Coors and Molson announce merger

[Dave the Cook]

The combined company created by the deal, which was described as a merger of equals, would have annual revenues of about $6 billion and would rank fifth in the world by brewing volume, the companies said in a statement.

It will be known as Molson Coors Brewing Co., and will market brands like Coors Original and Coors Light, Molson Canadian, Keystone and Carling.

Full story here.

Now, I don't drink much beer. And I gather that Coors and Molson are not necessarily the favorites of the discerning group that populates this board. Still, there are aspects of this that will likely ripple through not just boardrooms in Toronto and Golden, and throughout the industry, but they bring up cultural and nationalistic issues that echo those caused by other food and beverage mergers:

• Can you really buy market share like this? I'm sure it's been tried before.
  
• Presumably a big reason for the merger is to cut costs (a later announcement mentioned the figure of US$ 175 million). I've been through a few of these, and my experince is that the expected savings rarely materialize.
  
• Both of these are iconic brands. In the case of Molson, there is strong national identification. Will this be a factor in approving the merger? Again, it seems to me that this has been attempted before.
  
• Is the Molson family going to argue over this? Ian Molson supposedly was preparing a bid that was 30% higher.
  

[tryska]

canadians are not gonna like this.

[razzar]

The combined company created by the deal, which was described as a merger of equals...

The "merger of equals" tag was the same that Daimler-Chrysler used. The "equality" in that merger didn't last too long.

And, according to the Washington Post version of the story, the combined company will maintain two headquarters operations, and seeminly separate marketing operations.

How is this going to work?

(Of course, I really don't care as I drink neither Coors nor Molsons)

[rickster]

They could save a fair amount of money by consolidating breweries, but that would mean having Molson brewed in the US or Coors in Canada. which might be an issue to some consumers. Then again, no one in the US seems to care that Molson brews all the Foster's sold in the US. While you probably have to have 2 different marketing and sales organizations given the national differences, at some point they will have to combine other HQ functions either shutting down one head office or maybe leaving it as a token operation.

Edited July 22, 2004 by rickster (log)

[Mayhaw Man]

Analysts have been skeptical of the rumored deal, saying they were uncertain how it would benefit the companies or save money. The U.S. market is flat and companies have begun working together to tap emerging markets overseas, particularly in China and South America.

I am with the analysts who are confused over this merger.

Molson may have something to gain here, but not much in my opinion. Of the Big 3 in the US, Molson is joining with the weak younger brother of the family. Molson will certainly benefit from being in a "real" distribution network as opposed to the mixed bag of beer, wine, and liquor distributors that now handle their product. I am sure that they will both save money and get much better product handling and more opportunity to grab shelf space. I seriously doubt most Canadians care much who gets the stock dividends as long as Molson continues their current brewing and packaging operations in the places that they are currently brewing. National identity is important in the beer business and apparently even more so to Canadians, so beer brewed elsewhere and imported is going to be a bad plan and I seriously doubt that this will be considered as a real possibility.So it may not be such a bad deal for Molson.

OTOH-It is very unclear what Coors has to gain by this deal. Clearly they will be able to put some more brands in their houses and ultimately gain shelf space (the holy grail of the beer business), but make more money than they would by spending money on their own already well established brands? I don't think so.

Coors, in the late 80's early 90's, spent some serious money making a run at being number 2. They couldn't do it, despite a massive adveritising budget, new brewery acquisition and expansion, and the addition of new brands. I don't see why this will be any different.

I would much rather see Coors spending money and time on their own well recognized and established brands. Probably taking on Miller head to head as they don't have a prayer at outspending or outcompeting Anheuser Busch, a monolith in the beer industry and also, quite possibly. the best run large company in the World.

This is a strange deal. The other part is that I believe that if the Molson family was acting responsibly that they would have spent some time looking for a Canadian buyer. Seagrams seems a likely candidate, but I don't know how trust laws are set up in Canada and under Canadian law this merger might not even be possible.

It is an interesting subject though. Thanks for bringing it up.

[tommy]

personally, i hope this means more Coors Extra Gold and that wacky canadian Molson with the 7% alcohol content in my neighborhood.

[Dave the Cook]

The "merger of equals" tag was the same that Daimler-Chrysler used. The "equality" in that merger didn't last too long.

If I recall correctly, there was also talk about sharing skills and technology -- in other words, making better cars. I'm not sure if that actually happened in the case of Daimler-Chrysler. But it's notable that nowhere in the Molson-Coors story or the corporate announcements, is there talk about better beer.

. . . I believe that if the Molson family was acting responsibly that they would have spent some time looking for a Canadian buyer. Seagrams seems a likely candidate, but I don't know how trust laws are set up in Canada and under Canadian law this merger might not even be possible.

I had the same thought. The fact that this deal pre-empts the offer Ian Molson was putting together makes me wonder if family politics weren't a motivating factor. If Coors could do just as well by spending money on their own brands, surely Molson could have put Ian's premium price to work for equally good effect.

[rickster]

Molson will certainly benefit from being in a "real" distribution network as opposed to the mixed bag of beer, wine, and liquor distributors that now handle their product. I am sure that they will both save money and get much better product handling and more opportunity to grab shelf space.

Remember that Molson was handled by Miller for a number of years in the US, which has a better distribution system than Coors, although maybe not in the Northeast which is Molson's core market. Molson was very unhappy with Miller and broke up the deal. Of course now as a merged company, the Coors system may pay better attention to Molson than Miller did.

One factor that's been mentioned is that while there may not be a lot of economic sense in this, both brewers have families that want to remain in control of the business. This way, they can do so at least jointly. If Molson sold out to anyone else, it's unlikely the Molson family would play a long term role.

[bloviatrix]

From what I heard, the reason behind Coors entering this merger is because there is a lack of interest in the family to continue running the business. As many of you know, Peter Coors is running for Campbell's seat in the Senate.

[Daddy-A]

This is from the Molson website:

In 2001, Molson repurchased 100% of the Molson brands in the United States and has a 50.1% interest in Molson USA, which markets the Molson brands in the United States. The Corporation is rebuilding the Molson brands in the largest and one of the fastest growing import markets in the world.

Molson also is pursuing international growth in Brazil, one of the world's fastest growing beer markets. Molson's acquisition of the Kaiser brand in 2002, combined with its previous purchase of Bavaria in 2000, firmly positions it as the second largest brewer in Brazil and the 15th largest in the world.

The second part is of particular interest here. Aside from the fact that the Bavaria TV ads are damn HOT (thank you Molson!), the aquisition of Kaiser & Bavaria shows a trend towards market growth. I've had a bottle of Marca Bavaria ... trust me, they didn't buy the company for the taste of its beer! It's all about moving units.

DA

[jayt90]

And, according to the Washington Post version of the story, the combined company will maintain two headquarters operations, and seeminly separate marketing operations.

How is this going to work?

Apparently Molson's is held mainly by family and by strong pension funds, as well as some large Canadian mutual funds. This necessitates a Canadian head office, but it may turn out to be a shadow office after the cuts.

[rickster]

The Kaiser acquisition has not gone well for them. They may be #2 in Brazil, but it's with a small share of market, since the Brazil government let Antarctica and Brahma merge a few years ago and the new company AmBev probably has 80% of the market.

From what I heard, the reason behind Coors entering this merger is because there is a lack of interest in the family to continue running the business. As many of you know, Peter Coors is running for Campbell's seat in the Senate.

True, but there is a difference between controlling it and actively running it. The family may not have wanted to see it swallowed up by a big multinational brewer.

Edited July 22, 2004 by rickster (log)

[jayt90]

canadians are not gonna like this.

I like it, a lot!

The tired brands from Labatt, Molson, Bud, and Coors will lose even more market share to upcomers such as Sleeman, Chambly, Moosehead, Keith, Algonquin, and many others who have been bullied by the big boys for years. The constant harranging of the little guys in the Beer Store (Ontario) has already led to an increase in boutique beer sales in the LCBO. This trend will continue, and spread to the Beer Store as the big companies become less relevant.

[Mayhaw Man]

Remember that Molson was handled by Miller for a number of years in the US, which has a better distribution system than Coors, although maybe not in the Northeast which is Molson's core market. Molson was very unhappy with Miller and broke up the deal. Of course now as a merged company, the Coors system may pay better attention to Molson than Miller did.

Miller began a long slow slide (that was oddly caused by their biggest success) in the mid seventies with the introduction of Miller Lite. Miller houses saw their longtime flagship brand, High Life, take a back seat to the giant advertising budget (an all the eggs in one basket situation, if there ever was one) of Lite. At the same time (or milliseconds afterwards) Anheuser Busch saw the success of Miller Lite through sports oriented marketing and started spending huge amounts of money on ALL of their brands, as St Louis recognized that there was a huge mistake being made in Milwaukee. There was a point when the joke was that AB would sponsor a tiddliwinks match as long as the logo was going to appear on cable in Greenland. The combination these two things caused Miller Houses to lose the one thing that they had heretofore----SHELFSPACE.

Miller took shelf space away from it's premium product for Lite. As Bud Light sales (and to a degree, but much smaller on, Coors Lite-Coors had started going National outside of it's original 5 state area around 1980 or so)increased the shelf space once held by High Life and now held by Lite was lost to the Miller Brand Houses completely as the nice folks on the Mississippi steamrolled over another brand (something they have been doing handily since the repaeal of the Volstead act).

Where the hell am I going with all of this?

Well, as someone who interviewed and worked with a hundred or so beer distributors over the last 15 years or so I can tell you that the current state of the average Miller house is much worse than the average Coors house and nowhere on the same level as an average A-B House (the average A-B distributorship is nicer than YOUR house they are amazing-physical plant, rolling stock, etc. etc.-first class even in the smallest areas). Miller is not the way to get your beer moved from a distributorship to a shelf.

Were I Molson and looking to increase market share in the US, and I had made the decision that A.B. was not in my future, I think that Coors would probably be my second choice of partners. Currently on local levels (where in fact beer is sold) Coors is doing a much better job of running their day to day business than Miller (and although it's another issue-I believe that part of this is due to the fact that Coors is a BEER company and Miller is now just another brand owned by a giant holding company and that means that Miller is not being run by "beer guys". This is never a good thing for a brewery).

[jayt90]

As many of you know, Peter Coors is running for Campbell's seat in the Senate.

[Lew_Bryson]

Were I Molson and looking to increase market share in the US, and I had made the decision that A.B. was not in my future, I think that Coors would probably be my second choice of partners. Currently on local levels (where in fact beer is sold) Coors is doing a much better job of running their day to day business than Miller (and although it's another issue-I believe that part of this is due to the fact that Coors is a BEER company and Miller is now just another brand owned by a giant holding company and that means that Miller is not being run by "beer guys". This is never a good thing for a brewery).

Beg to differ: SAB is definitely beer guys. Miller WAS with a giant holding company. Now they're with a giant brewery. The difference in attitude at the top was apparent immediately. The guys from SAB are cleaning house at Miller, and things are changing quickly.

That said, I think you're dead on the money with your analysis of choice of partners for Molson. Coors makes a good second choice.

[Mayhaw Man]

Lew,

My point (not very well made ) was that Coors (and clearly A-B--A Busch visit is the constant fear of all distributors and they happen regularly-I should write about them as I have been through a couple including one at a production plant in MX-it was one of the most tense 10 hours that I have ever spent) is very concerned about distributor operations. At some point Miller, probably right around the time of the P-M takeover, stopped riding their distributors and things started to go quickly downhill. There was a serious lack of understanding about how beer distribution works on a local level and they were also blinded by the then still pretty good cash flow generated by Miller Lite. I think Coors will be a good partner in the US for Molson. Much better than Miller Brands.

Coors, at the time they decided to go National, was very careful about who got the local distributorships (the first time I ever got involved or was around the business was when a group of local men in my town (including my Dad) went after the local distributorship in N.E. Louisiana. That application looked like a phone book). Coors ended up with some pretty strong partners, many of which are still their distributors today, some twenty five years later. For example, here in New Orleans it is hard to do better (with the exception, again, of AB) than Crescent Crown Distributing. Probably the best draft technicians in the Gulf South. If you have draft to move and want it done right, they are the go to guys.

[mongo_jones]

does this merger mean that the coors commercials will now feature bob and doug's boys' nights out? i can't wait! grrrrrrrr!

[Mayhaw Man]

does this merger mean that the coors commercials will now feature bob and doug's boys' nights out? i can't wait! grrrrrrrr!

I would consider Bob and Doug a step up from thier current campaign involving "ways to get chicks" or whatever they call it. I consider "Strange Brew" to be a high point in comedic stupidity (that is to say that I loved it-I am nothing if not a fan of absurdity). That movie is roundly loved by beer guys the world over.

Incidentally, Beer is not the way to get chicks (or at least not one of the high percentage ones ).

Of course, what do I know about these crazy kids today?The last one I got was almost twenty years ago (this Aug. 17th, as a matter of fact) and in the long run beer would have been cheaper than the wily methods I had to use to snare her.

[cakes]

As many of you know, Peter Coors is running for Campbell's seat in the Senate.

Is the Coors family still strongly right wing? I remember that the company (or its owner) supported Reagan in the 70's. The Molson's are probably more liberal.

[paul mitchell]

The famous "I am Canadian" ad will now go "I am a Yank from Golden" and then you will see said actor and his friends laughing their asses off as they chug Moosehead's with hot chixx's in bikinis.

Edited July 29, 2004 by paul mitchell (log)

[phaelon56]

In my neck of the woods (central NY state - about 120 mles south of Ontario province Canada), Molson has always held a good local share, dating back as far as the 1970's. IMHO Miller shot themselves in the foot in this area back in the early 1980's when they bought the right to the Lowenbrau name and started pumping out some crap beer that in no way resembled real German Lowenbrau. Despite having opened a huge brewery here in Fulton NY (about 25 miles north of Syracuse) back in the 1970's, they never regained market with anything new after Miller Lite was introduced and then all the better light beers came along. They shut down the enitre Fulton operation some years back and it still sits empty. Apart from Coors Light, Coors has never ever had any real market presence around here. Back in the day (1970's) we considered it to be a big deal to get some Coor's Golden that someone might bring back in an ice chest from a trip out west. It didn't keep well at room temp and the only time it resemebled the "real" Coors was if it got hand delivered chilled and transported with care.

There are no "mergers of equals" in anything but name.

[GoodEater]

The may want to rename the entire operation - Maybe they could call it Moor's or Colson and just start all over again!

[TarteTatin]

Well, that's it. I don't drink Coors, mainly because it's what I class as 'canoe beer', i.e. drinking it is like making love in a boat (Need I explicate?). I suppose that that sensibility will inevitably overtake the Moslon brewers and make their beer lose even more character - I really do like Molson Export.

[suzilightning]

canadians are not gonna like this.

discerning people from the etatis unis will not be happy either. trust me ....

also as a former suc fred(onia) student. coors?(unfortuantely i do not see a vomit smilie)