THE GIST
For the second time in 13 months, MillerCoors is restructuring divisions and shedding jobs as a means to become more nimble in an ever-changing beer industry. This time around, it’ll also have a name change reflective of the market forces behind it.
MillerCoors (U.S) and Molson Coors Canada (Latin America) will combine to become the Molson Coors Beverage Co. on Jan. 1, 2020. Once formed, the two will serve as the company's North America unit. The new name is a telltale sign of how the company wants to approach the beverage sector in the new decade. According to Molson Coors president and CEO Gavin Hattersley, it plans to make "significant and difficult changes necessary to get back on the right track.”
In September 2018, the company had its first reorganization since 2013, which included the elimination of about 350 salaried positions. This latest round of restructuring will see 400-500 jobs lost as the new Molson Coors works to identify areas in which to reinvest $150 million annually—an attempt to fight off declining sales for the company's flagship brands and build up interest in new ones seen as more reflective of modern tastes and expectations.
WHY IT MATTERS
Things are shaping up to be another down year for the MillerCoors collection of brands in grocery and convenience chain stores, as tracked by IRI, a market research firm. The company's collection of beers is down 2.7% in the most recent 52-week period ending Oct. 6, with Coors Light (-3.5%) and Miller Lite (flat) struggling yet again. Both have been on the decline since 2015, and even Brewers Association-defined craft beer hasn’t had it as easy, either.
MillerCoors' collection of craft brands has had a hard time, losing about 285,000 barrels of total production from 2015-2018. Those declines are attributable to Blue Moon and Leinenkugel brands, once the core of the company's craft efforts. However, the business has seen steady growth from its recent craft acquisitions and new entries into the flavored malt beverage (FMB) and "better-for-you" spaces—all of which underlines the decision to add “Beverage Co.” to its name.
Henry's Hard Sparkling Water—the company's hard seltzer line—will more than double its IRI sales from 2018-2019, selling a little more than 47,000 BBLs of product through the first nine months of 2019 alone (it sold about 28,000 BBLs in all of 2018). There’s also Cape Line Sparkling Cocktails, which is the best-selling new FMB line in the country by volume sales—a successor to the failed trial of Two Hats, a fruit-flavored beer that was discontinued about six months after its launch.
There are no worries, however, about the Steel Reserve FMB portfolio (12.3%) and Arnold Palmer Spiked iced tea (103.6%), which were tracking hot in a 52-week period that ran through the start of September. Not to be outdone, the company also has plans around wine spritzers and hard coffee.
The laundry list of new products and launches underscores the pressure MillerCoors has been under as it transitions to the new “Beverage Co.” What’s gotten the business to this point is no longer working, and the need to bring new products to market—and fast—is being felt by the largest companies in the U.S. This is what ZX Ventures has become for Anheuser-Busch InBev, as it attempts to ramp up the speed of change for its parent company. A “see-what-sticks” mentality is being felt from small businesses up to the largest.
“As the world around us rapidly changes and the nature of competition intensifies, our business performance is lagging," Hattersley wrote to employees, as shared by the MillerCoors blog. "We’re over-indexed in declining segments, our core brands have seen years of volume losses, and we haven’t had the resources needed to fully invest behind our innovations."
Money saved "will be funneled into investments behind its brands, further expansions in the beyond beer space and new digital capabilities," according to the blog.
There’s a bit of irony to the Oct. 30 announcement, which marks the one-year anniversary of when the Brewers Association last changed its definition of “craft” to ensure its members could keep that designation while pivoting to a variety of FMBs, ciders, and other alcoholic products that could supplement lost beer volume.
The new Molson Coors will focus investment in the "above-premium segment," which notably includes Saint Archer Brewing Company's Saint Archer Gold, a Helles Lager marketed for its 95 calories and 2.6 grams of carbohydrates. That brand has grown 29% in the last 52 weeks. Also in the beer space, Hop Valley Brewing Company (12.1%) and Terrapin Beer Company (20.8%) continue to be strong players for the business in the past 52 weeks. Hop Valley's Bubble Stash IPA (136.6%) has seen one of the biggest jumps for any regional beer brand in 2019, and Terrapin's Hopsecutioner IPA (17.1%) is showing continued growth, having increased its IRI volume by 90% from 2015-2018.
Then there are the new “better-for-you” beers set to debut in 2020:
Blue Moon Light Sky, 95 calories
Coors Peak, 92 calories
Leinenkugel’s Spritzen, 93 calories
Keystone Light’s Keylightful (unlisted number of calories)
As a complement to these various changes, Pete Marino is being promoted to “president of emerging growth” for the North American Emerging Growth team. He has acted as chief public affairs and communications officer for MillerCoors since 2014, and served as president of Tenth and Blake Beer Company since 2017. Oddly, there was no reference to Tenth and Blake in the restructuring announcement, despite the fact that it acted as home to select craft and import brands over the years. Marino led the group’s slow, surgical growth strategies.
In the newly formulated Molson Coors Beverage Co., Peroni Nastro Azzurro and Pilsner Urquell will shift out of Tenth and Blake to oversight from the new company, while Leinenkugel will move back in, bringing all craft brands except Blue Moon under one roof.
In the company blog post announcing the changes, Hattersley said that the new name in particular “speaks volumes about who we are," which will help Molson Coors Beverage Co. to "regain the glory of our past, and we will create a brighter future."
With a shift away from classic flagships and a focus on a variety of non-beer brands, however, the future will decidedly not be shaped by the past that brought the company to this point.
Words by Bryan Roth