N American beer rivals mull merger
considering joining forces in a bid to bolster flagging
performances and generate growth in an increasingly tough market.
But will the "merger of equals" be enough for Molson and
Coors to kick-start their business and start making inroads into
the leadership of Anheuser-Busch?
Molson and Coors have so far confirmed simply that they are discussing a "merger of equals" which would create a brewer with annual sales of nearly $6 billion, still less than half the annual sales of A-B but nonetheless making it a much stronger competitor than either brewer on their own.
Generating growth in the North American beer market is a difficult job - as Miller's singular failure to drag itself out of the doldrums over the last few years clearly testifies - and while there are pockets of frenzied activity - light beer, low-calorie beer, low-carb beer, premium imports - the market for standard beer brands has been static.
Recent figures from market analysts Canadean, focusing on the US market, showed that the beer market as a whole had grown by a modest 1 per cent between 1998 and 2002, although light beer sales had grown by 4 per cent and imported beer by nearly 9 per cent in that same period.
All of which has made it hard for many brewers to improve their lacklustre performances in the North American market - even market leader Anheuser-Busch managed just a 0.8 per cent increase in domestic volume sales in the first quarter of the year - making the likelihood of consolidation stronger than ever.
The two medium-sized players have found it hard to compete with A-B, Miller (notwithstanding its own problems) and Interbrew, which owns the Canadian brewer Labatt. Molson has seen sales in its home market, where it is the number two beer maker, begin to flag in recent years, and its Brazilian unit, Kaiser, has also underperformed. Coors, the third largest US brewer, has also fallen behind its much larger rivals.
Both family-owned brewers have been keen to avoid takeover by a domestic or foreign rival, and a merger is the obvious way for both families to retain some level of control and influence while strengthening the companies' prospects. But whether the combination of two mid-sized, underperforming companies will in fact lead to any noticeable improvement in their long-term prospects remains to be seen.
In any case, there are likely to be few interested parties in either brewer, together or separately, with A-B too dominant, Miller too busy coping with its own problems and other international players such as Heineken or Interbrew too focused on markets with greater growth potential, notably in the Far East and Latin America.
