Peter Swinburn, chief executive of Molson Coors, told Reuters on Tuesday the sponsorship became less attractive after the financial terms changed.”It’s value, it’s not price,” Swinburn said in an interview. “We came to a point where we believed we could actually extract much better value for our money above a certain level and, once we were asked to go above that level, it no longer became attractive to us.”
The company’s U.S. joint venture with SABMiller Plc, known as MillerCoors, said on Tuesday it would not renew the Coors Light sponsorship once the current deal expires after the 2010-11 season. It still has over a dozen deals with individual teams, such as the Dallas Cowboys and said it still expects to purchase NFL ads.
In its place Anheuser-Busch InBev said its Bud Light, the top-selling beer in the United States, would take over.
It is not surprising MillerCoors would bow out of the sponsorship, said Jim Andrews, senior vice president at IEG, a unit of advertising giant WPP Plc, which tracks sponsorship spending.
“A league sponsorship provides a national platform, but the value of that is questionable, given that consumers are not fans of the NFL, they are fans of the Bears, Steelers, Cowboys, etc,” Andrews said.
He estimated that MillerCoors’ current deal is worth about $100 million- about $30 million a year for the sponsorship plus another $70 million in guaranteed NFL media buys.
Swinburn said the company has a “Plan B” for the money it was spending on the NFL, although he declined to give specifics, except to say it would still be in sports.”We’re very confident that we will extract more value from that for the company than we would’ve done if we would’ve paid more than we wanted to for the NFL,” he said.
Terms of the Bud Light deal were not disclosed, but an article in Street & Smith’s SportsBusiness Journal said Anheuser was paying twice what Coors paid, according to sources. Based on Andrews’ figures, that would come to about $1.2 billion over the six years of the contract.
PRICE OF BEER IN CHINA
Molson Coors, the world’s fifth-largest brewer and maker of Molson Canadian, Blue Moon and Carling, also said on Tuesday it agreed to pay $40 million for a 51 percent stake in a joint venture with a regional brewer in China.
Even though Molson’s business is largely concentrated in the mature markets of Canada, Britain and the United States, Coors Light is currently sold in 43 Chinese cities.
The venture will ensure the supply and quality of beer for Coors Light, as well as improve profit margins by eliminating contract brewing fees, Swinburn said. The direct control will also give the company more freedom to innovate.
Swinburn does not want to lose focus on increasing sales of Coors Light in China, but he said the venture makes it easier to launch additional brands as well.
“We don’t see any reason why over the next 18 months to three years we can’t be bringing other products into the system that we already have and obviously that will help it become more viable as well,” Swinburn said.
Gaining a toehold in emerging markets is important as growth is hard to come by in the company’s existing markets. Sales volume in April fell at a low single-digit percentage rate in Canada and the United States, Swinburn said, noting the U.S. rate represented “an amelioration” of the drop seen in the just-ended first quarter, when sales to wholesalers fell 3.6 percent and sales to retailers fell 4 percent.