MillerCoors is proof that beer can make old foes new friends. Long-time rivals, UK-based SABMiller and US-based Molson Coors put aside their differences to merge their operations in the US and Puerto Rico in a joint venture, MilllerCoors. The #2 brewer in the US operates eight breweries and enjoys some 30% of the domestic beer market. Its flagship brews are sold under the Coors Light and Miller Lite labels and import brews under Peroni and Molson Canadian. A division, the Tenth and Blake Beer Company offers craft and import brews, such as Blue Moon, Foster's, and many others. MillerCoors also makes Sparks, a line of brand malt-based beverages. The company is 58%-owned by SABMiller with Molson Coors holding 42%.
Formed in 2008, MillerCoors' operations were anticipated to boost market share and spur stagnant sales through a larger portfolio of brands, as well as improve profits through cost savings from combining production, distribution, and marketing. The joint operation was also positioned as a more formidable competitor to brewing giant Anheuser-Busch, and to a lesser extent local and regional brands, than either SABMiller or Molson Coors could be on their own in the US. (The merger did not include Molson Coors business in Canada, or SABMiller's international business.)
The American alcohol market, however, is rapidly changing for large beer companies with increasing competition coming from wine, spirits, and craft beers and imports. In fiscal 2012 (ends March) SABMiller reported a 2% slip in MillerCoors' volume sales to retailers, driven by a difficult economy that continues to hurt mainstream consumers. Domestic volume sales to wholesalers declined by 3%. MillerCoors' earnings were shored up primarily by Tenth and Blake. The craft and exports division delivered a double-digit increase in earnings atop a rise in revenues, thanks to higher pricing and a favorable brand mix coupled with cost savings. At the same time, according to SABMiller the joint venture has resulted in $790 million in cost savings since its inception, exceeding the target of $750 million one year earlier than planned.
MillerCoors' strategy focuses on growth through offering local premium and global brands paired with developing craft beers and other malt-based drinks. In 2012 Coors Light rolled out a more sophisticated temperature-sensitive label along with new packaging and advertising. Miller Lite has gained a packaging makeover and new advertising. Tenth and Blake's momentum is fueled by consumer interest in seasonal alternatives under the Blue Moon and Leinenkugel's lineup. The division is further boosted by its acquisition of The Crispin Cider Company's cider offerings, giving MillerCoors a share of the fastest growing category in the US Beer industry. (The deal was completed in February 2012 for an undisclosed amount.)
In addition to offering one of the brands that made Milwaukee the onetime "beer capital of the world," MillerCoors produces another old-time favorite Milwaukee brew -- Pabst Blue Ribbon -- which it manufactures for Pabst's owner, billionaire investor C. Dean Metropoulos, under a long-term contract.
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