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During the mid-1970s, Miller used the same successful technique to develop a whole new product category, reduced-calorie beer, and cash in on the nation's fitness craze. A typical commercial would feature a group of baseball or football players gathering in a neighborhood bar to argue over the merits of Miller Lite. The subtle message in the debates: that because the beer has one-third fewer calories, rugged men can actually drink more of it at a single sitting. Throughout the industry, light beer now accounts for 15% of the barrels sold, and Miller has about 60% of the market.
In reality, lower-calorie beer boils down to less brew for the money. Not only do most light brands carry premium-brand prices, they contain less grain and more water. In spite of the dilution, such beers are not all that much lower in calorie content than normal beers. Observes newspaper Beer Columnist Steve Byers of the Milwaukee Journal: "The calorie difference between a light beer and a premium beer is five potato chips. Why get a worse taste and flat beer for five potato chips?"
In the struggle for a slice of the low-cal market, Anheuser-Busch has not fared so well. The company's first two light beers, Natural Light and Michelob Light, have proved only moderately popular. Undeterred, the firm is spending some $50 million this year to launch yet a third reduced-calorie entry, Budweiser Light. Claims Anheuser-Busch President Dennis Long: "We are starting to see some chinks in Miller Lite's armor."
With Anheuser-Busch and Miller now controlling more than half the total U.S. beer market, life has become precarious for smaller competitors. Schlitz, a strong No. 2 ten years ago, slumped to a weak third after tampering with its brewing formula in the early 1970s. The company used cheaper ingredients and a faster brewing cycle to boost production. As drinkers tasted the difference, sales of the Schlitz brand plunged, from an estimated 17.4 million bbl. in 1975 to 6.2 million bbl. last year. Though the original beer recipe has now been largely restored, the damage has been done.
Schlitz's decline made it an easy target for takeover this summer by the much smaller Stroh, Detroit's family-owned regional brewery. In an audacious move to go national, Stroh borrowed $340 million, five times its net worth, to buy Schlitz.
Chairman Peter Stroh, the great-grandson of the firm's founder, saw the acquisition as a defense against the growing power of Busch and Miller. Says he: "Expanding was immensely important to our survival."
Like Schlitz, Pabst Brewing Co. has fallen on hard times. In 1959 the nearly bankrupt brewery decided to cut the price of Pabst Blue Ribbon to attract more customers. The strategy produced quick sales but eventually undermined Pabst's image. Between 1976 and 1981, sales of Pabst Blue Ribbon dropped from about 16 million bbl. to 9.6 million.
Pabst is gradually pushing the price of its Blue Ribbon brand back up again in an effort to restore its status as a premium beer. For now, though, the company's hopes for stronger sales rest chiefly with its own new entrant into the low-cal sweepstakes, Jacob Best Premium Light, and its popular West Coast superpremium brand, Henry Weinhard Private Reserve.