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Adolph Coors Co. is to spend $190 million to add capacity at Virginia plant. Adolph Coors Co. doesn't plan to abandon its Rocky Mountain image, even as the brewer shifts some of its Coors Brewing Co. operations east. The Golden-based company said Tuesday it will spend up to $190 million in the next three years to add brewing capacity at its facility in Elkton, Va.

"We maintain that our Rocky Mountain heritage of brand will continue to remain strong," spokeswoman Kabira Hatland said of the 131-year-old Colorado brewer. Coors will use its new facility - expected to be able to turn out 6 million to 7 million barrels annually by 2007 - to brew Coors Light, Keystone Light and Aspen Edge. The brewery isn't designed to increase overall production; instead, Coors will shift some of the brewing it now does in Golden to the new plant.

Virginia will be the first brewery outside of Golden to brew Coors Light for U.S. consumption, Hatland said.

The company makes the brew for overseas markets at its Memphis, Tenn., plant. Coors Light sold in U.S. bars, restaurants and liquor stores is created using a cold-filtered process, while the brew destined for other countries is pasteurized, she said.

The move aims to serve customers in Eastern markets more quickly and cheaply, she said, but not to change the beer's Western image. Coors Brewing Co. began operating in Elkton 17 years ago but doesn't have a full brewing operation there.

Instead, huge tanker trucks haul a stronger version of Coors beer made in Golden to the facility, where it's diluted with local water, packaged and shipped to consumers. The site and its water were chosen with care, Hatland said. "(Former Chairman) Bill Coors led a search for several years to find the perfect water outside of Golden for an additional brewery," she said.

The company expects the new facility to save about $25 million annually, largely in reduced shipping costs. The move is part of an overall goal of reducing the cost of production by about $5 per barrel in the next half-decade. Coors' operating margin in the U.S., Canada and Puerto Rico in 2003 was 9 percent, compared with Anheuser-Busch Cos.' U.S. operating margin of 28 percent, said Mark Swartzberg, an analyst with Legg Mason Wood Walker in New York. "A barrel of Coors product . . . travels a lot farther on average than a barrel of an Anheuser-Busch product," he said. Swartzberg has a "hold" rating on Coors shares and doesn't own them.

The new, high-tech brewing operation will add from four to 10 jobs in Virginia, the company said in a statement Tuesday.
Meanwhile, Coors expects to eliminate 30 to 40 jobs from its staff of about 4,000 in Golden during the next three years, largely through attrition, Hatland said. Coors employs 450 people at the Virginia facility and about 500 at the Memphis brewery it acquired from Stroh in 1990, she said.

Plans for the new facility are separate from the planned $6.1 billion merger with Canadian brewer Molson Inc., announced last month, the company said. The move makes sense whether or not the merger closes, said Paul Gatza, director of the Boulder-based Association of Brewers. "It does make sense for them to try to move some of their brewing to places closer to some of their markets," he said. "This gives them a lot better access to Canada as well."

Canada has been a growing market for Coors Light, unlike several U.S. markets where sales have been flat or falling recently. The access is also important in cutting costs since Coors and Coors Light are shipped cold in refrigerated trucks, which costs even more than regular shipping, he said. Gatza says he doesn't think the brewing shift will affect Coors' image as a Rocky Mountain institution. "People will always associate it with Pete Coors standing in the snow, with Clear Creek running by it," he said. "They will always associate it with that, even though it's made in Virginia."


14 August, 2004