Breweries Leon Chung Jorge Cruz Darren Devine Cameron Mc. Leod reweries
Breweries “All right, brain. You don't like me and I don't like you, but let's just do this and I can get back to killing you with beer” (Simpson, 1999). reweries
Outline • Introduction – Industry Analysis: § § § History of the international and North American beer industry. The Global Industry. The North American Market. • Valuation: – Bud – Coors – Molson reweries
Industry Overview: History • Ancient History: – Historians speculate that prehistoric nomads may have made beer from grain & water before learning to make bread. – 4300 BC, Babylonian clay tablets detail recipes for beer. – Beer around the world: There is evidence that beer was elaborated by the Babylonian, Assyrian, Egyptian (for medical purposes), Hebrew, Chinese, and Inca cultures. – Romans brewed "cerevisia" (Ceres the goddess of agriculture & vis meaning strength in Latin). – 55 BC Roman legions introduce beer to Northern Europe. – 23 BC Chinese brewed beer called "kiu“ reweries
Industry Overview: History • Ancient History: – 500 -1000 AD the first half of the Middle Ages, brewing begins to be practiced in Europe, shifting from family tradition to centralized production in monasteries and convents (hospitality for traveling pilgrims). – 1200 AD beer making is firmly established as a commercial enterprise in Germany, Austria, and England. – 1420 German brewers develop the lager method of brewing. – 1489 Germany's first brewing guild, Brauerei Beck, was established. reweries
Industry Overview: History • Renascence History: – 1553 Beck's Brewery founded & still brewing today. – 1587 the first beer brewed in New World at Sir Walter Raleigh's colony in Virginia. – 1602 Dr. Alexander Nowell discovers that ale can be stored longer in cork sealed, glass bottles. – 1612 the first commercial brewery opened in New Amsterdam (NYC, Manhattan). – 1674 Harvard College has its own brew-house. – 1680 William Penn (founder of Pennsylvania) operated a commercial brewery. – 1786 Molson brewery is founded in what is today Canada. reweries
Industry Overview: History • Modern History: – In the mid-19 th Century (1850's) German immigrant brewers introduced cold maturation lagers to the US (Anheuser-Busch, Miller, Coors, Stroh, Schlitz, and Pabst roots begin here). – The modern era of brewing in the US began in the late 1800's with commercial refrigeration (1860), automatic bottling, pasteurization (1876), and railroad distribution. – 1870's Adolphus Busch pioneers the use of doublewalled railcars, a network of icehouses to make Budweiser the first national brand. reweries
Industry Overview: History • Modern History: – 1876 Pasteur unraveled the secrets of yeast in the fermentation process, and he also developed pasteurization to stabilize beers 22 years before the process was applied to milk. – 1880 there were approximately 2, 300 breweries in the US. – 1890 s Pabst was the first US brewer to sell over 1 million barrels in a year. – 1914 commercial competition drove the number of operating breweries down to 1, 400. reweries
Industry Overview: History • Modern History: – 1919 House of Representatives Bill No. 6810, establishing the apparatus for the enforcement of prohibition. The bill was passed October 10, vetoed by President Wilson on October 27. The veto was subsequently overridden by Congressional vote. – 1920 Prohibition Starts for beer, even though some regions started as early as 1846, e. g. Maine. Prohibition focused more on whiskey and other distilled products. – 1920 s Near beers brewed during prohibition: Pablo by Pabst, Famo by Schlitz, Vivo by Miller, Lux-O by Stroh and Bevo by Anheuser-Busch. – 1933 Prohibition ends for beer (April 7). – 1935 only 160 breweries survive Prohibition. Source: http: //www. beerhistory. com/library/holdings/raley_timetable. shtml reweries
Industry Overview: History • Modern History: – 1935 the beer can is introduced (American Co. & Kreuger Brewing). – 1966 Budweiser is the first brand to sell 10 million barrels in a year. – 1976 New Albion is the first in the rebirth of brewpubs and microbreweries in the US first opening in California. – First half of the 1900's beer was associated with men, bluecollar workers, college students, and mainstream sports enthusiasts. – Late 1900's beer had a different image and cultural function, with growth in popularity among a more diverse share of the population. Source: http: //www. beerhistory. com/library/holdings/raley_timetable. shtml reweries
The Brew Process 1. Malted barley is cracked in the Roll Mill turning into grist and then stored in the grist case. The grist drops into the mash lauter tun and mixes with hot water provided by the hot liquor tank producing a sugary liquid called wort. The wort travels to the brew kettle where it's heated to a rolling boil. Hops are added to provide bitterness, flavor, and aroma. The hopped wort passes through the heat exchanger cooling to the right temperature for fermentation. The now chilled, hopped wort meets up with the yeast in the fermenter to begin the fermentation process. Once completed, the liquid referred to as wort is now called beer. The beer enters a filter designed to help remove yeast and haze producing compounds. 2. 3. 4. 5. 6. • 7. PASTEURISATION: This is a process of heating and rapid cooling which prolongs shelf-life and destroys any bacteria or other organisms in the beer. The finished beer exits the filter and enters the serving tank ready to be dispensed. reweries
Industry Overview: General Characteristics – – – Beer is a Mature Product. It is the largest seller in the alcohol drinks sector. Sales are related to: § § § Weather (summer months) Holidays: Christmas and the 4 th of July in the US The first and fourth quarters historically are the slowest with the rest of the year typically demonstrating stronger sales – Consumer base: heavily male dominated. Source: The Brewers’ Handbook (http: //www. beer-brewing. com/) Source: The (http: //www. beer-brewing. com/) reweries
Industry Overview reweries
Global Beer Market: General Characteristics • Beer is one of the smallest global consumer goods. • Although globalization is a general trend in many industries, the brewing industry has long been lagging behind and has remained very fragmented. • Globalization in the beer industry has proceeded at a much slower pace than in many similar industries (e. g. tobacco). reweries
Global Beer Market: Recent Trends • Consolidation led by major international brewers. – During recent years brewers like Heineken and Interbrew have started internationalizing their activities. • Volume growth in developing markets – China: Second largest market (by sales) and growing. Largest market in total volume. – Eastern Europe and Russia • Big gets bigger: – According to various studies aggregate volume of the world’s top 10 brewers has grown at more than four times the pace of total industry volume since the mid-1990 s. Source: Ludwig Theuvsen and Oliver Ebneth (2004). International Food and Agribusiness Management Association (IFAMA). http: //www. ifama. org/conferences/2004 Conference/Posters/Ebneth 1022. pdf reweries
Development of the Top 10 Brewers and the World Market (in millions of hl*) • hl = hectoliter, measure used in the brewing industry equivalent to 100 liters. Source: International Food and Agribusiness Management Association (IFAMA). reweries
Top 10 Global Brewers (2003) (57% Market Share)* * Volume of the world beer market in 2003: 1. 455 billion hl. Source: International Food and Agribusiness Management Association (IFAMA). reweries
Above Average Growth of the 5 largest brewing companies over the last 5 years Source: International Food and Agribusiness Management Association (IFAMA). reweries
Global Beer Consumption reweries
Global Beer Market • Reasons for global expansion: – Growth potential – Expansion in view of saturated home markets. Source: Ludwig Theuvsen and Oliver Ebneth (2004). International Food and Agribusiness Management Association (IFAMA). http: //www. ifama. org/conferences/2004 Conference/Posters/Ebneth 1022. pdf • Global market share of top 20 brewers is increasing – 1990 - 51% – 2000 - 65% • Industry remains fragmented – 5 largest account for approximately 30% of total volume – Compare this to the cigarette industry – 5 largest, 60% share • Home Market Dependence. reweries
Global Beer Market • According to Theuvsen and Ebneth (2004) “consolidation in the brewing sector is far from ending and the internationalization process has just begun to pick up speed” Source: Ludwig Theuvsen and Oliver Ebneth (2004). International Food and Agribusiness Management Association (IFAMA). http: //www. ifama. org/conferences/2004 Conference/Posters/Ebneth 1022. pdf reweries
Global Beer Market • Internationalization Process: – According to Kutschker et al. (1997) the process can be classified into three categories: § § § international evolution international episodes international epochs – According to Theuvsen and Ebneth (2004) in the brewing industry we could identify an international epoch over the last five years, which is characterized by § § § a broad scope high speed long duration of change – They also predict that “during the following years, consolidation and integration will be the overall pattern”. reweries
Global Beer Market • Source: International evolution, international episodes, and international epochs--implications for Source: International managing internationalization. Michael Kutschker, Iris Baurle, Stefan Schmid. Management International Review. Wiesbaden: 1997. Vol. 37, Iss. 2; pg. 101, 24 pgs reweries
The Internationalization Matrix Source: Ludwig Theuvsen and Oliver Ebneth (2004). International Food and Agribusiness Management Association (IFAMA). http: //www. ifama. org/conferences/2004 Conference/Posters/Ebneth 1022. pdf reweries
The North American Market: General Characteristics • 3 basic levels of brewing according to annual production: – High-volume (shipments of over 15 million barrels): § § They account for around 80% of total production. All of them are owned by the 3 largest brewing companies in the US (Anheuser. Busch Inc. , Miller Brewing Co. , and Adolph Coors Co. ) – Regional (15, 000 – 15 M barrels): § § They account for 15% of total production Usually focused on local distribution Many micro-breweries have grown into this category in the last 5 years. Examples: Stroh Brewery Co. , Pabst Brewing Co. , Genessee Brewing Co. – Small Breweries (less than 15, 000 barrels): § § § They account for 5% or less of total production. Microbreweries and brewpubs (also restaurant-breweries or “craft brewers”). They started in the late 1970 s Source: Goldammer (2000) - The Brewers Handbook http: //www. beer-brewing. com/US_beer_market/beer_retailers. htm reweries
The North American Market: Market Segments • Domestic, imported and specialty beers: – Domestic Beers § § § § Sub-premium Premium Malt liquor segments Super premium* Light* Ice* Dry* * They are the result of high price competition during the 1970 s and 1980 s. They are priced high and their purpose is to reclaim some of the revenue lost during the “price wars”. reweries
The North American Market: Market Segments – Imports: They’re growing steadily (around 5 -8% since 1990 s). Reasons for growth: § § § Expanding economy Consumer interest in ‘higher-quality’ (higher-priced) beer. Growth of the Hispanic community in the US. Most importantly, corporate partnerships/ownerships of foreign breweries that allow foreign brands to access the local distribution networks. Since 1995 the No. 1 import is Corona Extra from Cerveceria Modelo. Source: Goldammer (2000) - The Brewers Handbook http: //www. beer-brewing. com/US_beer_market/beer_retailers. htm reweries
The North American Market: Market Segments – Specialty Beers: § § § Fastest growing segment (10 -15% since 1990). They are perceived as higher quality by consumers. Subcategories include: o o o large breweries regional breweries contract brewing companies microbreweries brewpubs Source: Goldammer (2000) - The Brewers Handbook http: //www. beer-brewing. com/US_beer_market/beer_retailers. htm reweries
The North American Market: Industry Structure • Flat consumption trends: only some international markets and the micro-brewing segment show growing opportunities. – The Western and the Southern regions have accounted for most of the growth (around 1. 4% in 2002). • Highly Concentrated: The industry includes more than 300 breweries but is dominated by three producers who command a nearly 80 percent market share: – – – Anheuser-Busch (45%) Miller Brewing (23%) Adolph Coors (10%) • The market leaders have expanded their respective market shares at the expense of other national brewers like Strohs Brewery. • The industry as a whole has stable and relatively predictable CFs. Source: Department of Employment and Economic Development of Minnesota (2004) http: //www. deed. state. mn. us/bizdev/PDFs/beer. pdf Goldammer (2000) - The Brewers Handbook http: //www. beer-brewing. com/US_beer_market/beer_retailers. htm reweries
The North American Market: Industry Structure Source: Poitras (2003) – US Breweries: Anheuser-Busch reweries
The North American Market: Industry Structure • Market Leadership: – For any consumer product company and for brewers in specific, ML is very important as it gives benefits over their rivals (i. e. production, distribution and advertising economies of scale). • Distribution: – – Expensive to ship: beer has low value relative to weight. Therefore, several breweries are needed for successful distribution. This sometimes explains why large breweries take over small ones. The importance of good distribution networks. • The importance of branding and pricing: – Price elasticity of demand. – Premium Pricing Sources: Department of Employment and Economic Development of Minnesota (2004) http: //www. deed. state. mn. us/bizdev/PDFs/beer. pdf Poitras (2003) – US Breweries: Anheuser-Busch reweries
The North American Market: Industry Structure • The industry’s niche markets are very fragmented, but some are growing: – From 1990 – 1995 smaller brewers increased their MS from 7. 1 to 8%. – The number of U. S. brewing establishments has nearly doubled since 1990 (from 73 -172) but nearly all of the establishment growth occurred in firms employing fewer than 20 employees. – Virtually all new entrants to the beer industry are niche players that pursue specialized, often regional but sometime national tastes. Source: Department of Employment and Economic Development of Minnesota (2004) http: //www. deed. state. mn. us/bizdev/PDFs/beer. pdf reweries
The North American Market: Industry Structure • The fastest growing market segment in the US is the smaller microbrews which are often brewed by regional brewers. – Characteristics of the microbrews market segment: § § § High barriers to entry (i. e. legal, manufacturing and distribution costs) Small consumer market with less consumer price differentiation (i. e. low price elasticity) than for major brands. Due to the high costs of entry microbrews rely on regional brewers to produce their products under contract (e. g. Minnesota Brewing, Samuel Adams) Source: Department of Employment and Economic Development of Minnesota (2004) http: //www. deed. state. mn. us/bizdev/PDFs/beer. pdf reweries
The North American Market: Demographics – Beer consumption is overwhelmingly male-dominated; men account for more than 80% of the volume consumed. – The largest group of male consumers are white and they favor domestic light beer. – African American drinkers make up about 10% of the beer market overall, and they are the biggest consumers of malt liquors, followed by ice beer. – Women beer drinkers are more attracted to specialty microbrewed beers than they are to the big brands, due to their greater variety. – Craft-beer is more appealing to white beer drinkers than to African Americans. Source: Goldammer (2000) - The Brewers Handbook http: //www. beer-brewing. com/US_beer_market/beer_demographics. htm reweries
The North American Market: Market Trends • Consolidation (e. g. mergers and acquisitions) due to: – Flat consumption trends – Regulatory burdens – High Taxation • The market is mature with flat consumption trends due to: – Increased alcohol awareness. – Slow population growth. – Aging population (young [male] adults are the largest beer consumers). Source: Department of Employment and Economic Development of Minnesota (2004) http: //www. deed. state. mn. us/bizdev/PDFs/beer. pdf reweries
The North American Market: Market Trends • As competitors fight to maintain market shares, competitive pricing could result in decreases in industry-wide pricing levels and ultimately decreased operating margins. • Price competition combined with increasing vertical integration (i. e. Anheuser-Busch) and the inherent production economies of the market leaders makes it very difficult for an inefficient major brewer to compete on a national scale. Source: Standard & Poors Industry Surveys as quoted by the Department of Employment and Economic Development of Minnesota (2004) http: //www. deed. state. mn. us/bizdev/PDFs/beer. pdf reweries
The North American Market: Market Trends • Changes in tastes – Shift to “light beer” (started by Miller in 1972 – Miller Light). – Affected companies: § § § Schiltz Pabst Stroh – Light beer segment grew from 0% to 23% of US beer consumption since 1972. – A-B has deterred Miller’s leadership in this segment. In 2001 Bud Light became the top selling beer overall. Source: Standard & Poors Industry Surveys as quoted by the Department of Employment and Economic Development of Minnesota (2004) http: //www. deed. state. mn. us/bizdev/PDFs/beer. pdf reweries
The North American Market: Market Trends • Distribution: – – – Increasing number of independent (multi-brand) wholesalers. More wholesalers going out of their home-states. However, the total number of wholesalers is decreasing. § § • Due to consolidation. The number of wholesalers has declined from more than 5, 000 nationwide in 1970 to fewer than 2, 500 today. Retailing: – Traditional stores (mom-and-pop operations) account for a significant amount of sales but national retail chains are accounting for more sales. – While independently owned taverns, restaurants, and night clubs account for a sizeable share of beer sales, national restaurant/hotel chains are growing in importance. – Consequences: § § More competitive pricing Distribution networks have become more important. Source: Goldammer (2000) - The Brewers Handbook http: //www. beer-brewing. com/US_beer_market/beer_retailers. htm reweries
The North American Market: Market Trends • Internationalization through: Exports (i. e. Miller) § Joint Ventures. § Equity Purchases of foreign brewers and distributors (i. e. Anheuser-Busch and Grupo Modelo). § • Ethical Investment Source: Standard & Poors Industry Surveys as quoted by the Department of Employment and Economic Development of Minnesota (2004) http: //www. deed. state. mn. us/bizdev/PDFs/beer. pdf reweries
The North American Market: Regulations • Regulations focus on: – – – – Distribution Labeling Advertising Credit Container characteristics Alcoholic content Tax rates Litter assessments. Source: Goldammer (2000) - The Brewers Handbook http: //www. beer-brewing. com/US_beer_market/beer_distribution. htm reweries
The North American Market: Regulations Subject to regulation at the 3 levels: • Federal: – Formerly issued by the Bureau of Alcohol, Tobacco, and Firearms (BATF), which was established by the Federal Alcohol Administration (FAA) Act. – On November 25, 2002, the Homeland Security Act of 2002 split the agency into two different agencies. § § The Department of Justice The Alcohol and Tobacco Tax and Trade Bureau (TTB) (kept within the United States Department of the Treasury). Source: Goldammer (2000) - The Brewers Handbook http: //www. beer-brewing. com/US_beer_market/beer_distribution. htm reweries
The North American Market: Regulations • Federal: § TTB responsibilities: o o Enforce the compliance of provisions for the formulation and labeling of alcoholic beverages, as required by the Internal Revenue Code and the FAA Act Taxes, distribution and advertising. International trade regulations Lab testing (approval of brewing formulas and equipment) Source: Goldammer (2000) - The Brewers Handbook http: //www. beer-brewing. com/US_beer_market/beer_distribution. htm reweries
The North American Market: Regulations • State: – After Prohibition, state governments were given considerable authority over the production, importation, distribution, sale, and consumption of beer within their borders. – Regulations vary across states (i. e. Minnesota requires that the beer label show the alcohol content, while Michigan does not permit the label to show alcohol content). – Other regulations include: § § § Max – Min alcohol content Max – Min size of containers Credit sales Advertising Production, distribution and retailing Taxes Source: Goldammer (2000) - The Brewers Handbook http: //www. beer-brewing. com/US_beer_market/beer_distribution. htm reweries
The North American Market: Regulations • Local: – Many states permit local jurisdictions to regulate and separately tax beer sales, and even to prohibit the sale of beer within their jurisdiction. § Georgia, Illinois, Louisiana, Maryland, New York, and Ohio have cities or counties that impose local beer taxes. – Jurisdictions in which the sale of alcoholic beverages is prohibited are called “dry”. § about 4. 3% of the U. S. population live in dry counties Source: Goldammer (2000) - The Brewers Handbook http: //www. beer-brewing. com/US_beer_market/beer_distribution. htm reweries
The North American Market: Regulations • Other consequences of Prohibition: – ‘Three-tier’ system: the industry is required to be divided into § § Brewers and Importers Wholesalers o o § Exclusive (often partially owned by the brewery). Independent or multi-brand: Unlike wine and spirits wholesalers, which are generally multi-state operators, beer wholesalers tend to operate within the boundaries of a single state Retailers Source: Goldammer (2000) - The Brewers Handbook http: //www. beer-brewing. com/US_beer_market/beer_distribution. htm reweries
The North American Market : Regulations • Taxes: • Brewers – 44% tax of beer retail price in US (2001). – taxes equal 31. 7% of final sales of all products (GNP) in the U. S. (approx. 20% at the federal level and 12% at the state-local level) – Beer Excise Tax Source: Dawson, Havis (2002). Stir. Beverage World; Dec 15, 2002; 121, 1721; ABI/INFORM Global pg. 38 Source: Dawson, Havis (2002). Stir. reweries
The North American Market • Threats of new entrants: – Barriers to entry: § § § Capital Intensive Distribution networks Regulations – Economies of scale in marketing, production and distribution. reweries
The North American Market • Rivalry (price competition has been decreasing): – Increasing competition from imported beers (however, national brewers own part of these breweries). – 2, 200 wholesalers. – 560, 000 retail establishments. – Growing popularity of micro-breweries and other craft-beers. – Alternative: expansion to super-premium beers and other segments with lower demand elasticity. reweries
The North American Market • Substitutes (Growing): – Growth in: § § § Premixed drinks. Alternative malt beverage. Alternative non-alcoholic drinks (from juices to mineral water). – However, beer remains the largest drink sector. reweries
The North American Market • Buyer’s Bargaining Power: – It changes from segment to segment, but in general: § § § Low switching costs Price competition Increasing health conscience. – However, for craft-beers, which are perceived as having higher quality, these characteristics may not always hold. reweries
The North American Market • Suppliers’ Bargaining Power (Low): – Most supplies come from competitive industries which are more fragmented than the beer industry: § § Farmers Labor (the case of unionized labor) – The more consolidated supplier is that one supplying bottles/cans. reweries
The North American Market • Key elements for improving operating margins for national breweries: – – – Expanded market share. Low cost structure. Price increases and premium pricing (low demand elasticity). Improved production efficiencies (packaging and automation). International expansion to countries with increasing consumption trends. – Connection between branding and pricing. – Distribution Networks (wholesalers’ loyalty). Sources: Department of Employment and Economic Development of Minnesota (2004) http: //www. deed. state. mn. us/bizdev/PDFs/beer. pdf Poitras (2003) – US Breweries: Anheuser-Busch reweries
VALUATIONS Molson – Leon Chung Coors - Cameron Mc. Leod Bud - Darren Devine reweries
Molson reweries
Company Overview • • • Founded in 1786 by John Molson 3, 800 employees 5 breweries located in Vancouver, Edmonton, Toronto, Montreal and St. John’s • Oldest beer brand in N. America • Operations in Canada, Brazil, and the United States reweries
Company Overview • Canada’s largest brewer • In 2001, Molson repurchased 100% of Molson brands in the US and has 50. 1% interest in Molson USA • Pursuing the fast growing Brazilian market • Global gross sales of $3. 5 billion reweries
Senior Management • Daniel J. O'Neill* President and Chief Executive Officer • Brian Burden* Executive Vice President and Chief Financial Officer • Kevin T. Boyce* President and Chief Operating Officer, North America • Robert Coallier* President and Chief Executive Officer, Cervejarias Kaiser and Executive Vice President, Molson Inc. • Raynald H. Doin* Senior Vice-President Strategy and Integration, Human Resources • Marie Giguère* Senior Vice President, Chief Legal Officer and Secretary • Peter L. Amirault* Senior Vice-President Business Development and Innovation reweries
Portfolio of Brands Core Brands • Canadian, Canadian Light, Carling Black Label, Exlight, Export, Golden, Marca Bavaria, Kaiser, Molson Dry, and Rickard’s Molson’s Partners • Coors Light, Corona, Heineken, and MGD reweries
Challenges in 2003 • Faced same challenges in US as Coors did • In Canada, Alberta and Ontario faced strong discount activity and Molson had a hard time responding • In Brazil, market share decreased by over 2% due to increased competition reweries
Plans for the Future Five Key Objectives • Grow operating profit • Grow market share • Grow volume • Organizational renewal • Improve quality reweries
1) Grow Operating Profit reweries
1) Grow Operating Profit • Revenue growth • – through both pricing and product mix improvement • Cost savings – Project 125 § § § Capacity utilization savings are expected to reach $41 million through improved brewery assets usage and equipment modernization. Best-in-class practices and materials sourcing aim at procurement savings of $35 million. Costs savings of $40 million for distribution are anticipated through capital investment, productivity and supply chain integration. Savings in organizational costs of $9 million are planned. reweries
2) Grow Market Share Segmentation of Canadian Beer Market reweries
2) Grow Market Share Canada • Total market share in Canada decreased by 0. 6% from 44. 4% to 43. 8% - however, customers’ preference for core owned brands (increase in share by 0. 9%) lead to a rebalancing in Molson’s brand portfolio in favour of owned brands • Strengthen the CANADIAN brand in the premium segment • Redesigned packaging including a customized die-cut label for bottles • New look for cans • Refreshed outer case reweries
2) Grow Market Share Brazil • Market share decreased from 14. 6% to 12. 4% in Brazil • The flagship brand, KAISER PILSEN, was reformulated the liquid and launched a new advertising campaign reweries
2) Grow Market Share United States • Market erosion of GOLDEN and MOLSON ICE • Molson used print, radio and outdoor advertising to win the young adult consumer • Use of Molson Twin Labels reweries
3) Volume by Geographic Sector reweries
3) Volume by Hectolitres reweries
3) Grow volume Canada • Volume grew by 0. 7% but was slower than industry which moved up 2. 0% • Product innovations and new packaging are and will be biggest drivers of volume • New products such as COLD SHOTS, CANADIAN LIGHT, and MOLSON ULTRA should increase volume in fiscal 2005 reweries
3) Grow volume Brazil • Brazilian operations experienced volume drop of 17. 5% over fiscal year while industry only declined by 3. 4% • Have hired key sales leadership with beer sales experience • Created Kaiser-managed sales teams to work with Coca-Cola distributors • These and other measures lessened and even reversed the negative trend in some geographic areas reweries
3) Grow volume United States • Molson USA grew by 1. 4% • Aligned itself with Coors distributors which accounted for 85% of Molson USA’s distributors • Improved results and leveraged Coors market infrastructure • Continue to build on strength of CANADIAN trademark and use innovative packaging reweries
4) Organizational Renewal Organizational Design • New structure of an integrated but decentralized sales force connected to local markets • Brazil: hiring of more than 1, 200 experienced sales people in six regional sales centres Leadership Development and Succession Planning • Production Leadership Program • New program for development of talent in strategic marketing function • Optimal Work Environment philosophy Optimal Work Environment reweries
5) Improve quality • Renaissance in Brewing initiative • Quality – – – Incoming raw materials Conversion in the brewery Consumer and customer satisfaction • Safety – Frequency of down time declined by 16% – Severity of accidents resulting in down time declined by 11% reweries
Events in the News • Molson and Coors Announce Merger of Equals to Create World's Fifth Largest Brewer • Molson and Coors Announce Agreement to Pay Special Dividend to Molson Shareholders Molson to Build New $35 Million Brewery in New Brunswick reweries
Molson and Coors Announce Merger • Pentland agrees to forego participation in special dividend • Molson Coors Brewing Company will be fifth largest in world • Combined total of 60 million hectolitres • Management structure and board composition – – Chairman: Eric H. Molson (Molson) CEO: Leo Kiely III (Coors) Vice Chairman: Daniel J. O’Neill (Molson) CFO: Timothy V. Wolf (Coors) reweries
Special Dividend to Molson Shareholders • Announced on Nov. 5 th • As part of Molson and Coors merger • Pentland will forego special dividend – As a result, dividend will be $3. 26 rather than $3. 00 • Pentland is owned by Chairman Eric Molson and Director Stephen Molson reweries
New Brewery • • • Cost of $35 million Located in Moncton, New Brunswick Completed by January 2007 Capacity of 6 million 12 packs annually Implementation of distribution system $3. 5 million forgivable loan reweries
Income Statement reweries
Income Statement Analysis • • • P/E 17. 99 Price to Sales 1. 22 Price to Book 3. 50 Dividend Per Share 0. 56 Book Value Per Share 9. 57 Revenue Per Share 27. 34 reweries
Balance Sheet reweries
Balance Sheet Analysis • • • Quick Ratio 0. 25 Current Ratio 0. 42 Debt to Equity 0. 65 Return on Equity (ROE) 25. 1% Return on Assets (ROA) 6. 03% Return on Invested Capital (ROIC) 10. 7% reweries
Cash Flows Statement reweries
Cash Flow Analysis • • • Operating Activities 216. 4 Investing Activities (73. 1) Financing Activities (125. 8) Net 21. 2 Operating Activities is greater than other expenditures • Investing Activities, Molson has been investing in newer equipment • Financing Activities, repayment of long term debt was greater than refinancing reweries
Stock Price Summary • Traded the TSX – Symbol: MOL. A P – Price: 33. 460 – 52 week high: $36. 80 – 52 week low: $28. 50 – Market Capitalization of approximately $4121 million reweries
Stock Price Performance: One Year Chart (TSX) reweries
Stock Price Performance: Five Year Chart (NYSE) reweries
Recommendation Hold reweries
reweries
Company Overview • • • Adolph Coors company was founded in 1873 World’s 9 th largest brewer with $4 billion in annual sales Principal subsidiary is the Coors Brewing Company, which is the 3 rd largest brewer in the U. S. • Also owns Coors Brewers Limited in the U. K. , which is the U. K. ’s 2 nd largest brewer • Primary product in the U. S. is Coors light and in the U. K. their flagship is Carling. They rank #3 and #1 respectively in sales per market • Traded on the NYSE, ticker symbol (RKY) reweries
Company Overview Con’t • Corporate headquarters and primary brewery are located in Golden, Colorado • The Coors Golden brewery is the world's largest on a single site. Coors owns a second brewery in Memphis, Tenn. , and a packaging facility in Virginia's Shenandoah Valley, near the town of Elkton, Va. • Coors products are available in over 30 international markets reweries
Portfolio of Brands • Coors has a wide array of brands including: – Coors Light, Coors Original, Aspen Edge, Killian’s, Blue Moon, Keystone Ice, Keystone Premium, Coors NA, Extra Gold, Zima XXX Hard Lemon Lime, Zima XXX Hard Black Cherry, Zima XXX Hard Orang reweries
Flagship Brands • Carling is the #1 selling beer in the U. K. and Coors Brewing Limited is ranked #2 for total market share with 21% • Coors Light is the #3 selling beer in the U. S. and Coors Brewing Company is ranked #3 in total market share with 11% reweries
Brewing Bits • Coors uses an all-natural brewing process and the finest ingredients: ideal brewing water, hops, cereal grains (rice and refined corn starches), and barley. Coors has developed special strains of barley it malts itself to ensure product quality. Nothing artificial is in Coors beers. • On average, Coors takes 55 days to brew, age, finish and package its lagers—about twice as long as its major competitors. The result is a naturally aged, stable and smooth product. reweries
Challenges in 2003 • Continued weakness in the US economy during 2003 and, specifically, high unemployment levels among the key 21 - to 24 -year-old male consumer population, • Unfavorable weather, particularly in the Northeast, for a significant part of the peak summer selling season, • The popularity of low-carbohydrate diets that softened demand for beer, • The rise in popularity of distilled spirits and other alternative beverages, particularly among 21 - to 29 -year olds, and • A grocery store strike in California that likely impacted sales in the largest beer state. reweries
Plans For The Future • They are striving to capture an increasing share of each new generation of legal-drinking-age beer drinkers in order to gain their brand loyalty for the long-term • They intend to seek publicity through both new products and brands, or product developments with existing brands, such as Coors Light and Carling • Strengthen their access to retail by creating a solid distribution network with wholesalers and retailers • Lower the cost structure in order to grow profits and afford the investments needed to grow and succeed reweries
Sales Volume • Has risen dramatically with the acquisition of Coors Brewers Limited reweries
New Global Strategy reweries
Financial Review • Have become globalized and diversified. In 2003, CBL performance in the U. K. and Coors Light in Canada showed the advantages of becoming more than a onebrand, one-market company. • Continued cost reduction and productivity despite difficulties. Improved upon costs and productivity, in spite of challenges, particularly in the U. S. market. • Reducing debt ahead of schedule. In just two years, they reduced debt by nearly a third through an emphasis on cash generation and disciplined capital management. reweries
Sales by Volume & Dollars reweries
After Tax Income • Figures are in millions of dollars • Coors has seen steady growth in income • Large increase in 02 is due to the acquisition of Coors Brewing Limited (U. K. ) reweries
Financial In Brief • Adolph Coors Company is ranked among the 500 largest publicly traded corporations in the U. S. , based on annual sales. The company is the world's 9 th largest brewer. • In 2003, Coors sales volume was 32. 7 million barrels (1 U. S. barrel equals 31 gallons). • Net sales for 2003 totaled $4. 0 billion. 2003 net income was $174. 7 million, up 8. 0 percent from 2002. reweries
Merger With Molson • Coors is planning on merging with Molson in December, 2004 • It will become the 5 th largest brewing company in the world • Goals are to increase penetration into new markets • Allows the company’s to compete with the “superpower’s” of the brewing industry reweries
Propels Molson. Coors into ‘Top 5’ Volume (M hl) 215 Interbrew. Am. Bev A-B 152 SABMiller 116 Heineken 109 60 Molson Coors Carlsberg(1) Scottish & Newcastle 54 50 Grupo Modelo 42 39 Coors 36 Asahi Tsingtao FEMSA Kirin Molson Foster’s 33 25 23 21 17 reweries
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Income Statement Analysis • Increased sales due to U. K. and Canadian success • High interest expense due to the $1. 6 billion investment in CBL • Steady increase in net income even with a highly competitive U. S. market • P/E: 14. 8 • Price to Cash Flow Ratio: 5. 25 • Price To Sales: 0. 64 • Price To Book: 1. 93 • Dividend Per Share: 0. 82 • Book Value Per Share: 34. 62 • Revenue Per Share: 108. 0 reweries
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Balance Sheet Analysis • • Only has $0. 53 cash on hand per share Quick Ratio: 0. 67 Current Ratio: 0. 95 LT Debt to Equity: 91. 5 Total Debt to Equity: 98. 7 Return on Equity (ROE) Per Share: 18. 0 Return on Assets (ROA): 5. 57 Return on Invested Capital (ROIC): 9. 07 reweries
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Cash Flow Analysis • • Dividend Yield: 1. 17 Dividend Yield - 5 Yr. Avg: 1. 25 Dividend Per Share: 0. 82 Dividend Payout Ratio: 17. 0 5 Year Annual Growth: 20. 8 Revenue - 5 Year Growth: 15. 7 Dividends Per Share - 5 Year Growth: 6. 44 EPS - 5 Year Growth: 21. 3 reweries
Stock Price Summary • Traded on the NYSE – Symbol: RKY – Price: $71. 88 – 52 week high: $80. 11 – 52 week low: $53. 73 – Market Capitalization of approximately $2. 6 billion reweries
Stock Price Performance: One Year Chart (NYSE) reweries
Stock Price Performance: Five Year Chart (NYSE) reweries
Recommendation Hold reweries
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Overview • • Established in 1864 Largest Brewer in the world Budweiser is #1 brand of beer in the world Beer Production, Entertainment, Packaging, Real Estate Development & Transportation • Almost 50% domestic market share reweries
Operations • • 12 US Breweries 2 International Breweries (China/ UK) Produced 111 Million Barrels of Beer 6 th consecutive year with double digit growth in earnings per share • $16 Billion in Sales reweries
Competitive Advantage • Three divisions: Brewers, Wholesalers & Retailers • 2/3 rds of volume delivered by wholesalers who only carry Anheuser-Busch (A-B) • Loyalty of wholesalers is compensated by large profit margins • Leverage 49. 8% market share into 75% of markets operating profit through Procurement, Manufacturing efficiency and Marketing reweries
Products • • • Budweiser & Bud Light Michelob and Michelob Ultra Busch and Busch Light Hurricane and Malt liquors Bacardi Silver & Mike’s Hard Lemonade O’doul’s & non-alcoholic beverages reweries
Subsidiaries & Satellites • A-B Packaging: Recycling, Printing/ Packaging, Aluminum Production • Busch Entertainment: Sea World, Busch Gardens • • 50% Share in Grupo Modelo: Corona (93 -98) 27% Share in Tsingtao: China’s largest brewer 20% Share in Cervecerias: Chile’s largest brewer Distribution partnerships: Labatt & Kirin (Japan) reweries
Executives • • August A Busch III Chairman of the Board (29 Years) Patrick T. Stokes President & CEO (20 Years) W. Randolph Baker CFO & Vice President (8 Years) John E Jacob Director of Global Communications (14 Years) Carlos F Gonzales Director “Grupo Modello”(8 Years) James J Forese Director (26 Years) Americas Most Powerful People Charles F Knight Director (21 Years) Americas Most Powerful People reweries
Financials-2003 Annual Report • • Symbol Price (Nov 12 -04) Outstanding Shares P/E EPS Dividends Paid ROE BUD $51. 06 $837 Million 20. 59 2. 48 $685. 4 Million 70% reweries
Financials Cont. reweries
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Balance Sheet Analysis • Invested $200 Million in Bonds & Loans with Tsingtao Brewery in China • Net Increase to Debt $682. 2 Million with US Dollar Notes and Commercial Paper • Current Ratio. 88 • 11% Decrease in Shareholders Equity reweries
Debt Analysis reweries
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Income Statement Analysis • 9% Increase in Revenues • 7% Increase in COGS • 18% Increase in Operating Income • 22% Increase in Net Income reweries
Income Statement Cont • Advertising and promotional activities are a key component of A-B’s Strategy • Advertising Costs were $806. 7 Million • Promotional Costs were $511. 8 Million • A-B is able to gain a competitive advantage through their advertising reweries
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Cash Flow Statement Analysis • • • 1. 82 Billion in Free Cash Flow Acquired almost $2 Billion in Treasury Stock Paid $652 Million in Debt However, increased Debt by $1. 4 Billion Issued $685. 4 Million in Dividends Continue to acquire businesses and invest in packaging and related operations • Future Cash may be directed towards China reweries
Cash Flow Statement Cont • • Reached 5 year agreement with Union Pension Increases of 14% $7. 5 Million signing bonus 100 Million executive stock options yet to be exercised • Price equal to price on option issue date • Employee Stock Ownership Plan (ESOP) deferred 45. 4 million shares for purchase reweries
Impact of Stock Options on N. I. reweries
Derivatives • Derivatives used to mitigate the company’s exposure to volatility in commodity prices, interest rates and foreign currency. • Hedges only with derivatives that have high correlation with the underlying transaction pricing • Company policy is not to speculate in the derivatives market reweries
Employee Pension Plans • Defined contribution plans • Pension plans cover substantially all regular employees • Based on negotiated labour contracts reweries
Financial Statement Analysis Cont. VALUATION MEASURES- Nov 12 Profitability- Nov 12 -04 Market Cap 40. 34 B Profit Margin (ttm): Enterprise Value (12 -Nov-04) 48. 14 B Operating Margin (ttm): Trailing P/E 17. 19 PEG Ratio (5 yr expected) 1. 85 Price/Sales 2. 71 Price/Book 14. 49 Enterprise Value/Revenue 3. 26 Enterprise Value/EBITDA 11. 3 0. 226 18. 86 Forward P/E 0. 1235 Management Effectiveness Return on Assets (ttm): 0. 1205 Return on Equity (ttm): 0. 8121 Dividend Yield 0. 02 reweries
Technical Analysis reweries
Dividend Discount Model • Good for stable companies w/ growing dividends. • 2001= 614. 1 2002= 649. 5 2003= 685. 4 • Stock Price = Ex (Div/Share) (k – g) g= 6% Div/ Share=. 82 k=. 075 Ex Stock Price= $54. 67 Actual Price= $51. 06 reweries
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Recommendation Hold reweries
Questions? ? ? ? ? ? ? reweries
Скачать презентацию Breweries Leon Chung Jorge Cruz Darren Devine Cameron
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