Sunday, July 6, 2008

MillerCoors is Up and Running

MillerCoors, the combined U.S. effort of Molson Coors and SABMiller, has begun operations as of this month.

Here's a press release.

The merger effectively leaves the U.S. with two major brewing behemoths. (The other, of course, being you-know-who.) It's funny – at a time when The Big Boys are seeing their sales drop while imports and craft beers continue to grow, the answer is to consolidate, consolidate, consolidate. (Actually, under that framework, InBev's proposed buyout of A-B is, somehow, both typical and ironic at the same time.)

The big brewers' insistence on More of the Same in the face of shifting consumer preferences is the industry's way of battening the hatches, digging in the heels. Too often the "solutions" these guys come up with – merge distribution channels to increase efficiency and create greater economies of scale; ramp up marketing efforts on behalf of core brands – betray either a tremendous ignorance of the real reasons behind BMC-types' struggles, or an astonishingly dismissive posture toward that reality, or both. Here's what it boils down to: If consumers are increasingly reaching for higher-end, more flavorful, and – saints alive! – pricier brews, the big guys' answer is always (a) find ways to streamline distribution (to what end – improve upon nearly 100 percent market saturation?) and (b) find a way to "reinvigorate" the marketing apparatuses behind brands that already are what they are thanks to years of very effective navigation of the highly competitive world of beer marketing.

And all this will ultimately serve the consumer how? Or respond to changes in the industry (really, changes in consumer tastes) how? Or, in MillerCoors' own words, "build the best portfolio of beer brands in the business" how?

In this last case, I hate to rain on Pete Coors' corporate flimflammery parade with a rational line of thought, but I fail to see how one gigantic macro-lager brewer whose portfolio consists largely of giant macro-lagers merging with another gigantic macro-lager brewer whose portfolio also consists of giant macro-lagers will represent a progression toward "the best portfolio of beer brands in the business." The most homogeneous, perhaps.

Oh, well. Let MillerCoors do what they want. I suspect they'll find this marriage, though unlikely to end in disaster, will not bear the fruit promised by their fanciful mission statement. But it's also unlikely that beer industry executives will stop viewing this kind of move as anything but another in the long line of highly successful maneuvers that have seen 80 percent of U.S. beer market share now consolidated in the hands of two players. It is, on some level – a very significant one, in fact – hard to argue with that kind of success.

It may be tempting to compare this mergers-and-acquisitions game to rearranging the deck chairs on the Titanic, but to do so would be exaggerating these companies' challenges, and clichéd, besides. A percentage slip here and there might be millions of dollars off the balance sheet, but there's plenty of space between today's stock price and rock bottom. The icebergs are small and negotiable yet.

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