STZ Constellation Brands Inc

By Saabira Chaudhuri 

A fight between America's two biggest brewers is jeopardizing a proposed "Got Milk?"-style campaign intended to help struggling beer makers win back drinkers who have defected to wine and spirits.

Anheuser-Busch InBev SA, Molson Coors Brewing Co., Heineken NV and Constellation Brands Inc. have for over a year discussed a potential multimillion-dollar, brand-agnostic campaign aimed at improving the overall health of the beer category.

But the campaign could now be dead in the water after MillerCoors, Molson's U.S. unit, pulled out of a meeting slated for next month and said the initiative should be paused following a public spat with Bud Light maker AB InBev.

The rift began when AB InBev ran three Super Bowl TV ads earlier this month highlighting MillerCoors's use of corn syrup in Coors Light and Miller Lite. MillerCoors responded on Twitter and with a full-page newspaper advertisement addressed to "Beer Drinkers of America" defending its use of corn syrup as a part of the brewing process.

High-fructose corn syrup, used as a sweetener, has attracted negative attention for its role in the national obesity epidemic. MillerCoors notes that it uses corn syrup, not high-fructose corn syrup, only in the fermentation process for beer making, as does AB InBev for some other brands. MillerCoors says the corn syrup doesn't actually make its way into the beer.

Pete Marino, MillerCoors's communications chief, called it a "waste of time and money" to work on the campaign "while the dominant industry leader is spending millions of dollars demonizing beer ingredients."

Beer has been losing market share for two decades, prompting brewers, after years of infighting, to recently agree to a rare rapprochement. Beer's share of the U.S. alcohol market by sales dropped to 45.5% last year, down from 56% in 1999, according to the Distilled Spirits Council. Spirits, by contrast, had a share of 37.3%, up from 28.2%. Wine's share was 17.2%, up from 15.8%. Alcohol makers of all stripes are also struggling with a propensity among younger drinkers to drink less.

Mr. Marino said AB InBev's ads could hurt beer overall because many brewers use corn syrup to brew. "ABI's misguided attempt to gain a competitive advantage threatens to single-handedly set back the health of our category for a long time," he said.

AB InBev says highlighting how Bud Light eschews, and Miller Lite and Coors Light use, corn syrup was about transparency and shouldn't hurt collaboration. "It's a fact and one we thought consumers should know as they decide which beer to drink," a spokeswoman said.

Mainstream lager brands like Bud Light, Miller Lite and Coors Light have suffered the most as consumers defect to craft beer and other tipples, prompting especially fierce competition among their owners. MillerCoors, for instance, has for years run ads saying Miller Lite has more taste than Bud Light.

Bud Light and Miller Lite volumes are down more than 25% over the past decade, while Coors Light is down 13%, according to data from Beer Marketer's Insights, a trade publication.

Beer has performed better in Europe, where brewers say industrywide campaigns including the U.K.'s "There's a Beer for That" have helped sales. But executives say the U.S., where the top four brewers dominate 75% of the market, makes collaboration harder.

"The tone of competition was as unfriendly as I've seen during the Super Bowl campaign," said Heineken Chief Executive Jean-François van Boxmeer. "No wonder the beer category isn't going to elevate itself."

Early last year, top executives from AB InBev, MillerCoors, Constellation and Heineken huddled together for five hours at the Westin hotel in Crystal City, Va., to discuss beer's troubles and concoct a way to jump-start growth.

A presentation showed photos of a glamorous woman drinking a glass of wine, Pierce Brosnan (as James Bond) drinking a martini and an older man in a vest drinking a beer while smoking in his kitchen. "Beer should be thriving but instead we are losing," it read.

The presentation acknowledged billions of dollars of lost revenue, how other drinks are perceived as more sophisticated, and criticized disorganized grocery store shelves and the use of generic glasses in bars for cheapening beer's image.

Ideas to boost beer included helping drinkers find the right beer for them, positioning beer as a reward at the end of a tough job and efforts to convince consumers that beer is social and sophisticated.

Other possible moves include a program to educate bartenders, highlighting beer's contribution to the U.S. economy and marketing targeting younger drinkers, according to documents reviewed by The Wall Street Journal and people who attended the meetings.

Over the past year, brewers, retailers and distributors have met repeatedly to discuss how to tackle the challenges facing beer, according to an attendee. Executives met in San Diego in September to hear pitches from five marketing agencies. They decided to hire one and were poised to confirm the decision at a meeting next month at Constellation's offices in Chicago, according to a person familiar with the effort.

MillerCoors is adamant it won't participate, raising questions about the project's funding. A Heineken spokesman said it was too early to comment on the project's future, while Constellation didn't respond.

A spokesman for AB InBev said it was still committed to "strengthening the beer segment" but also signaled it wouldn't back down from its fight with MillerCoors, pledging to "compete vigorously in the marketplace."

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

February 24, 2019 07:14 ET (12:14 GMT)

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