One on One with Susie Gharib

 

One on One with Molson Coors CEO Peter Swinburn

Thursday, September 04, 2008

SUSIE GHARIB: Change is brewing in the U.S. beer industry. Mergers are on the rise as beer sales slow down and prices increase for commodities like barley, aluminum, and glass. Earlier today, I talked with the new CEO of Denver- based Molson Coors. My first question to Peter Swinburn, his strategy for growth for the nation's third-largest brewer.

PETER SWINBURN, PRES. & CEO, MOLSON COORS: We need to get scale internationally. And that means, actually, developing Coors Light internationally, and also looking for any smart deals that might be out there. We're in the position to do that now. We haven't been in previous years because we've been paying down debt. But fundamentally it's also concentrating upon our core businesses. And that really means investing in our brands, developing the brands and making sure that we can gain margin from to those brands over the medium to long- term. But a lot of that is what we have done in the past, and it has been a great recipe for success.

GHARIB: Mr. Swinburn, to what extent is the weak economy impacting your business?

SWINBURN: Presently not significantly. We can only talk about our business. But in the United States, for example, the category is over 1 percent, which historically is quite good. And we have not seen any evidence of trading down or indeed trading out.

GHARIB: Are you doing things differently now than Anheuser-Busch (BUD) has merged with InBev and it created this powerhouse competitor? What are you doing to stay competitive? SWINBURN: We've already done it, to be honest with you, we put the -- our American business, the Coors business together with Miller. And we did that specifically to make ourselves more competitive in the United States market. So instead of having a 20 share and a 10 share, we now have 30 share combined. The big advantage is going to be that having put the businesses together, we will drive out about $500 million worth of cost savings, and put two great brand portfolios together.

GHARIB: As you know, there is a lot of consolidation going on in your industry. Is your partnership with Miller just the beginning of a full-out merger?

SWINBURN: Absolutely not. It's a partnership just in the United States. And it makes sense for both businesses to do that in the United States. Outside of the United States we compete very vigorously against each other.

GHARIB: But do you feel that given all the consolidation that is going on in the industry, to be competitive in the international -- in the global marketplace, that, you know, size really matters, and that you really do need to partner up with somebody at some point?

SWINBURN: No, size does matter, you're right, it is about scale. But we've played that game very successfully. I mean, you have to remember that both Molson and Coors were individual businesses just six years ago. We probably quadrupled the size of our market cap in that time. What we have proven is that we can actually come up with really smart deals. We can execute them very, very efficiently, and bring huge shareholder value. There is no reason why we can't continue to do that.

GHARIB: As you know, China is the biggest beer market in the world. What is your China strategy?

SWINBURN: We are expanding our footprint. We are actually establishing all the brand values that we need to establish in the consumer's mind. And what you get then is an inflection point. We have been in China for about six to seven years, it is a very, very big country. And so it's taken us time to get distribution, solid distribution, solid brand-building and brand health. And we would expect to get an inflection in China within the next five to six years.

GHARIB: Let's talk a little bit about Molson Coors stock. It has been volatile. What do you think is going to be the catalyst to make it to move higher?

SWINBURN: The important thing for shareholders is that we've actually virtually doubled the value of our stock in the last three years since we put Molson Coors together. With the deal that we've done in the U.S., we've got more savings coming through. The fundamentals of the business are tremendously strong. We've got a strong balance sheet. We've great plans that are growing and getting pricing. And we're throwing off cash. And really that's what investors look for, especially in today's market.

GHARIB: Mr. Swinburn, thank you so much for your time. We appreciate it.

SWINBURN: Thank you.