E-Malt.com News article: 4366

USA: Molson Coors Brewing Co., the world's fifth-largest brewer, announced on March 2 plans to boost its 2005 revenues through the restructuring of its Brazilian operations, besides investing $70-$90 million at its plants in Canada and the US.

Molson Coors, formed last month with the merger of Montreal's Molson Inc. and Colorado-based Adolph Coors Co. and now the world's fifth-largest brewer by volume, said the Brazil market has compelling growth potential. Molson Coors Brewing’s chief executive, Leo Kiely said, "From a financial perspective, the cash drain from the Brazil business is unacceptable and must be addressed quickly. As it's performing today, the Brazil business is clearly not economically viable." "Making the right choice in Brazil is critically important to this company and our shareholders," Kiely said.

In the text of its presentation on the company's Web site, Molson Coors said it would grow its Kaiser business in Brazil. Kiely said that in Brazil, the company will focus on growing the Kaiser brand; turning around its core market of Sao Paolo; working on its distribution system; stemming the cash drain; and evaluating long-term profitability and growth potential. Molson bought Brazilian brewer Cervejarias Kaiser Brasil SA in March 2002 for $765 million, Reuters said, but it has so far proved to be a drain on profits and Molson was forced to record an impairment charge last year.

"Our challenge centers on the growth rate of the Kaiser brand particularly in our core market, which is Sao Paulo ... From a financial perspective the cash strain from the Brazil business is unacceptable and must be addressed quickly," Molson Coors Chief Executive Leo Kiely told the meeting. "We are committed to turning the situation around in very short order," he added, saying the company planned to rebuild its relationship with Coca-Cola FEMSA, which distributes Kaiser beer.

Rolling out its 2005 global objectives, Molson Coors also said it aimed to achieve low double-digit growth of earnings before interest and taxes and for more than $1 billion in earnings before interest, tax, depreciation and amortization, pre-synergies and merger-related costs.

In Canada, where the brewer continues to lose market share amid aggressive price-cutting and higher costs, Molson Coors said it planned to "significantly increase investment" in its Molson Premium brands and reduce reliance on price increases. It also said it would "aggressively invest" in Quebec behind its Coors Light brand.

"Based on current share of premium light segment -- 58 % -- Coors Light could grow from 8.5 % share of the Canadian market now to 14.5 % in the long run," it said. It said that by heavily marketing Canadian and Coors Light it aimed to stabilize Canadian and drive Coors Light share from other domestic brands, mainly Labatt Blue, which is brewed by Belgium's Interbrew. "They can't raise prices, they have recognized they had better find some other way of getting profits up," Palmer said.

In its key U.S. market, the company said the trend for low carbohydrate drinks was moderating, while price discounting was ticking higher. It said sales to retailers for Coors Light were better and unveiled new products for the brand including an 8-ounce can and a plastic 18-bottle cooler box. The company's Coors Brewers Limited unit said it would focus on its three core lager brands -- Carling, Grolsch and Coors Fine Light -- to capitalize on growth in that segment.

The beer maker has touted a restructuring plan that targets annual savings of $175 million within three years and includes plans to close its Memphis, Tennessee, brewery and cut jobs at corporate headquarters. "We can say ... three weeks after the merger closed, we have taken action on about $45 million of the savings target, which represents about 25 percent, which gives us a great degree of confidence in our ability to deliver the further actions," said Cathy Noonan, the global chief synergies officer.

Molson Coors said it would consolidate corporate centers, rolling Coors Canada and Molson USA into the existing Canadian and U.S. businesses. It also said it would move to one corporate center from two, but did not say which one, and would consolidate its information technology infrastructure.


05 March, 2005