Two years after the highly publicized merger between US brewer Adolph Coors Co. and Canadian brewer Molson, the management problems anticipated by many analysts—most notably a power struggle between two long-standing brewing families—have yet to come to pass. In fact, Molson Coors Brewing Co., now the world’s fifth-largest brewer, is leveraging the strength of its family-based culture to strategically focus on brand building and growing its domestic and international beer businesses.

Already on track to exceed its merger synergy goal of $175 million in annual savings by the end of 2007, Molson Coors has capitalized on operational efficiencies while leveraging enterprise capabilities. At the same time, the company is driving solid brand momentum in its three main business units—the US, Canada and the United Kingdom.

“One of the dangers in a merger is that you become internally focused and you forget about your consumers and customers, but we didn’t do that,” remarks Dave Perkins, global chief strategy and commercial officer for Molson Coors. “Through our three operating business units, we had a really clear focus on making sure the strategic brands were healthy and we’ve continued to grow share. And that’s so central to our DNA. If you look at both Molson and Coors historically, the families are such believers in brands.”

With net sales up 6.1 percent to $5.84 billion in 2006 and sales volume up by 2.4 percent to 42.1 million barrels, Molson Coors’ recent performance has quieted many early skeptics by signaling that the merger is starting to pay off.
“I think if you look at the nature of the coverage of us in the analyst community, there’s no question that we’ve earned credibility over the last couple of years because we’ve done two things—we’ve delivered on the financial side of the business and we’ve made our brands stronger,” Perkins says.

Coming into the merger, both Molson and Coors had strong senior management teams with a good understanding of the needs of the local businesses, Perkins notes. After the merger, Molson Coors reorganized the senior management team by drawing members from both parties and establishing executive headquarters in both Denver, CO, and Montreal.
“[Molson Coors CEO] Leo Kiely brought a clear focus to what our priorities were coming out of the merger and the first priority was obviously to get a good, balanced team in place,” says Perkins.

A Family Affair
With brewing histories that date back more than a century, Molson and Coors each has a distinct heritage rooted in Canada and the US, respectively, and preserving those legacies while operating under one corporate umbrella has been a key factor in making the merger a success. As North America’s oldest beer brand, Molson, founded in 1786, has achieved institutional status in Canada, especially as a long-standing sponsor and supporter of Canadian hockey, including all six Canadian NHL teams. Meanwhile, in the US since 1873, the Coors Brewing Co. has been synonymous with Rocky Mountain heritage and community involvement.

The family ties to the brewing operations remain intact as Eric Molson serves as chairman of the board and former Coors chairman Peter Coors serves as vice chairman, while members of both families play active roles in the business.

“The heritage of both Molson and Coors is based on two things—the family aspect and community involvement—which help define who we’ve been and who we are,” notes Perkins. “With the local management autonomy that we have there really is no pressure on that heritage. The heritage is an important part of our winning formula.”

Molson Coors’ solid performance in 2006 was driven in large part by a keen focus on strengthening key brands in the US and Canada. Coors Light, Keystone Light and Blue Moon Belgian White Ale drove the growth story in the US. At the end of 2006, Coors Light completed its seventh consecutive quarter of total channel US growth, while Blue Moon continues to chart double-digit growth, benefiting from strong craft beer category growth.

“The growth of Coors Light is not driven by just one thing. First, we’re very clear on what the brand stands for, which is ‘Rocky Mountain cold refreshment,’ and that’s being executed well in our advertising. And our sales team also has been very disciplined in determining which channels they want to go after, so we’ve really strengthened our key account programming,” asserts Perkins.

In addition, the US team also put in place a general management concept within the sales group that places experienced people at the local level who can effectively engage with the distributor network, which, in turn, has led to increased distributor support, Perkins attests.

While Coors Light continues to be the heart and soul of the US business, the company has taken a strategic portfolio approach in order to compete in an increasingly fragmented market. Competing in the value segment with Keystone Light, the craft segment with Blue Moon and the light beer category with Coors Light, the company has an offering for every drinking occasion. The brewer also is looking to drive momentum behind the Coors brand by rekindling the “Banquet Beer” heritage and mystique with a packaging redesign and a new TV ad campaign that includes voiceovers by actor Sam Elliott.

Similar category trends in Canada—growth in above-premium, import and craft beers—have boosted Molson Coors’ craft and import offerings, including high-end craft beer Creemore Springs, which Molson acquired in 2005, Rickard’s Red and partner import brands such as Heineken and Corona. And while the Molson Canadian trademark brand has been losing share to discount brewers, Perkins reports that the company has been ramping up support for the brand and adjusting its pricing strategies.

“We are seeing a stabilization in that franchise, which is encouraging,” he says.

Meanwhile, Coors Light, which was introduced into the Canadian market in 1985, is now Molson Coors’ No. 1 brand in Canada and is Canada’s No. 2 overall brand.

“It’s just seen as a very contemporary, extraordinarily drinkable product that fits into so many different social occasions. It’s just an enormous brand and we’ve had incredible success with it,” Perkins says.

In the UK, where the company has a 21-percent share of the market, Carling is the No. 1 brand in the market and is growing share and volume.

In addition to its brand-building strategies, Molson Coors places a priority on innovation that enhances existing brands. So while other major brewers come out with a new offering every quarter—some that stick, some that don’t—Molson Coors has been launching packaging innovations, such as a Frost Brew Liner in all Coors cans, the Coors Light Cold Wrap Bottle and a temperature-sensitive label that indicates a “cold activated bottle,” that reinforces the fundamental positioning of its key brands. The company also strategically launches new products, such as Rickard’s White in Canada and C2, a low-alcohol beer in the UK, in order to fill a particular niche in the market.

“We are smaller than some of the other players in the industry and a strategy for them of multiple new brands may well be right, but it wouldn’t be right for us,” Perkins explains. “Consumers are faced with so many brands every day and the way to win is for them to understand what you stand for and that’s what we’re doing through our innovation.”

With insight and innovation in mind, the company also created a Brand and Innovation Council made up of sales and marketing staff from each business unit to share consumer and customer learnings from various markets and exchange ideas and best practices.

Going Global
The brewer is setting its sights beyond North America and the UK with a long-term, brand-building strategy for growing markets such as China, where the company is slowly expanding the Coors Light brand as well as partnering with distributors in emerging markets such as Hong Kong, Vietnam, Taiwan and South Korea.

“One of the things we really like is how Coors Light has shown an ability to travel,” remarks Perkins, referring to the brand’s expansion into Canada, Ireland, the UK and Mexico. “We believe that Coors Light has a really good shot at becoming a true global brand over time if we do it right and have the patience.”

The growth of Coors Light in international and emerging markets also plays an important role in the company’s strategic plan to become a top-performing global brewer. Similar to Coors’ acquisition of Carling in 2001, Molson Coors is keeping its eyes open to acquisition opportunities, both at home and abroad, as it looks to compete in an increasingly consolidated market.

“Size for the sake of size isn’t what we’re all about,” Perkins points out. “If there are opportunities to expand in a way that creates value and that has benefit back to the base businesses, then we’ll pursue them.”

While emerging markets open up the potential for future volume growth, Molson Coors remains strategically focused on strengthening its base markets. While the US and Canada represent mature beer markets, and beer’s share of the alcohol market began to dip a few years ago due to growth in spirits and wine, Perkins says he sees great potential for sustained growth.

“Within the industry there are clearly pockets of momentum where you’re getting growth that would exceed the growth that you’re seeing in spirits and wine, such as above premiums, imports and craft beers. The light segment continues to grow and if you look at our portfolio, we’re nicely aligned with that market growth,” he notes.

To help support continued growth in North America, the company recently opened a new state-of-the-art brewery in Virginia’s Shenandoah Valley to more easily reach thirsty Eastern beer consumers—no more smuggling the beer across the Mississippi River—and has plans to open another brewery in New Brunswick, Canada this fall.

VITAL STATS
MOLSON COORS BREWING CO.
EXECUTIVES: Eric H. Molson, chairman of the board; Peter H. Coors,
vice chairman; W. Leo Kiely III, president and CEO
HEADQUARTERS: Denver, CO, and Montreal, Quebec, Canada
’06 SALES: $5.84 billion
EMPLOYEES: 9,550
GOALS: To become a top-performing global brewer, winning
through inspired employees and great brands.

 From Beverage World July 15, 2007