SABMiller seeks to end licensing agreement with Molson Coors
Seeing that their own brands are not really going anywhere in the highly lucrative Canadian market, Miller Brewing Company, the U.S. subsidiary of SABMiller, has terminated its Canadian licence agreement with Molson Coors Canada as of 22 July 2013. Although Molson Coors Canada has filed a lawsuit in Ontario seeking to prevent the termination of the license agreement, Miller is vigorously defending that action and maintains its right to terminate, Canadian media report.
It’s a funny thing that in the business world divorce procedures by one partner are often resisted by the other. It’s probably not because the abandonee is still harbouring deep feelings for its former partner. More likely it’s the sudden drop in taken–for–granted profits that makes the one left behind seeking a court ruling to prevent the other from walking out on them.
Same in this case. Canada is an important market for Molson, where it is the number two brewer by volume behind AB–InBev–owned Labatt. According to the Barth/Hansmaennel report, AB–InBev/Labatt has 42 percent of the market and Molson Coors 39 percent. Molson Coors sells its own products as well as several other brands under licence, including Heineken, Amstel Light and SABMiller’s Miller Lite and Milwaukee’s Best.
However the Canadian beer market is flat or even slightly in decline, which means that competition is fairly aggressive with major brewers, foreign companies, and craft brewers fighting for market share.
Never mind that Canada has long been a 24 million hl beer duopoly, figures for the on–trade sector show that there is not a single beer brand that dominates. Of the top–25 on–premise beers in Canada, only Budweiser has a double–digit market share, says Restaurant Sciences, a market research outfit.
While Molson Coors has 39 percent of top–25 on–premise sales by dollar sales (compared to 40 percent for AB–InBev), SABMiller’s Miller Genuine Draft (MGD) makes up only 7.7 percent of the total, Restaurant Sciences report.
One look at the table shows that AB–InBev and Molson Coors have built large brand portfolios in Canada, there are still nine brands among the Top 25 brands which don’t belong to either.
According to the Brewers Association of Canada, approximately 80 percent of beer consumption in Canada takes place in the home. The remaining amount is consumed in the on–trade, which has been brewers’ preferred platform for consumer trial and adoption.
So there is plenty of room to grow for MGD, many think, if SABMiller can combine good consumer marketing with a new distribution portfolio.
