E-Malt.com News article: 2851

Canada: The deputy chairman of Molson has resigned from the company board. While Molson has been a Canadian brewing icon for 218 years, board-level arguments, poorly performing subsidiaries and lacklustre North American sales have raised question marks over the company's future. It may yet need to form a partnership with a larger rival to compete in an increasingly consolidated beer market, according to Datamonitor comments from June 25.

Canada's largest brewer Molson has been a family-run company since its foundation in the eighteenth century. However, tensions among those family members erupted at the company's annual meeting this week, with William Molson publicly challenging distant cousin and chairman, Eric Molson, on the decision not to put his younger brother, Ian, up for re-election to the board. Deputy chairman Ian Molson has held a position on the board since 1996, after being head of investment banking at Credit Suisse First Boston.

Adding to the turmoil is a division between family board members and outside shareholders, who plan to block three nominees put forward to represent nonvoting stockholders. Strongest disapproval is directed at nominee Daniel Colson, who is named in a lawsuit concerning his former company Hollinger International, which is currently being investigated for accounting irregularities.

In an increasingly consolidated brewing industry, Molson has found it difficult to compete. Efforts to grow sales have been unsuccessful: Canadian sales have remained flat over the last two years, while its US division lost ground during the same period, and net earnings fell 23% in the fiscal year just ended.

As part of efforts to gain market share in South America, Molson purchased the Brazilian beer company Cervejarias Kaiser for $765m in 2002. The acquisition has proved disappointing, with Kaiser's domestic market share decreasing in the first quarter of 2004. This has given rise to speculation that Molson will now sell its Brazilian subsidiary.

Amid growing concerns over North American sales, a so-far unsuccessful debut in Brazil, and diminishing market share overall, the family infighting and shareholder division could not have come at a worse time. Molson will have witnessed the recent merger agreed between AmBev and Interbrew and it could now be considering a similar move. It may put itself up for sale or, if it wants to maintain a degree of independence, attempt a strategic partnership with a larger brewer.


30 June, 2004