Miller and Molsons not Playing Nice


The two brewers squared off last year after Miller wanted to cancel its distribution agreement with Molson in Canada because it felt Molson was sabotaging its sales there and decided it wanted to try its own hand at distribution. Created in 2007, their MillerCoors joint venture mainly distributes beer in the U.S. and Puerto Rico, but also allows for Molson to distribute certain Miller brands up north, primarily Miller Genuine Draft


According to Miller, sales were far below the targets agreed to between 2010 and 2012, and that, Miller says, gives it the right to terminate the contract. Molson, however, contends MGD is a strategic brand that would cause it irreparable harm if the deal was dissolved, and that Miller never renegotiated the sales target like it was supposed to. Molson objected to breaking up the joint venture and won an injunction from Canadian courts, although the judge thought Miller had a strong case.

The two have been trying to resolve their differences ever since, but last week both brewers announced they were unable to reconcile and were heading back to court.

This past February, Molson reported a 0.2% decline in fourth-quarter revenues and a similar decrease in its underlying after-tax income as its taxes rose and beer sales continued their slump in Canada, the brewer's top market. While sales to retailers were up 2.6% in the quarter, a calendar change added three more days to the quarter and added 3 percentage points to the STRs. Pretax income dropped 14% to $86.9 million and was down 9% in local currency, even though National Hockey League play returned from the game's lockout


Additionally, Molson's Canadian business, which accounted for about half its fourth-quarter revenue of $1.03 billion, has been dealing with a 20% increase in beer excise tax rates in Quebec.

As acrimonious as the Canadian fight may seem, it's not so heated that it threatens to sunder MillerCoors, which is needed to effectively take on Anheuser-Busch InBev in the U.S. market. Although beer sales have remained anemic in the U.S., Bud owns 47% of the market while MillerCoors comes in second with about a 28% share. A breakup would be akin to cutting their nose off to spite their face.

Things may be frosty up north, but SABMiller and Molson Coors still have cordial relations south of the border, and that should allow them to brew up a resolution.