NEW YORK -- Molson Coors tap and SABMiller sbmry will pool their U.S. assets to mount a stronger challenge to Anheuser-Busch's close-to-50% dominance of the domestic beer market.
The venture announced Tuesday, to be called MillerCoors, will hold all of their operations in the USA and Puerto Rico, which have projected total revenue this year of $6.6 billion. Resulting savings will be $500 million annually by the third year, the companies say.
Costs to integrate the operations are estimated at about $450 million, much of it to adapt the eight total breweries to handle each other's products.
"Our job is to put a brand new beer company in place with its culture and its operating plan," says Leo Kiely, the CEO of Molson Coors who will be CEO of the joint venture.
In the $94 billion U.S. beer market, the world's most profitable, SABMiller is No. 2 at about 18% and Molson Coors No. 3 at about 11%.
Pete Coors, vice chairman of Molson Coors, will be chairman of MillerCoors, and Graham MacKay, SABMiller CEO, will be vice chairman. Tom Long, CEO of Miller, will be president. SABMiller and Molson Coors each will have a 50% voting interest and five board seats. Larger SABMiller will have a 58% economic interest, and Molson Coors, 42%.
U.S. beer sales have been flat as consumers drink more wine and spirits. Beer growth has been mostly in smaller, upscale "craft" brands. Coors said the venture will let them better compete for U.S. consumers who are "broadening their tastes and increasingly looking for greater choice and differentiation."
As companies fought to grow in recent years, the industry has seen consolidation and more distribution deals. Molson and Coors merged in 2005. A-B this year became the U.S. importer for InBev's Stella Artois, Beck's and Bass Ale.
MillerCoors would be in a position to ride growth in craft and premium beers, says Benj Steinman, editor of Beer Marketer's Insights, an industry newsletter. "They are each playing a little more effectively in the high end of the portfolio, which is where the market seems to be going. You can bet they will be going after that segment more."
The companies hope to complete the combination by mid-2008, barring any hitches in regulatory approval.
"Normally, a 30% market share would not create a problem," says Steven Newborn, an antitrust attorney with Weil Gotshal & Manges in Washington, D.C. "But when you have two companies controlling almost 80%, the government may think there is potential for anti-competitive effect."
Molson Coors shares closed up 10% at $56.15. SABMiller shares rose 1.4% to 1,487 pence ($30.33) in London.