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Molson Coors snaps up StarBev and plans to push ‘aspirational’ premium brands in CEE

By Ben Bouckley , 04-Apr-2012
Last updated the 05-Apr-2012 at 13:35 GMT

The Ukrainian success of Molson Coors' brand Carling reflects its 'aspirational' association with London, president and CEO Peter Swinburn said
The Ukrainian success of Molson Coors' brand Carling reflects its 'aspirational' association with London, president and CEO Peter Swinburn said

Molson Coors has swooped to takeover Staropramen brewer StarBev for €2.65bn and says it aims to leverage its own premium brands in central and eastern Europe (CEE) citing the success of Carling in the Ukraine, which it said was now an ‘aspirational’ London-linked drink.

Czech Republic-based StarBev runs nine breweries in central and eastern Europe (CEE) and generated 2011 sales of approximately €700m and pre-tax profits of €241m. 

The brewer employs 4,100 staff and brews 13.3m hectoliters per year in the Czech Republic, Serbia, Croatia, Romania, Bulgaria, Hungary and Montenegro; it also distributes products in Bosnia Herzegovina and Slovakia.

US giant Molson Coors will finance the deal – the 11x EBITDA purchase price has been struck with StarBev’s private equity owner CVC Funds – via cash and debt, and subject to approval by European competition authorities expects it to close in Q2 of 2012. 

‘Good stepping stone’

Asked by analyst Dara Mohsenian from Morgan Stanley (during a conference call on the acquisition) why the deal was happening now, Peter Swinburn, Molson Coors president and CEO, said the company aspired to "smart M&A" that added value and offered returns.

He said: “We’ve been in Russia and Ukraine over the last couple of years and both these markets have performed well for us. We don’t necessarily believe that we have the capacity to go into a fully developing market – where there is no real brand development.

“So this really is a good stepping stone for us, the markets have real brands [StarBev is at least number three in every market and the number one brand in 50% of markets] are consolidated markets with strong brand positions,” he added.

“They offer us opportunities to leverage distribution for our existing brand portfolio and also give us the opportunity to bring brands such as Staropramen into our distribution as well.”

Swinburn told analyst Judy Hong from Goldman Sachs that StarBev had been on Molson Coors’ radar for some time, and discussing the attraction of CEE markets said: “These are not markets that have been opened-up too much to innovation, and to premiumisation and premium brands. So we see opportunities both with the [StarBev’s] existing brand portfolio, and to leverage premiumisation with new brands,” he said.

Scope to ‘premiumise’ StarBev offer

StarBev provided NYSE-listed Molson Coors with a strong platform from which to extend key brands such as Carling (others include Coors, Cobra and Canadian) within CEE, Swinburn said.

Discussing market competition, he told James Watson from HSBC Research Division: “The main players in the region are Heineken, Carlsberg and SABMiller, all of which are companies that are pretty recognised in terms of developing their brands.

"Molson Coors would do likewise, but also intended to use its brands to “premiumise” StarBev’s portfolio in central and eastern Europe, Swinburn said, adding that the deal would have been done irrespective of Carling’s success in Ukraine.

“But having said that Carling has been extremely successful there, and we’ve found that London and its association with the brand is aspirational within this part of the world, and all our consumer insight reinforces that,” he added.

Aside from Staropramen, StarBev’s portfolio includes local brands Borsodi, Kamenitza, Bergenbier, Ozusko, Jelen and Niksicko. It also distributes Stella Artois, Beck’s, Hoegaarden, Lowenbrau and Leffe under license.

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