Craft beer companies ‘overvalued’
MOLSON COORS NOT IN A RUSH to expand portfolio, CEO says
The craft-beer industry is getting frothy. That’s the view of Molson Coors Brewing chief executive Peter Swinburn, who sees 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 Friday. “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 and SABMiller 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.
Shares of Molson Coors, which has a market value of $13.7 billion US, have climbed 32 per cent this year. That’s outpaced the 5.9-percent gain of the Standard & Poor’s 500 Index.
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 two per cent in the $100-billion beer industry. The craft segment is still small, though, making up about eight per cent of volume.
Molson Coors sells Blue Moon in the U.S. through a joint venture with SABMiller. That company, MillerCoors, formed Tenth & Blake Beer Co. to develop and acquire craft beers. MillerCoors also owns a minority stake in Georgia’s Terrapin Beer Co.