Molson Coors Sees Margin Growth East Europe, CEO Says
Stock Chart for Molson Coors Brewing Co (TAP)
Molson Coors bought StarBev LP, which operates nine breweries in central and eastern Europe including the Czech Republic, the home of Prague-based Staropramen, as well as Hungary, Romania and Bulgaria from CVC Capital Partners Ltd. for 2.65 billion euros ($3.5 billion) in April 2012.
“If you look at” regional margins “in comparison with more developed markets, they’ll be lower because GDP is lower -- but that’s an opportunity for growth,” CEO Peter Swinburn said in a Prague interview today. “The focus is on Staropramen as we have enough headroom to grow outside the Czech Republic, then we do innovations and then maybe -- we haven’t decided yet -- we can bring in craft brands that we already own.”
Denver-based Coors Molson bought StarBev to expand outside of its main regions of North America and the U.K., where high unemployment and aggressive competition are weighing on growth. Czech annual per-capita consumption is at 144 liters in 2012 from a year earlier, while total beer production rose some 2.8 percent, driven by exports and beer mixes.
“If you’re going to make a category attractive, you have to create value by bringing new products that add to the margin chain,” Swinburn said. “You don’t do it through cheap beer.”
There will be a “significant” push for innovation across the region, Swinburn said.
The brewer will start offering Carling in Croatia, a former Yugoslav republic that will join the European Union in July, and roll out Carling cider and three new flavors of beer mixes across the region, among other strategies.
On top of moving Staropramen to other countries, the company will also offer non-alcoholic beer mixes and cider and beer mixes to its markets, Swinburn said.
StarBev was a “good” purchase and it will be “value accretive” through the whole year, Swinburn said. “There’s no doubt that we’ll see GDP to grow in the region and that will translate into growth.”
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