E-Malt.com News article: Canada: Molson Coors volumes will not be hit by end of partnership with SABMiller

Global brewer Molson Coors Brewing Company operates in Canada through Molson Coors Canada; in the U.S. through MillerCoors; across Europe through Molson Coors Europe; and outside these core markets through Molson Coors International.

In Canada, the company distributed beer brands under license from Heineken N.V., which sells and brews beer worldwide, and SABMiller Plc, the world's second-largest brewing company and one of the world's largest bottlers of The Coca-Cola Company.

However, last week, Molson Coors Canada and Miller Brewing Company, a subsidiary of SABMiller, mutually decided to end their partnership. The litigation arose in Toronto, Canada over the sales of Miller’s beer brands in Canada, including Millers Genuine Draft, Miller Lite and Miller High Life. SABMiller will regain the rights to distribute Miller trademark brands in Canada, effective from Apr 1, 2015. Molson Coors will still distribute beers in the U.S. through MillerCoors, which is a joint venture of Molson Coors and SABMiller.

While Molson Coors Canada ended one partnership, it expanded its marketing partnership with Heineken N.V. in Canada in August. Under the expanded deal, Molson Coors Canada will distribute five additional above-premium brands of Heineken including Dos Equis, Sol, Tecate, Birra Moretti and Desperados in the country, starting Jan 2015.

Zacks analysts note that Molson Coors has been posting negative beer volumes in Canada for quite some time. Since 2001, the premium beer segment in Canada has been gradually losing volume to the above-premium and value segments, mainly due to an aging population and a sluggish economy. In Canada, the substantial excise tax increase in Québec, enforced in Nov 2012, has been hurting volumes, as the company holds a significant share of the Québec market.

The tax rate in Canada reduced in the second quarter of 2013 but the situation did not improve after that. In the recently reported second quarter 2014 too, a 2% decline in sales volume and currency headwinds led to a sales decline at Molson Coors Canada.

Zacks analysts do not believe that the decision to end the partnership with SABMiller will hurt volumes further. However, they do believe that the expanded partnership with Heineken will strengthen the market share of the above-premium category of beers, which has been growing of late. Molson Coors currently holds a Zacks Rank #4 (Sell).


16 October, 2014