Miller beer volumes still sinking, warns brewer

Sabmiller has marred a strong rise in profits with a poor performance from Miller, the US brewer it bought in July for $5.6bn (£3.6bn).

The group, which is the world's second-biggest brewer behind Anheuser-Busch of the US, said beer sales at Miller had slumped over the summer because of a lack of management focus. Its shares fell 3 per cent to 440p.

Graham Mackay, the chief executive, said: "We have a turnaround situation on our hands with Miller." He added that it would take up to 18 months for the enlarged group to get the US brewer back on track as a strong US number two to Anheuser-Busch.

The company said comparable beer volumes at Miller had slumped by 2.4 per cent against a 1 per cent rise in the US beer market. It added that part of the reason for the fall was because Miller's management was overly occupied with launching four new ready-to-drink products – or flavoured malt beverages as they are known in the US. Two of the drinks – Stoli Citrona and Sauza Diablo, which Miller produces in partnership with Allied Domecq – performed badly and may be withdrawn, the group said.

"We probably overemphasised the introduction of new items, and this took the emphasis away from our own brands," John Bowlin, Miller's chief executive, admitted.

To counter the decrease in beer volumes in the US, SABMiller said it would refocus its attention on Miller Lite, which makes half of the US brewer's profits, by repackaging its bottles and launching a new advertising campaign in the new year.

Despite the early hiccups at Miller, Mr Mackay said the integration was progressing "as planned". He added that the company expected to achieve "significantly more" than the planned $50m in annual cost savings by 2005.

Analysts said the group faced a big challenge in making up for years of decline at Miller, which was owned by Philip Morris. Nigel Davies, at JP Morgan, added: "Results elsewhere demonstrate the quality of group management to influence and improve results."

Mr Mackay said he was "actively" seeking acquisitions in markets such as China, India and Central America, where the group's emerging market expertise lies. Anything bigger than an in-fill acquisition would be achieved through mergers or joint ventures, a spokesman added.

The group reported a 24 per cent rise in pre-tax profits for the six months to end-September to $374m from $302m.