COULD FIGHT POSE FUTURE PROBLEMS FOR $7.76BN US JV MILLER COORS?

Molson Coors draws first blood in Canada court spat with SAB Miller

By Ben BOUCKLEY contact

- Last updated on GMT

The iconic Molson brewery in Montreal (Picture Credit: Molson Coors)
The iconic Molson brewery in Montreal (Picture Credit: Molson Coors)

Related tags: Miller brewing company, Molson coors brewing company, Coors brewing company

SAB Miller is disappointed by yesterday’s interim court injunction that stops it terminating its Canadian License Agreement with Molson Coors, and one City analyst warns that the spat could be a symptom of broader tensions between the two brewing giants, who co-own the massive US JV Miller Coors.

The two brewers are heading for a court showdown in December over SAB Miller’s decision (SAB is the world's No.2 brewer) to terminate the agreement before term, where it grants US-Canada brewer Molson Coors (the world's 5th-largest) rights to license SAB products in Canada.

Asked what he made of SAB Miller’s move to terminate the deal, one City analyst, who did not wish to be named, told BeverageDaily.com: “They’re involved in a court spat with their JV partner in the US, which makes for a bit of a heady cocktail.”

Asked whether the Canadian court spat could affect the SAB Miller/Molson Coors JV in the US (the Miller Coors Brewing Company clocked up $7.76bn in sales in 2012), another City analyst told BeverageDaily.com: “It’s not exactly indicative of a smooth and hassle-free relationship. There are obviously a few problems under the surface there, and this is hardly going to smooth over the cracks.”

After Miller served notice of its intention to terminate on January 18, Molson Coors swiftly hit back, filing a lawsuit in Ontario seeking to prevent SAB Miller's Canadian subsidiary, Miller Brewing Company, from exiting the contract.

Alleged failure to meet sales targets

Launching its suit, Molson Coors said in a late-February SEC filing that it sought an injunction (now granted) preventing termination of the deal and ordering Miller to abide by its contractual terms.

“In our lawsuit, we also assert that Miller breached the license agreement by attempting to terminate the license agreement,”​ Molson Coors said at the team.

“We intend to vigorously assert and defend our rights in this lawsuit.”

In a February statement sent to BeverageDaily.com, SAB Miller blamed allegedly low sales volumes (and the failure to meet targets) on its decision to exit the agreement, and said it intended to explore other options for Canadian import and distribution.

The first City analyst told BeverageDaily.com that he wasn’t surprised at SAB’s move to terminate the agreement before term and that, privately, executives felt that Molson Coors hadn’t put enough effort into marketing SAB's products, he said.

Canada only accounted for “around 2%”​ of SAB’s sales, he added, and although the country did not present a massive beer opportunity, “they probably feel they’re under-indexed there”.

‘Ability to better serve’ customers' beer preferences

Yesterday, Stephen Rogers, legal counsel for Miller Brewing Company, said: “While we respect the decision, Miller Brewing Company looks forward to proceeding to trial, presently set for December 2013.”

He added: “We remain firm in our expectation that the court will agree that we adhered to the terms of our Canadian License Agreement when we exercised our right to terminate.”

And Paul Gurr, MD of Miller Brewing Company Canada, affirmed SAB Miller’s commitment to the Canadian marketplace.

“In the interim, we will continue to prepare for the seamless transition following termination of the agreement, pending a successful trial decision, one that ensures Miller Brewing Company’s ability to better serve Canadian retailers and consumers’ beer preferences, choices and occasions in the future,”​ he said.

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