Miller-Coors merger could fuel battle of beer ads

ST. LOUIS -- It wasn't clear until Sunday which teams would face off in this week's World Series. But baseball fans could count on catching one thing during the televised games: wall to wall advertisements for beer.

The competition among brewers to get advertising time on major sporting events is fierce, and only likely to become more intense with the announced merger of the nation's second and third-largest beer companies, Molson Coors Brewing Co. and Miller Brewing Co., owned by SABMiller PLC.

The companies' stated goal is to get a leg up in fighting St. Louis-based Anheuser-Busch Cos. Inc., the industry Goliath that has a larger market share and advertising budget than both its rivals combined. With overall beer sales flagging, analysts expect much of the fighting will done through advertising as the companies compete for each other's customers.

"What you're doing is duking it out for market share," said Juli Niemann, an analyst with Smith Moore & Co. in St. Louis. "At this point, the whole thing is about advertising because drinkers out there don't really have brand loyalty anymore."

Milwaukee-based Miller and Denver-based Coors are keeping mum about strategic plans for their combined marketing department if they pass antitrust reviews.

Chances seem slim the firm will be on equal footing with the king of beers. Advertising Age magazine estimates the companies spent a combined $425.7 million on advertising in 2006, compared with Anheuser-Busch's $510 million.

It appears the combined company, to be called MillerCoors, won't cut the ad budgets of its respective companies when they merge and might even boost spending to battle Anheuser-Busch's clout.

Miller's chief executive, Tom Long, told media outlets shortly after the merger that ad spending would increase to boost some of the company's lagging brands.

MillerCoors is expected to shave about $500 million in costs over three years when the separate companies combine operations. Miller spokesman Pete Marino said at least part of those savings will be plowed back into the company and its marketing department.

Even beyond extra investment, the merger will give MillerCoors increasing clout with advertising companies, helping them drive down rates for big media buys, Marino said. That clout could also help the company strike better deals for sponsoring sports teams, music events or big events like the World Series, he said.

"You can talk about having more and different alliances in more and powerful ways," Marino said.

It's unclear how Anheuser-Busch plans to compete with a larger No. 2 brewer nipping at its heels. The company declined to answer detailed questions for this story.

"Our marketing and advertising strategies don't change due to any combination or separation of companies," Dave Peacock, Anheuser-Busch's marketing vice president, in an e-mail.

"When we allocate marketing dollars, our attention remains focused on our customers in order to grow our business," the e-mail said.

While the ad fight might heat up, the Coors and Miller merger isn't necessarily good news for advertising companies.

Big mergers often make advertising firms nervous because costs are often trimmed, sometimes starting with the marketing budget, Niemann said. Those fears are particularly acute in the beer market, where lagging demand is hurting brewers' profits and revenue, she said.

Even if MillerCoors keeps ad spending steady, it's going to be looking for the best deal possible from advertising agencies.

"All add accounts, all old relationships, it all goes up for bid again. It makes you tense," Niemann said.

Advertising Age's annual survey of the nation's biggest advertisers found that all three big brewers spent less in 2006 than the year before. Anheuser-Busch dropped 11.5 percent, Molson Coors was down nearly 8 percent and Miller slashed its spending by 18 percent, according to the survey.

Even if the big brewers keep tightening their belts, it likely won't have a big effect on the advertising world overall, said Brad Adgate, vice president and director of research at New York-based advertising agency Horizon Media Inc.

Considering that Advertising Age ranks the beer, wine and liquor industry only the 19th largest purchaser of advertising, Adgate said he also doubted that MillerCoors would be able to beat down ad rates too drastically.

"You saw where beer ranks overall. I don't know how much clout they're going to have," he said.

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On the Net:

Anheuser-Busch Cos. Inc: http://www.anheuser-Busch.com

Molson Coors Brewing Co.: http://www.molsoncoors.com

Miller Brewing Co.: http://www.millerbrewing.com