Molson Coors Plans, Looks to Brazil
The newly merged Molson Coors Brewing Co. will cut jobs, boost spending on marketing and review its money-losing investment in Brazil with a view to keeping it, chief executive officer Leo Kiely says.
In his first interview since shareholders for both companies endorsed the controversial deal, Kiely confirmed some of the $175 million (U.S.) in synergies at the combined company would come from job losses.
"There are redundancies," Kiely said in a telephone interview after Adolph Coors Co. shareholders endorsed the $3.4 billion deal as expected. Molson Inc. investors had already voted yes, though the outcome of that vote was far less certain.
Other cost savings will come from combining the two companies' purchasing power and rationalizing their brewery operations, Kiely said.
Kiely declined to say where, when and which jobs would be cut, though industry observers said they are more likely to come from administration and overhead than from the breweries.
Unionized workers at Molson's Etobicoke distribution centre said Molson had indicated there could be more work rather than less for Canadian brewery workers as Coors decentralizes its production.
"Molson has intimated to the union that there may be a bit more work in Canada because some of the Coors product could move here," said James McNamee, vice president of the Brewery, General and Professional Workers Union. However, McNamee said he is worried some of Molson's production may be moved to Coors' plants in the U.S., offsetting those gains.
Kiely said he could not provide any more details until after the deal closes. However, he added that in the longer term, the merger would be good for employees of both firms, as it strengthens the brewers' ability to compete around the world.
The deal creates the world's fifth-largest brewery, with $6 billion in sales and 15,000 employees at 15 breweries in four countries, including the U.S., Canada, the U.K. and Brazil.
The Brazilian operation, which Molson acquired in 2002, has been losing money and market share to larger, better-financed competitors. Analysts have been urging Molson to dump its 80% stake in Cervejarias Kaiser before its gets any worse.
However, Kiely said he is "bullish" on Brazil. "Ironically, as Coors, not being in Brazil, it's on our list of the top three places we'd like to be in the world."
While Molson has already committed to reviewing that investment, Kiely said, "there's (sic) several strategic options we want to explore."
On the subject of other potential mergers and acquisitions, in particular of the Mexican brewery Femsa, considered by some to be a good fit for Molson Coors, Kiely said it was too early to comment. The first order of business is "pulling the team together" and reinvigorating its existing businesses in North America, he said.
Kiely said he would have more to say about that at an investor conference in the first week of March. Molson's core brand, Molson Canadian, has been under attack from premium imports and regional discounters in its Canadian home market.
Meanwhile, Coors Light has been caught in a marketing squeeze between Anheuser-Busch Co., brewers of Budweiser, and SABMiller PLC, makers of Miller Light, in the United States.
The combined Molson Coors company will trade under the stock symbol TAP on both the New York Stock Exchange and the Toronto Stock Exchange.
Kiely, who is currently CEO of Coors, becomes CEO of the combined company, while Molson's CEO Dan O'Neill becomes vice chairman in charge of integration and synergies. Eric Molson, chairman of Molson, becomes chairman of the combined company. Peter Coors, chairman of Coors, will take a seat on the board.
The Molson and Coors families each control 33% of the votes in the new company, and each nominate five of the 15 board members. Molson's son, Andrew, and Coors' daughter, Melissa, will be joining the new board.
Molson's independent nominee is John Cleghorn, retired chairman and chief executive of the Royal Bank of Canada.