By Dow Jones Business News, February 27, 2013, 12:08:00 PM EDT
--Molson Coors, SABMiller fighting over terms of licensing agreement in Canada
--SABMiller aiming to end deal; cited failure to meet volume targets
--Molson filed lawsuit in Canada to prevent SABMiller's move to end the deal
(Updates with prepared statement from SABMiller, and more details about agreements between the companies.)
By John Kell
Molson Coors Brewing Co. (TAP, TAPA) and SABMiller PLC (SBMRY, SAB.LN, SAB.JO), two of the world's largest brewers,
are fighting over the terms of a licensing agreement in Canada the latter company is aiming to terminate this summer.
SABMiller is planning to end a licensing pact in July that gave Molson the exclusive rights to distribute its products
in Canada. Though Miller brands make up only a small percentage of Molson's Canadian sales, SABMiller believes there are
opportunities for the brands to perform better in that market.
"We see Canada as a country with a rich tradition of beer appreciation," Paul Gurr, SABMiller's managing director for
Canada, said in a prepared statement. "And believe we can better serve Canadians' needs through this transition."
Canada is an important market for Molson, a region where it is the second-largest brewer by volume and commands 39% of
the market. Roughly 15% of Molson's total world-wide volume was derived from Canada last year, though the company
doesn't break out how much of those sales were tied to SABMiller's brands.
Molson's Canadian results were disappointing last year. Volume slid 3.9% in 2012, hurt by a beer excise tax increase
in Quebec and the National Hockey League lockout, which ended last month.
The Canadian beer market is highly competitive, as large and smaller brewers fight for market share in a mature market
where overall volume is falling. Canadians have shown a stronger preference in other alcoholic beverages, like spirits.
Large events, like the recent Winter Olympics in Vancouver, provide only a short-term jolt to beer demand.
The companies also work together in the U.S. market, through a joint venture called MillerCoors. A SABMiller spokesman
said the decision to end the license was "driven solely by circumstances in Canada and has no bearing on our ongoing
commitment to the MillerCoors joint venture in the United States."
Molson--which makes Coors Light and Carling--has claimed SABMiller sought to end the pact after it failed to meet
certain volume targets. The company has filed a lawsuit in Canada, seeking an injunction to prevent SABMiller from
terminating the agreement, which began in 2003.
Spokesmen from both companies declined to comment on the litigation.
SABMiller disagrees with Molson claims that SABMiller's written notice warning of plans to terminate the pact breached
the license agreement. SABMiller "maintains its right to terminate" the licensing agreement with Molson, saying that it
gave the necessary six-month notice of termination.
SABMiller also said it is exploring other options for import and distribution of Miller Lite and other beers in
Molson's shares dropped 1.5% to $44.34 in recent trading.
-Write to John Kell at email@example.com.
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