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Molson Coors looks to exploit Olympics to kick start Canadian beer brands

MONTREAL - Molson Coors (TSX:TPX.B) is gunning for gold by exploiting its Olympic association to help kick start a makeover of its flagship Molson Canadian brand and reverse the brewer's falling market share.

MONTREAL - Molson Coors (TSX:TPX.B) is gunning for gold by exploiting its Olympic association to help kick start a makeover of its flagship Molson Canadian brand and reverse the brewer's falling market share.

The brewer is hoping its platform as official beer supplier of the Vancouver Winter Olympics will generate interest in the brand's makeover to be launched before Christmas.

"That put together with the impetus that we'll have from the Winter Olympics is probably the best news that we've had for that brand in quite a long time," chief executive Peter Swinburn said in an interview Wednesday.

Molson Canadian is a strong seller, but has seen its share of the Canadian beer market fall over the years.

The company plans to spend an undisclosed amount of money on a major advertising campaign and new packaging. The focus will be on Molson Export in Quebec.

Edward Jones analyst Brian Yarbrough said Molson needs to promote the stale brands by following the successful strategy adopted with Coors Light.

"They need to pick something and stick with it because when they switch around people really don't know what the brand stands for," he said in an interview.

In addition to pushing these iconic brands, Molson Coors is introducing three new products: Rickard's Dark, Molson M and Molson Canadian 67, a low calorie beer that will be initially sold in Ontario and the West.

The brewer is trying to rejuvenate the Canadian market that has grown by less than one per cent annually over the last decade. Molson and Labatt's own more than 80 per cent of the market.

Molson's market share fell a further one percentage point in the third quarter as discount regional brewers took a disconcerting slurp out of its business outside of Quebec and Ontario.

Molson Coors said its Canadian sales to retail decreased by 3.2 per cent in the third quarter, well above the 0.7 per cent decrease faced by the industry as a whole.

Heavy discounting that has dominated the Quebec market has spread across the country as smaller regional players cut prices.

"No question we saw smaller regional brewers in each market grow share at the expense of the two major brewers combined and that's something we'll continue to be focused on," Molson Canada CEO Dave Perkins said in a conference call about third-quarter results.

The company, which reports in U.S. dollars, says it earned US$235.3 million, or $1.26 a share, in the three months that ended in September, up from $171.3 million or 92 cents a year ago.

Net sales fell 7.3 per cent to $853.7 million in the quarter as global volumes fell by 2.9 per cent.

The company said the small competitors benefit from special provincial tax breaks that allow them to sell beer at very, very low prices.

Concern of the heightened competitiveness of the Canadian market caused Molson Coors shares to drop in trading on the Toronto Stock Market.

Molson's shares closed at C$48.34, down 7.43 per cent, or $3.88 in Wednesday trading.

Yarbrough said investors are concerned that discounting will squeeze the brewer's Canadian profits, but believes the concerns are overblown and doubts the situation will be as bad as 2005 when Miller Lite chopped prices in the United States.

Swinburn said the Canadian market will continue to be challenging for the rest of the year despite efforts to improve its brand portfolio.

"For the near term, I think what we will see is the consumer continuing to be savvy in terms of what they're looking for but equally they will continue to look for the best deals they can get on their brands."

 
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