MillerCoors Craft Portfolio: Will its Field of Dreams come true or will it need to find a home run from somehwere else

 

The sad news came out the other day that my hometown company MillerCoors plans to cut 350 salaries positions as part of a restructuring. Although many other brewers made cuts in the past, MillerCoors restructuring worries me, because it faces uncertainty.

In an article in the Chicago Tribune MillerCoors indicated that it discontinued after less than a year on the market its fruit flavored lager, Two Hats, which it developed to target a younger audience. MillerCoors in the same article stated that it would focus resources on Coors Light and Miller Lite, its two major brands.

With this new plan MillerCoors seems to double down on the strategy that stagnated its growth and future prospects. Do we believe it will go down this road or will they throw us a curve ball?

 

MillerCoors presently lacks the home run hitter

The four major brewers in the United States are: 1) Anheuser Busch (AB); 2) MillerCoors; 3) Constellation Brands (Constellation); and 4) Heineken. The market with the explosion of craft beers required all four brewers to remake themselves either through mergers and acquisitions and sometimes through strategic thinking.

What resulted is all four breweries purchased craft brewers for their portfolio and entered into this market space.

At present AB, Constellation, and Heineken found home run hitters in the craft beer game. AB went with Goose Island, Constellation with Ballast Point, and Heineken with Lagunitas.

All three of these brands are well known and have a strong presence in the marketplace. As an example, Goose Island’s portfolio is so strong that it keeps introducing different brands that become good sellers. Lagunitas and Ballast Point provide the same benefit for Heineken and Constellation respectively.

All these three brands are home runs for their companies and are difference makers.

MillerCoors on the other hand, lacks the home run hitter. Blue Moon and Leinekugel’s are great brands, but they are too mature for the craft world. Further, Blue Moon does not have a vast portfolio of great selling brands and although Leinekugel’s dominates the shandies world, its national presence is small.

Hence, the question becomes, how will MillerCoors raise its game?

 

Will they build for the future or make a big trade

A baseball team looking to raise the stakes will either sign a big free agent or make a big trade or gather younger players to develop them into superstars.

Heineken and Constellation decided to make the bold move and pay dearly for Lagunitas and Ballast Point. Constellation bought Ballast Point for $1 billion while some reports indicate that Heineken may have paid the same amount for Lagunitas.

MillerCoors on the other hand bought four smaller brewers: Hop Valley Brewing Company; Revolver Brewing Company; Saint Archer Brewing Company; and Terrapin all within the last three years.

MillerCoors has stockpiled high quality assets that are smaller than Ballast Point and Lagunitas and don’t carry the same immediate impact.

It would seem that MillerCoors, like a developing baseball team, is looking to develop its less expensive assets and create several great brands that can eventually take the lead in market share.

But the question becomes, does MillerCoors stay the course or does it go all out for the home run hitter?

 

What’s on deck for MillerCoors?

MillerCoors could swing for the fences and suddenly buy someone like Founders or Stone. This would provide them the home run hitter they need to match the other big 3 and really grow its craft business instantly.

This would make sense for MillerCoors but at what price? Ballast Point was acquired for $1 billion in 2017 and the price of a big impact craft brewery has not gone down, so maybe the stakes will increase from this $1 billion number.

History has shown that MillerCoors has decided to shun the large acquisition and instead decided to develop an expanding and diverse portfolio.

Will the strategy pay off? I don’t know, in baseball young and promising players sometimes turn into superstars and sometimes they don’t. Nevertheless, it seems MillerCoors is relying on the strategy that its portfolio will develop into all-stars.

But life is funny and MillerCoors could pull the trigger and make a mega deal. In the end I do know one thing, MillerCoors needs to develop and market its craft brands aggressively or go for the homer, because if its biggest play is bringing back Zima, then the market will pass it by.

 

 

 

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