rewing Co. Chief Executive Officer, Peter Swinburn, regards North American craft breweries as “massively overvalued.” While demand for small-batch beers is growing in the U.S. and Canada, the companies that make them are typically too expensive to justify an acquisition, he said.“I’m sure the craft owners would say they’re not overvalued,” Swinburn said in an interview at Bloomberg’s headquarters in New York yesterday. “I’m just saying we have to generate value from any purchase we make, and we find it difficult to get the returns we want.”
The explosion of upstart breweries in recent years has brought both headaches and opportunities to Molson Coors. While the new brews are competition for traditional beers like Coors Light, the company has had success with its own craft-style products such as Blue Moon. Though Molson Coors would consider buying new brands, it’s not in a hurry to do so, Swinburn said.
“We’re very relaxed,” he said. “We will always look at the opportunity to expand our brand portfolio. We have a belief that we can buy, build or borrow.”
The big beer companies also could see more consolidation, though Swinburn doesn’t expect the kind of merger mania that created Anheuser-Busch InBev NV and SABMiller Plc in the first decade of the 2000s. Regions such as Asia have potential for additional deals, he said. And some investors may be betting that Molson Coors itself is a takeover target. One reason for the stock’s recent run-up may be “deal fever,” Swinburn said.
Stock Rally
Shares of Molson Coors, which has a market value of $13.7 billion, have climbed 32 percent this year. That’s outpaced the 5.9 percent gain of the Standard & Poor’s 500 Index. The stock rose 0.5 per cent to $74.21 in New York yesterday.
The runaway sales growth of craft breweries make them attractive targets, assuming the price is right. The category saw volume climb 18 per cent in the U.S. last year, according to Boulder, Colorado-based trade group Brewers Association. That compares with an overall decline of 2 percent in the $100 billion beer industry. The craft segment is still small, though, making up about 8 per cent of volume.
Molson Coors sells Blue Moon in the U.S. through a joint venture with SABMiller Plc. That company, MillerCoors LLC, formed Tenth & Blake Beer Co. to develop and acquire craft beers. MillerCoors also owns a minority stake in Georgia’s Terrapin Beer Co.
Molson Coors, which has dual headquarters in Denver and Montreal, sells Blue Moon in Australia and Japan and plans to be part of the craft industry in those markets, Swinburn said.
In Canada, craft breweries enjoy tax advantages that make them difficult to acquire, he said. U.S. companies, meanwhile, are overpriced because of how hot the market is. Eventually that could lead to a shakeout where some craft breweries close, though the larger companies are well managed, he said.
Along the way, Molson Coors will see if there are opportunities to make deals, Swinburn said.
“But we’re not running around Canada or the U.S. or Europe trying to get people to sell their business to us,” he said.
