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MillerCoors execs face difficult to-do list

Cutting jobs among tasks for joint outfit

By Roger Fillion, Rocky Mountain News (Contact)

Published June 27, 2008 at 10:10 p.m.

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Molson Coors and SABMiller are set to tie the knot Monday on their much-ballyhooed joint venture, MillerCoors.

And when MillerCoors' top brass sit down at their desks next week, the executives will confront tough issues:

* Cutting jobs - likely more than 1,000 from the combined company, according to one estimate.

* Picking a site for the new headquarters - quite possibly other than Golden, home of Coors Brewing, or Milwaukee, home of Miller Brewing.

* Marketing longtime rival beer brands, including Coors Light and Miller Lite.

* Sorting out details of brewing Coors and Miller brands at each company's breweries.

* Meshing two corporate cultures - Coors, with its family ownership and western American roots, and Miller, a unit of the world's largest brewer by volume.

Analysts said the man tapped to be the first MillerCoors CEO - Molson Coors Chief Executive Leo Kiely - is up to the job of merging the U.S. operations of Molson Coors and SABMiller under one corporate roof.

"Leo Kiely is probably the best there is in the beer business in the U.S. If anyone can make it work, he can," said Mike Mazzoni, beer industry consultant based in Lexington, Ky.

Analysts noted that Kiely navigated Coors through two previous combinations: Coors' purchase in 2001 of Carling in the United Kingdom and the Coors-Molson merger in 2005.

But his job won't be easy. Executives say integrating Coors and Miller could take up to two years.

Molson Coors, with headquarters in Denver and Montreal, and London-based SABMiller plan to close on the joint venture Monday. They're wagering they'll be better poised to take on U.S. industry leader Anheuser-Busch.

"MillerCoors will be a much stronger business than either of our companies could have been on their own," Kiely told reporters this month.

Credit Suisse analysts Carlos Laboy and Anthony Bucalo agreed, writing in an April report: "MillerCoors will be bigger than the sum of its parts."

The joint venture will combine about 10,000 employees, eight breweries and more than 20 beer brands. The combined sales of MillerCoors will total $6.6 billion.

Tuesday is set to be "day one" for MillerCoors.

The new company will rank as the No. 2 brewer in the United States, with about a 30 percent market share.

Anheuser-Busch holds about a 50 percent market share.

MillerCoors meshes the U.S. operations of Coors Brewing and Miller Brewing. When they announced MillerCoors last October, executives said they expected to wring $500 million in annual savings from the joint venture.

Overlapping jobs would be cut. Transportation costs would be reduced. The companies would brew each others' beers at the combined eight breweries. Cans, bottles and kegs of beer would travel fewer miles to market.

And MillerCoors could leverage its newfound heft to buy raw materials at cheaper prices.

Coors spokeswoman Kabira Hatland said the companies are still planning "and don't have final job loss numbers." She added that "we will treat employees fairly, consistent with Miller and Coors company values."

The layoffs are expected to hit a range of areas: sales and marketing, transportation, legal and accounting.

In their report, Credit Suisse's Laboy and Bucalo predicted "the first internal challenge" for top executives "will be managing head count and finding a new home." The job won't be "easy," they noted.

"More than 1,000 employees will likely lose their jobs, and this will be stressful as old loyalties are tested."

The analysts also suggested that Chicago or Dallas might be the site of the new MillerCoors headquarters.

Molson Coors Vice Chairman Pete Coors said in February it was "not likely" the headquarters would be in Denver or Milwaukee.

"There's a fairly strong sense a neutral site would be important," he told the Rocky Mountain News.

Executives have said a decision would be made after the deal closes but that Miller- Coors would maintain a significance presence in Golden and Milwaukee. Coors employs about 3,000 in Golden.

Another hurdle for Miller- Coors will be marketing beers that up till now have been rival brands.

They range from flagships Coors Lite and Miller Lite to Coors Banquet, Miller Genuine Draft, Blue Moon and Leinenkugel's. Imports also enter the mix.

"They have a broad portfolio," said Mazzoni, the industry consultant. "They have to create identities for each of the brands that will allow them to gain volume and market share in each category rather than from each other."

The merger partners haven't decided which beers will be brewed at which breweries. Miller operates six and Coors two, one in Golden and a new brewery in Elkton, Va. None is expected to be closed.

Coors Banquet will be brewed only in Golden, given its "Rocky Mountain water" branding.

Kiely said in a recent interview the Golden brewery would serve as a "full-service brewery."

"It won't brew every brand in the portfolio because every brewery won't brew every brand," he added.

"But you certainly would expect that all the large brands will be brewed here in Colorado as well as Milwaukee as well as the six other locations."

And while Coors bottles its beer in brown bottles to protect against sunlight - particularly at Colorado's higher elevation - and Miller uses clear bottles, there are no plans to change the color of the clear Miller bottles, Coors spokeswoman Hatland said.

fillionr@RockyMountainNews.com or 303-954-2467

Vital statistics

MillerCoors will combine the U.S. operations of Molson Coors and SABMiller. Here are key facts about the new joint venture:

* Economic ownership:

SABMiller 58%

Molson Coors 42%

* Board makeup:

SABMiller 50%

Molson Coors 50%

* Brands: Coors Light, Coors Banquet, Keystone, Blue Moon, Molson Canadian, Miller Lite, Miller Genuine Draft, Miller High Life, Leinenkugel's, Pilsner Urquell

* Breweries: Eight, including six Miller and two Coors

* 2007 revenue: $6.6 billion combined

* 2007 beer shipments to wholesalers: 69 million barrels combined

* Total employees at deal closing: About 10,000

* Years of brewing history: 288 combined

Notable quotes

* On the impact of the U.S. brewing industry:

"It would be difficult to overstate the impact of this combination on all tiers of the U.S. brewing industry. The companies call the effort 'logical,' and it is hard to argue otherwise."

Carlos Laboy and Anthony Bucalo, Credit Suisse analysts

* On workers at Miller being unionized: "Our position has been and will continue to be that employees can choose whether they think they need representation or not."

Leo Kiely, incoming MillerCoors CEO

* On pending layoffs:

"We are still in the planning process and don't have final job loss numbers."

Kabira Hatland, Coors Brewing spokeswoman

* On the challenge:

"Their biggest challenge is integrating these two very disparate corporate cultures and making a smooth running machine."

Benj Steinman, publisher of trade publication "Beer Marketer's Insights"

Comments

  • June 28, 2008

    8:15 a.m.

    Suggest removal

    SteveM writes:

    Why do all Colorado companies get merged up and moved? Coca-Cola would never move out of Atlanta. Don't these people have any loyalty to the communities? This is a sad, sad day in Colorado. MillerCoors is a dumb and very bad idea. Merging up to compete has never been demonstrated to be a good idea down the road. It sounds good in the beginning and is loved by Wall Street. But, really, it's all about homogenization which does not increase market share. This new company will have a combined market share that is still lower than AB. Hmm. So what? Who cares? Are they both profiting? Are they both employing? Why do they have to have the biggest market share?

  • June 28, 2008

    9:37 a.m.

    Suggest removal

    jacka writes:

    Whoa there stevem, you forgot to rail on the eco justice angle and worker rights. You sound like a commie winer.

    Here is to more private for-profit investing via LLCs, non public cos., tax sheltering vehicles and partnerships. Too bad our Colorado business environment is so anti-business.

    Ever wonder why TX has hundreds to public and private corporations located in hot and dry TX.

  • June 28, 2008

    10:28 p.m.

    Suggest removal

    warrengfunk7 writes:

    Neutral???
    Either the Headquarters will be in Denver, or nowhere at all. Any other location is NOT acceptable. It wouldn't be in Golden or Milwaukee, it would be in Downtown Denver. No to Chicago, that is as neutral to Milwaukee and Denver is to Golden. Denver cannot stand by and allow another one of it's fortune 500 companies to relocate to Chicago or Dallas. It must be prevented, no matter the cost.

  • June 29, 2008

    8:33 a.m.

    Suggest removal

    blacksho89 writes:

    Alas, as a Golden native and long time Coors drinker, the alliance with SA Miller has forced me to change brands. Miller is a sponsor of a group that uses hateful imagery to denigrate other groups. As a proud progressive, I must therefore boycott this company.

    http://michellemalkin.com/2007/09/27/...