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New Beer, Old Cans: Why Investors Should Pay Attention to Miller Lite

If you haven't stopped by the refrigerated case at your local convenience store recently, you are missing the return of one of the handsomest beer cans of all time: The original Miller Lite.

It's almost as if MillerCoors, the SABMiller and MolsonCoors (NYSE: TAP  ) joint venture, took a long, hard look at itself last year and thought, I used to be better. Granted, the beer probably didn't taste better, but it definitely sold better. Sales of the nation's original light beer fell "in the high single digits" last year, and the trade publication Beer Marketer's Insights estimates its overall market share dropped 6.9% in 2012 and 6.5% in 2013. 

Yes, management at MillerCoors had an ugly problem on its hands, and needless to say, the weak sales prompted executives to try something new -- in this case, recreating the look of the original can from the 1970s.

Source: MillerCoors.

The company launched its retro Miller Lite can in December, and the strong reception from consumers convinced management to push back the end of the campaign from March to September.

How big was this retro sales pop? Overall sales of Miller Lite are still down through March 1, but sales specific to cans are up 4.7%. According to the Chicago Tribune, distributors in certain markets like Philadelphia and Houston are posting massive sales increases of this new beer in an old can. In fact, one distributor in Houston reported that Miller Lite can sales fell 9% in December 2013, and rose 6% from January through the middle of March in 2014. That's remarkable for a turnaround based solely on packaging, and cans of Miller Lite are carrying the brand right now, preventing an even bigger slide in sales.

Source: MillerCoors.

Miller Lite isn't the only MillerCoors beer that is making an old look new. Coors Banquet, sometimes referred to as "Original Coors," has rolled out four retro cans as well. Though sales of the banquet beer have been climbing for seven straight years, it's not nearly as ubiquitous as either Miller Lite or Coors Light. As Coors continues to tell its "heritage story" through packaging in 2014, expect sales to continue to grow. The beer is cheap and awesome-looking, and sometimes, as we've seen with the old Miller Lite cans, that's all you need.

The can, can
Handsome though they may be, there are serious business implications for MillerCoors when it comes to can sales, and it's important for investors to understand them. First and foremost, in 2013 a whopping 82% of MillerCoors' U.S. beer volume came from the off-premise (retail stores) sales channel , compared to just 18% at on-premise (bars and restaurants) locations. In other words, selling pints of Miller Lite at bars is important, but nowhere near as important as selling bottles and cans in stores. 

To that end, the second thing investors need to know is that last year more than 50% of MillerCoors products sold in the United States were packaged in aluminum cans, compared to roughly 30% in bottles and 10% in kegs. You can see now why can sales really matter, while at the same time realizing how a brand could still struggle overall -- as Miller Lite has done this year -- if those can sales are only rising 4%.

Bottom line
Retro cans are fun, and their short-term impact on the brand is important, but the real takeaway with this story is how the cans fit into MillerCoors' business model. Cans drive sales for this company, and that is something investors need to keep in mind going forward.

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