CHICAGO -- Expect 2015 to be a tough year for MillerCoors. So say beer-industry watchers who see the fact the company has yet to name a new CEO to replace the retiring Tom Long as a sign on continued trouble.
“They’re not looking at a great 2015,” Benj Steinman, president of Beer Marketer’s Insights, told the Wall Street Journal. “It’s getting tighter as volumes continue to decline. They’re not able to increase prices above inflation because their core brands can’t sustain it.”
MillerCoors is a joint venture of SAB Miller and Molson Coors crafted seven years ago in an effort to create strong No. 2 beer company behind Anheuser-Busch. Back then, A-B owned about 49% of the market. Today, it has 45%, according to the report, while MillerCoors owns 26% share.
While the numbers suggest some success to chip away at A-B, the U.S. subsidiary of Anheuser-Busch InBev, part of that is the continuing threat from craft beer. According to the report, craft beer has increased its share of the $100 billion U.S. beer market to 9% from 4.2% since 2008 (and as high as 11%, according to the latest report from the Brewers Association), and Mexican beer sales--a missing piece of MillerCoors’ portfolio--have gained a 15% share of the $14-billion import market, according to Beer Marketer’s Insights.
For MillerCoors, one of the biggest challenges is that Miller Lite and Coors Light, which contribute more than 50% of the company's profits, haven’t increased volume simultaneously since 2007, WSJ reported. When one thrives, it seems to cannibalize the other. Last quarter, Miller Lite delivered its first volume gain in seven years, but Coors Light, which competes in the same category, posted a single-digit volume decline.
Then there's that issue with the CEO.
Long, 56, told the board a year ago that he planned to leave his post, but it had nobody to replace him when it announced his departure Feb. 10. He will depart June 30.
For the past four years, Long has tried to reverse sinking volumes at MillerCoors. Beyond the success with Miller Lite, the company faces increasing pressure from both craft brews and cocktails, whose popularity have soared.
The board has been searching since September for Long’s successor, the newspaper reported. The process has been slow because the job “requires attributes that are hard to find: knowledge of U.S. consumers, deep understanding of marketing ... and appreciation for franchise markets.”
MillerCoors spokesman Pete Marino told the newspaper the company has a shortlist of candidates for the job. He added that the board was as “harmonious” as ever and said the joint venture has delivered record profits while also creating a stronger competitor to AB InBev.
“We know what we need to do to return the company to volume growth,” Marino said.
Click here to read the complete WSJ story.
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