Miller Terminating Molson Coors Canada Licensing Deal

Says it is seeking to boost Canadian sales of its brands

MILWAUKEE -- Miller Brewing Co., a subsidiary of SABMiller Plc, said on Wednesday that it is terminating its Canadian license agreement with Molson Coors Brewing Co.'s Canadian arm, as it believes its partner is not doing enough to promote Miller brands in Canada, according to a Reuters report.

Paul Gurr, who heads Miller operations in Canada, said the company was taking the step as part of a drive to boost its Canadian sales of brands such as Miller Lite, Milwaukee's Best and others.

"While Miller brands make up only a small percentage of Molson Coors' Canadian sales, this decision reflects our belief that there exists the opportunity to grow Miller's brands in Canada," Gurr told the news agency.

Miller said it provided Molson Coors in Canada with a six-month notice of termination on Jan. 1. The agreement is set to be terminated as of July 22.

In a regulatory filing earlier this week, Molson Coors said it has filed a lawsuit in the province of Ontario seeking to prevent the termination of the license agreement.

The U.S. Securities & Exchange Commission (SEC) filing said: "In December 2012, Miller Brewing Co. orally informed us of its intent to terminate the license agreement between Miller and us whereby we have exclusive rights to distribute certain Miller products in Canada. Miller alleges that we failed to meet certain volume sales targets under the license agreement. We do not believe Miller has any right under the license agreement or otherwise to terminate the license agreement. Following this communication, we filed a lawsuit in Ontario, Canada … seeking an injunction preventing Miller from terminating the license agreement and ordering Miller to abide by its contractual terms. On Jan. 18, 2013, Miller sent written notice to us purporting to terminate the license agreement. In our lawsuit, we also assert that Miller breached the license agreement by attempting to terminate the license agreement. We intend to vigorously assert and defend our rights in this lawsuit."

The company said it remains committed to the Canadian market and Miller trademark brands will continue to be available in Canada.

The conflict is not expected to have an impact on the partnership between the two companies in the United States, said the report. The U.S. beer market is currently dominated by the world's largest brewer, Anheuser-Busch InBev, and MillerCoors, a joint venture between Molson Coors and SABMiller.

Earlier in February, Molson Coors reported a 28% decline in its fourth-quarter profit as its tax bill more than doubled and beer sales slumped in Canada, the brewer's top market.

Molson's Canadian business, which accounted for about half its fourth-quarter revenue of $1.03 billion, was hit by a 20% rise in beer excise tax rates in the province of Quebec and the National Hockey League player lockout, the report said.

The case is Molson Canada 2005 V. Miller Brewing Co., in the Superior Court of Justice-Ontario.

Brands sold in Canada include Coors Light, Molson Canadian, Molson Export, Molson Canadian 67, Coors Light Iced T, Molson Dry, Molson M, the Rickard's family of brands, Carling, Carling Black Label, Pilsner, Keystone, Creemore Springs, the Granville Island brands, Caffrey's, Cobra and a number of other regional brands. It also brews or distributes under license the following brands: Heineken, Amstel Light, Murphy's, Newcastle Brown Ale and Strongbow cider under license from Heineken N.V. and Miller Lite, Miller Genuine Draft, Miller Chill, Milwaukee's Best, and Milwaukee's Best Dry under license from SABMiller plc. In 2012, it continued to brew the Foster's brand under license from Foster's Group Ltd., although this license was terminated in December 2012. MolsonCoors is also party to a joint venture with Grupo Modelo SAB de CV that imports, distributes and markets the Modelo beer brand portfolio, including the Corona, Coronita, Negra Modelo and Pacifico brands across all Canadian provinces and territories. In Canada, it also has contract brewing agreements to produce for the U.S. market Asahi and Asahi Select for Asahi Breweries Ltd. and Labatt Blue and Labatt Blue Light for North American Breweries Inc.

MillerCoors sells a variety of brands in the United States. In the formation of the MillerCoors joint venture, MillerCoors and SABMiller each assigned the United States and Puerto Rican ownership rights to its respective legacy brands to MillerCoors, but retained all ownership of these brands outside the United States and Puerto Rico. MillerCoors' flagship premium light brands are Coors Light, Miller Lite and Miller64. Brands in the domestic premium segment include Coors Banquet and Miller Genuine Draft. Brands in the below premium segment include Miller High Life, Keystone, Icehouse, Mickey's, Milwaukee's Best, Hamm's and Old English 800 brands. MillerCoors also brews or distributes under license the Molson and Foster's brands and George Killian's Irish Red. Craft and import brands, marketed and sold through Tenth and Blake, include the Blue Moon brands, Henry Weinhard's brands, Leinenkugel's brands, Peroni Nastro Azzurro, Pilsner Urquell, Batch 19, Grolsch, Worthington's, St. Stefanus and cider brands from the Crispin Cider Coy. Brands in the nonalcoholic segment include Coors Non-Alcoholic and Sharp's.