SABMiller and Molson Coors in $10bn merger

by Darren Davidson, Brand Republic 10-Oct-07, 09:10

LONDON - SABMiller and Molson Coors have agreed to merge their US brewing operations, in a move that will put fresh pressure on the market leader Anheuser-Busch, brewer of Budweiser.

SABMiller and Molson Coors, the second and third-largest US brewers respectively in terms of sales and profits, said the new combined entity would be named MillerCoors.

The joint venture will have about 30% of the US beer market, with Anheuser commanding nearly 50%.

The deal, which also includes their operations in Puerto Rico, will create an estimated $10bn (£4.9bn) business and cost savings of $500m. It is subject to regulatory approval, but is expected to gain clearance without any major hurdles.

SABMiller and Molson Coors have struggled to make money in the US market, which has experienced a dramatic shift in tastes in the last five years, as consumers began drinking wine and spirits in greater quantities.

Since 2000, servings of spirits in the US have increased by more than 5%, while serving of wine have risen nearly 10%.

Leo Kiely, chief executive of Coors, said: "The US alcoholic beverage market is more competitive than it's ever been."

Anheuser has weathered the challenge better than most, with sales of its core brand, Budweiser, increasing between 2000 and 2005, whilst sales of Miller and Coors declined.

According to analysts at Bernstein Research, Anheuser has benefited from better marketing and the development of new brands, such as Michelob Ultra and Bud Select.

It was not immediately clear how advertising and marketing assignments would be affected by the deal. Molson Coors' lead agency is Interpublic Group's DraftFCB.

SABMiller agencies include: Publicis Groupe's Starcom, which handles media duties; WPP Group's Young & Rubicam; Publicis Groupe-backed Bartle Bogle Hegarty; and Publicis Groupe agencies Digitas and Arc.

The joint venture could hasten further consolidation in the brewing industry. There has been speculation that Anheuser has been in talks with InBev, the Belgian group behind Stella Artois and Beck's.

Molson Coors US brands include Coors Light, Killian's Irish Red, Keystone Premium and Molson Canadian.

Miller produces Miller Lite, Miller Genuine Draft, Miller Chill, Peroni, Nastro Azzurro and Pilsner Urquell.