Dive Brief:
- Molson Coors will close its Irwindale, California brewery by September, the company announced. The brewery, which opened in 1980, employs about 470 people.
- At the same time it announced the plant closure, Molson Coors also entered an agreement with Pabst Brewing Co., offering Pabst the option to purchase the brewery for $150 million by the end of 2020, according to a report filed with the Securities and Exchanges Commission.
- Molson Coors announced a plan to cut 400 to 500 jobs as part of a major reorganization in October, but those numbers did not include this closure, Molson Coors said in the release published Monday afternoon. "This move will allow us to optimize our brewery footprint while streamlining our operations for greater efficiency across the network," Brian Erhardt, the company's chief integrated supply chain officer, said in Monday's release. "While it was a very difficult decision, we have extra capacity in our system and Irwindale's production can be absorbed by other breweries in our network."
Dive Insight:
The last several months have been full of bad news at Molson Coors.
As sales and net income continued to tumble at the brewing company, former President and CEO Mark Hunter abruptly announced his retirement alongside a disappointing earnings report in July. He passed the baton to Gavin Hattersley, who had been head of the company's U.S. business unit, MillerCoors, since 2015. After Hunter's departure, the company stayed on the downward path. According to its most recent earnings report in late October, U.S. sales, which accounted for 67% of its $2.8 billion in revenue during the period, fell 2.3% compared to the same time in the previous year.
The major reorganization Hattersley announced in October entailed all kinds of cuts. These included closing its Denver office and moving its corporate headquarters to Chicago, closing satellite functional support offices to base them all in Milwaukee and streamlining its corporate structure into two business units — North America and Europe — from four previously. His announcement detailed the number of job losses, but was not specific about job functions or locations.
The California plant that is being closed was not included in those numbers, meaning that up to 970 people may lose their jobs this year. According to the press release, the Irwindale brewery made 4.8 million barrels last year, producing several signature brews: Miller Lite, Coors Light, Miller High Life, MGD, Steel Reserve and Miller 64. The release states the closure will not impact production. Beers made there will be transitioned to other breweries in Golden, Colorado and Fort Worth, Texas.
According to the press release Molson Coors put out on Monday, the Irwindale brewery's closing also won't impact the cost savings guidance announced in October. And the reason may be tied up in why the closure news comes with an option to sell the brewery to Pabst.
Although Pabst is a storied American brewery, consolidations and M&A deals have left it without major brewing facilities of its own. Pabst opened a craft brewery in Milwaukee in 2016, but since 1998, relied on Molson Coors' breweries to produce much of its product. In 2015, MillerCoors chose not to extend this agreement, saying it would not have the capacity to continue brewing Pabst's beers. It raised its price to continue brewing there from $17 a barrel to $42 a barrel. This led to civil litigation, with a trial that started in November 2018 and abruptly ended in a secret settlement weeks later.
According to the Milwaukee Journal Sentinel, Pabst's attorney argued at trial that MillerCoors made $70 million to $80 million from this deal. That's revenue the brewer isn't going to be getting anymore. In November, Pabst signed a long-term deal to brew the majority of its beers at beverage co-packer City Brewing Company by the end of 2024.
Molson Coors' offer to sell the Irwindale brewery to Pabst may also be an olive branch to try to bury bad blood between the companies. When the dispute between the two was raging, MillerCoors closed a brewery in Eden, North Carolina. During the trial, the Pabst CEO said his company offered to buy it for $100 million, and Miller Coors countered with an offer of $750 million. The former brewery ended up being sold to a corporation that shares the same address with a Greensboro, North Carolina-based demolition and site development specialist for $2.75 million.
The closure is another sure sign of Molson Coors' attempts to do whatever it takes to get back to steady growth. As consumers move away from traditional beer, traditional brewing companies are scrambling to develop and invest in the types of drinks that they're more likely to enjoy.
Weeks after Hattersley took the helm of Molson Coors, the company took a stake in nonalcoholic beverage incubator L.A. Libations, which produces better-for-you beverages including aloe vera water and turmeric seltzer. According to The Wall Street Journal, sources said the brewer has a 49% stake.
Last month, Molson Coors also started testing La Colombe Hard Cold Brew Coffee, with an ABV of 4.2%. Inn addition, MillerCoors is launching vitamin C-enhanced hard seltzer brand Vizzy in March. And in Canada, through a joint venture with cannabis producer Hexo Corp called Truss Beverage Co., Molson Coors is working to produce and distribute cannabis beverage brands. The first, Flow Glow CBD-infused spring water, became available last month.
As major beer companies struggle to find their footing, it will be interesting to see how Molson Coors weathers the storm — especially given that some analysts think the company may be preparing to put itself up for sale. With so many big changes in such a short period of time, its financial outlook in a year may be distinctly different than what it was just a few months ago.