MillerCoors’ long search for new CEO has set tongues waging
Do potential candidates think the job a one-way ticket, or does the candidate who suits all still need to be born? Fact of the matter is that MillerCoors, the U.S. venture between SABMiller and Molson Coors, hasn't named a new CEO.
The venture's current CEO, Tom Long, 56, told MillerCoors’ board a year ago that he planned to leave his post, but it had nobody to replace him when it announced his departure in early February 2015. Mr Long will depart on 30 June this year.
The U.S. publication Dow Jones Business News, on 30 March 2015, judged MillerCoors’ hitherto futile executive search as the latest sign of trouble at a joint venture which was formed seven years ago with the aim of creating a more formidable number two in the U.S. to AB-InBev. The world’s number one brewer then had about 49 percent of the U.S. beer market. It now has 45 percent compared with MillerCoors’ 26 percent.
When the U.S. operations of SABMiller and Molson Coors were fused, they combined freight logistics, marketing, production and procurement. Thus they were able to wring about USD 1 billion out of costs, driving profit increases for six years straight. Now, though, much-needed investments in marketing and IT are undermining those cost savings, says Dow Jones.
Dow Jones reminded readers that while MillerCoors profit rose 2.9 percent last year to USD 1.33 billion, it reported one of its worst quarters ever in February, and warned during an earnings conference call that it doesn't expect margin improvements this year. Profit declined 12 percent in the fourth quarter from a year earlier, when earnings had risen 30 percent.
“They're not looking at a great 2015,” said Benj Steinman, president of Beer Marketer's Insights, a trade publication. He added: “It's getting tighter as volumes continue to decline. They're not able to increase prices above inflation because their core brands can't sustain it.”
Observers concur that the joint venture - with brands including Miller, Coors, Blue Moon, Keystone, Killian's and small labels like Hamm's - was never a match made in heaven, but a marriage of two companies with different styles and agendas.
Apparently, employees awarded to SABMiller’s people the nickname “the suits” while Molson Coors’ were referred to as “cowboys”. That’s because, says Dow Jones, SABMiller is known for its focus on business processes, whereas Molson Coors is family-controlled and steeped in entrepreneurial spirit.
Besides, both parents depend to varying degrees on their love-child. SABMiller derives just 12 percent of EBITA from the joint venture. Molson Coors, on the other hand, depends on the joint venture for 44 percent of its EBITDA.
Dow Jones argues that this has led to different views on how to run the business. “When the ten-person board met last year to discuss the joint venture's three-year plan, SABMiller's five members favoured a plan to balance the maximizing of profit with reinvestment in the business. Molson Coors' five members, however, wanted higher profits”, says Dow Jones.
One of the biggest challenges is that their two major sellers, SABMiller’s brand Miller Lite and Molson Coors’ Coors Light, which together contribute more than 50 percent of MillerCoors profits, haven't increased volume simultaneously since 2007. When one thrives, it seems to cannibalize the other.
In fact, in the past quarter, Miller Lite delivered its first volume gain in seven years, but Coors Light, which competes in the same category, posted a single-digit volume decline.
Another challenge is that even after seven years, the joint venture hasn't been able to integrate the companies' separate ordering systems, which has allegedly strained relations with distributors.
Mr Long conceded to Dow Jones that MillerCoors has “underinvested” in IT for years and has instead tried to “Band-Aid” the systems together before approving a new system that will be available next year.
Dow Jones claims that MillerCoors’ board has been searching since September for Mr Long's successor. The process has been slow, Mr Long said, because the job “requires attributes that are hard to find: knowledge of U.S. consumers, deep understanding of marketing... and appreciation for franchise markets.”
According to MillerCoors’ spokesman Pete Marino the board has finally put together a shortlist of candidates for the job. He added that the board was as “harmonious” as ever and said the joint venture has delivered record profits while also creating a stronger competitor to AB-InBev.
Surely, financial markets will hold their breath as to who MillerCoors will eventually pull out of their hat?
