In year since merger, MillerCoors invests in plant, adds jobs - 24 July, 2009

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Friday, July 24, 2009  |  Modified: Tuesday, July 28, 2009
A better brew?
In year since merger, MillerCoors invests in plant, adds jobs

The Business Journal of Milwaukee - by Rich Rovito

Since the MillerCoors LLC joint venture launched a year ago, the beer brewer has
moved scores of office jobs out of Milwaukee and cut some positions altogether.

At the same time, the firm has invested tens of millions of dollars and added
100 jobs at the Milwaukee brewery. It also has kept many of its major promises,
including maintaining its financial commitment to many Milwaukee-area community
groups and events.

“The promises we made to the community have been kept on many dimensions, such
as job creation, keeping our investments here locally and advancing the power of
the company from a sustainability perspective,” said Tom Long, president and
chief commercial officer of MillerCoors.

MillerCoors, created when Milwaukee-based Miller Brewing Co. and Coors Brewing
Co., Golden, Colo., joined forces in July 2008, also has successfully
established a cohesive management team, which many industry observers doubted
would be possible, said Long, who had been Miller’s top executive.

“Looking back after the first year, I think we’ve proved the industry pundits
wrong,” he said.

In addition, the joint venture has had financial success despite the recession.

“We haven’t missed a single quarter since we started,” Long said. “We’ve
exceeded our earnings targets.”

Five of MillerCoors’ top six brands are growing, with the lone exception being
Miller Lite.

A nationwide launch of Miller Genuine Draft 64, touted as the lowest-calorie
beer on the market, began just weeks after the joint venture. Now it’s one of
the hottest brands in the country, Long said.

Earlier this year, MillerCoors began producing Coors Light at breweries that had
been part of Miller, including at West State Street in Milwaukee. That was a
catalyst to increasing manpower in Milwaukee, said Tom Cardella, eastern
division president for MillerCoors.

“Just this year alone, we’ve added 100 new jobs in brewing and packaging (in
Milwaukee) and we’ve added a third shift,” Cardella said.

MillerCoors sees significant growth potential for Coors Light in the upper
Midwest, which traditionally has been “Miller country,” he said.

Earlier this month, the MillerCoors brewery in Golden, Colo., began producing
Miller High Life, the first Miller-branded beer to be made at what had been the
heart of Coors Brewing Co.’s operations. Starting in September, Miller Lite will
be brewed in Golden.

Eric Shepard, executive editor of Beer Marketer’s Insights, a West Nyack,
N.Y.-based beer industry newsletter, said the MillerCoors joint venture has
created a strong competitor for major rival Anheuser-Busch Cos. of St. Louis.

“It’s also making more money,” he said of MillerCoors.

For the first quarter, underlying net income attributable to MillerCoors,
excluding special items, rose 46 percent to $216.4 million from the prior year,
driven mainly by savings from the merger, strong revenue growth, cost
management, and phasing of marketing expenditures, despite continuing commodity
cost pressures.

MillerCoors’ total net sales increased by 3.8 percent to $1.72 billion.
MillerCoors’ domestic shipments-to-retailers increased 0.4 percent because of
strong results from five of the six “focus” brands, offset primarily by declines
in Miller Lite and Milwaukee’s Best. Coors Light shipments were up in the
low-single digits, while Miller Lite shipments decreased in the mid-single

Despite solid financial performance, Miller-Coors hasn’t been successful in
“stealing” market share from Anheuser-Busch, Shepard said.

He noted that MillerCoors and Anheuser-Busch essentially have a “duopoly” in the
U.S. beer market, with a combined market share of about 80 percent, 30 percent
of which belongs to MillerCoors.

“Five of their six priority brands are growing and you’ve got to tip your cap to
that,” Shepard said, “but the Lite numbers are troubling.”
Cost savings

MillerCoors has saved transportation costs by brewing Miller-brand beer at
Coors’ facilities and producing Coors beer at Miller breweries, which Cardella
said would eliminate 45 million truck miles a year.

“The implications in regards to the environment also are significant,” he said.

Through June, about $45 million has been invested in the Milwaukee brewery, with
total investment expected to reach $60 million to $70 million by year-end, Long
said. That’s more than the $50 million management initially said would be
invested in Milwaukee.

A majority of the investment so far has improved infrastructure, installed and
upgraded equipment, and reconfigured the brewery to accommodate production and
packaging of Coors products, Cardella said.

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