 5.7%, and Lite's sales for the year ended Aug. 9 were down 3.4%, according to IRI. The brand, which IRI says has a 14.2% share of the domestic premium beer market, slipped behind Coors Light last year as the country's second-best-selling light beer.

Lite's problems are manifold. The sour economy has hurt it more than some other beers because it's more reliant on restaurant and bar sales than grocery stores.

A price hike last year stung Lite sales too, and some beer industry watchers say Lite's marketing message has been muddled.

But competition from MGD 64 is a factor too, they say.

"I think the cannibalization rates are higher than [MillerCoors] would like -- absolutely," said Benj Steinman, editor of Beer Marketer's Insights, an industry publication.


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