Access denied for user 'bacula'@'localhost' (using password: YES)

While installing a test backup server (Bacula), I got the error "Access denied for user 'bacula'@'localhost' (using password: YES)" while connecting to the MySQL database. Root access was fine. Grant permission as well as the user password was correct and thus it took me quite some time to understand that though the user password was correct, it wasn't encrypted like the root when checked from Webmin. 

Thus from mysql command, instead of -

mysql> UPDATE mysql.user SET Password = 'baculauserpassword' WHERE user = 'bacula';

mysql> FLUSH PRIVILEGES;

I change it too 

mysql> UPDATE mysql.user SET Password = PASSWORD('baculauserpassword') WHERE user = 'bacula';

mysql> FLUSH PRIVILEGES;

After getting the password encrypted, I can finally connect to the MySQL server and run the Bacula.