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Canada, USA: Molson shareholders vote this week on a proposed merger with U.S. based Adolph Coors. The merger proposal has gone through many modifications to entice Molson shareholders who aren't sold on the deal which some say has no upside for Molson.

With Coors Brewing struggling just to keep a decade-long 11% U.S. market share behind Anheuser-Busch (50 percent) and London-based SABMiller (22 percent), it's remarkable enough that the Colorado brewer has stayed independent this long, Coors said. "You know, when I went to work for the company in 1939, there were 750 family-operated breweries humming along in this country - and doing very well," he said. "Prohibition had been repealed for only a few years, and everyone was enjoying the honeymoon”, according to a report of Rocky Mountain News published on January 24.

"That year we put out 126,000 barrels of beer. That means nothing until I tell you we put out in this past year 24 million barrels. "So you had to grow to survive. But of those 750 breweries, only two of any consequence are still alive - Anheuser- Busch and ourselves. And to show you what we're still up against, Anheuser- Busch has four times our market share, which means they can spend four times as much money as we can romancing the consumer."

First announced in July, the merging strategy of Canada's No. 1 beer maker and Coors Brewing - the third-biggest U.S. brewer - has been described by industry analysts as a race to build scale, one that will better position the combined companies domestically and in the growing overseas markets. Molson Coors Brewing would own brands that include Coors Original, Coors Light, Keystone, Molson Canadian and Carling. The combined company, to be controlled by the two founding families, would create the world's fifth-biggest brewer, with overseas markets in the U.K. and Brazil. As a stand-alone, Coors is No. 8. "Long range, I don't think it's practical to think a brewery like us with the modest market share we have in this country can continue like we have," Coors said. "If we don't expand our operations and become global, we aren't going to make it. That's basically what's behind this thing."

In the U.S., support hasn't been an issue. The Coors family owns all the company's voting shares and about a third of the 36 million publicly traded, non-voting shares, . But north of the border, the shareholders of Canada's oldest brewer have squabbled over price. For the merger to go through, it will require a two-thirds majority from Molson public shareholders at Friday's meeting in Montreal.

Bill Coors said the latest negotiated special dividend of $4.47 to Molson shareholders should be enough to appease the merger critics. Furthermore, if another buyer such as SABMiller were to step in, it would effectively destroy a 20-year working relationship that enables Molson to brew and market Coors brands in Canada.

Losing Coors could impact Molson's net profit by more than 20%, he said. "The point is, if somebody else buys Molson, Coors was going to pull that franchise out from under them . . . and that makes them much less attractive to a hostile takeover." Coors said he doesn't mind a bit that the merged entity will be known as Molson Coors Brewing instead of Coors Molson. "I don't think it makes any difference," he said. "This is something the Molson people wanted, and it's always a give- and-take process in these mergers."

Coors Chief Executive Leo Kiely will take charge of day-to-day operations as the first Molson Coors CEO. And while Denver is expected to become Molson Coors headquarters, for the first time in its 132-history there will be no senior executive from the Coors family at the throne of the Coors brewing dynasty. Adolph Coors Co. Chairman Pete Coors, Bill's nephew, is resigning and will serve as a Molson Coors director. "To me nostalgia is a waste of time," said Bill Coors. "It doesn't do you any good. You have to look ahead."

Changing dynamics and evolving strategies - they're as much a part of the Coors' brewing legacy as the 1941 recipe of the first Coors Light Beer (discontinued in World War II because of material shortages) and the snow-capped mountain logo on a can of Coors Original. Bill Coors chuckled as he recalled butting heads with his father, Adolph Coors Jr. There was a day in 1946, when Adolph held a high-level meeting to determine the company's future in a new peacetime economy. "He said under no condition would we ever sell more than 250,000 barrels a year. Heavens, do I remember it!

"All I knew is we had to grow, and it was synonymous with survival. But he walked the brewery every day and spoke to every worker . . . . He reasoned quality and growth were not synonymous. I think he figured if the brewery got any bigger he couldn't give it that scrupulous attention." When Adolph Coors died at age 86 in 1970, five years before the company went public, the brewery's annual output exceeded 3 million barrels.

In 1978, Coors Brewing was the "last guy on the block" to come out with a low-cal brand to compete with the phenomenally successful Miller Lite. It was the first time in 20 years that Coors had brewed more than one beer. "Our distributors were beginning to demand it as well as our customers," Coors said. "I remember asking our sales manager how much you think we should plan for. He said about 10 or 12 percent of our product mix.

"Well, we had to make some major changes in our processing and equipment to get this done right . . . so I just took a deep breath and doubled that figure."

Today Coors Light accounts for 70 percent of the brewery's volume. "It doesn't take a rocket scientist to figure out if there is a certain trend, you have to get with it . . . . If we hadn't come out with light beer, we wouldn't be in business now."


26 January, 2005