Molson and Miller mull consolidation

The number of beer
distributors has dropped from 5,500 to 1,600.

DENVER (AP) — As two of the world’s largest brewers prepare to marry their U.S. operations, the small independent companies that deliver cases and kegs to stores and bars may play their own version of the mating game.

Miller Brewing Co. and Molson Coors Inc. have proposed the MillerCoors joint venture to sell more Coors Light, Miller Lite and Miller Genuine Draft in the United States. The operation would target No. 1 Anheuser-Busch Cos., which has nearly 50 percent of the market with products such as Budweiser, Michelob and Bud Light.

Now some distributors of just Miller or just Molson Coors products are looking at buying competitors as they grapple with rising costs for fuel, materials and labor.

“If you have competing distributors in the same market that carry brands like Miller and Coors that work well together, it just makes sense to consolidate,” said Betty Buck, who heads a family-owned Miller distributor in Maryland.

In this age of global businesses, the beer industry has no nationwide distributors, consisting instead of family-owned and independent companies. The trend is driven by laws imposed after Prohibition giving each state authority over alcohol regulation within its borders, said Craig Purser of the National Beer Wholesalers Association.

The laws established a three-tiered system of distribution: Manufacturers and importers need federal licenses; distributors need federal and state licenses and retailers need state licenses to sell the products, Purser said.

Some states require exclusive territories for distributors by law to provide a level playing field in the marketplace. In others, distributors work with suppliers on contracts to carry a variety of products, according to the association.

With about $70 billion in gross sales, the beer distribution industry has been evolving in response to consolidation and other changes among the nation’s breweries as consumer tastes expand to include craft beers, wine and liquor.

Since 1995, the number of distributors has dropped from 5,500 to about 1,600 as smaller companies have been bought out, according to industry statistics. “Now, it’s a matter of bigger players getting together,” said Harry Schuhmacher, editor and publisher of the online trade publication Beer Business Daily.

Owned by London-based SABMiller PLC, Miller Brewing Co. of Milwaukee is the nation’s second-largest brewer with about 18 percent of the market. Denver-based Molson Coors, formed with the 2005 union of Molson Inc. and Adolph Coors Co., has nearly 11 percent.

The two companies are working on a definitive agreement for the venture, which is expected to be complete by year’s end, and hope to close the deal by mid-2008 depending on regulatory approval. Neither company has provided details about how they will handle distribution for the combined operation because it is too early in the process.

If the venture is finalized, about 60 percent of distributors delivering both Miller and Coors may see some synergies because they will be dealing with only one company, which could streamline record keeping and other tasks, Purser said.