Coors' £1.2bn bid for Carling was accepted on Christmas Eve 2001, concluding a turbulent spell as regulators forced Interbrew to break up the Bass Brewers business it had earlier snapped up for £2.3bn. But before the ink was dry, analysts were already sceptical of the deal, arguing that Coors had paid over the odds for assets valued at $1.7bn (£1.17bn).
Complete with the new name of Carling Brewers and an £80m marketing budget to spend on Carling, Reef, Worthington, Caffrey's and Grolsch (which it owns the UK rights to), Coors' UK arm was up and running on February 4 2002. One year on, Coors says the transition has been very successful with the UK business' turnover reaching $1.38 bn.
Coors Brewers' off-trade sales MD, Chris Edger, says confidently: "The loss of Tennent's and Bass (to Interbrew) had no effect on the business because they were flat in comparison to brands like Carling."
However, despite the brewer's insistence that its brands are growing in both value and volume, the City is still uncertain about Coors' path. One analyst tells The Grocer: "Coors' operating margins are slim, which suggests there are issues with pricing and distribution. How do they plan to grow margins with current pressures on pricing? This is coupled with the fact they overpaid for the assets in the first place."
ACNielsen's off-trade audit reveals that Carling has been plagued with pricing problems despite its iconic status. In 2002 the brand grew its volume by 4% but only gained 1% in value [MAT Nov/Dec 2002]. This is in stark contrast to Foster's its nearest rival in standard lager which grew volume by 8% and value by 13%.
As one buyer admits: "Because Carling is a power brand, supermarkets trash it at Christmas." Carling dropped to £9.49 for a 24-pack in Tesco last Christmas, 48p cheaper than Hofmeister, which Scottish Courage later delisted as it wasn't making any money.
Coors' chief financial officer, Tim Wolf, acknowledges that margins are an issue. "Periods of off-trade competitive price discounting, especially around big holidays, continue to be a risk factor," he says.
Wolf's sentiments back up Edger's fears, expressed in the Grocer last August, that aggressive retailer pricing could lead to a big beer brand being axed. These worries could also be behind Coors Brewers' decision to appoint three directors to champion its brands in the off-trade. In May it also plans to introduce "innovative pack formats" to encourage retailers to move away from selling on price.
But Carling still pulled in £21.1m worth of sales in the multiples last December alone, justifying 2003's beefed up marketing investment, which will be £37m.
But as one industry source says: "Do you really want to spend £37m marketing Carling to end up at £9.99 at Christmas?"
Rival brewers have applauded Coors' efforts to move Carling into the Scottish market. However, the extent of the challenge was confirmed in the four weeks to January 4 when the new kid on the block took just a 1.3% share of the standard lager market in the Scottish multiples, leaving Tennent's and Miller to enjoy a whopping 96%.
Meanwhile, expenditure on Grolsch has been upweighted to £12m, reflecting a good year that saw its volume in the off-trade market increase 35.2% and its value also grew by 38%. One senior beer buyer says Grolsch could even be Coors' strongest beer asset as Caffrey's and Worthington were forced to settle for third and fifth place respectively by volume in the off-trade ale market [ACNielsen MAT Nov/Dec 2002].
He explains:"It's just as well Coors doesn't just have Carling because if a disproportionate amount continues to be sold clearly then the brand could still be damaged beyond repair long term."
{{ANALYSIS }}
Complete with the new name of Carling Brewers and an £80m marketing budget to spend on Carling, Reef, Worthington, Caffrey's and Grolsch (which it owns the UK rights to), Coors' UK arm was up and running on February 4 2002. One year on, Coors says the transition has been very successful with the UK business' turnover reaching $1.38 bn.
Coors Brewers' off-trade sales MD, Chris Edger, says confidently: "The loss of Tennent's and Bass (to Interbrew) had no effect on the business because they were flat in comparison to brands like Carling."
However, despite the brewer's insistence that its brands are growing in both value and volume, the City is still uncertain about Coors' path. One analyst tells The Grocer: "Coors' operating margins are slim, which suggests there are issues with pricing and distribution. How do they plan to grow margins with current pressures on pricing? This is coupled with the fact they overpaid for the assets in the first place."
ACNielsen's off-trade audit reveals that Carling has been plagued with pricing problems despite its iconic status. In 2002 the brand grew its volume by 4% but only gained 1% in value [MAT Nov/Dec 2002]. This is in stark contrast to Foster's its nearest rival in standard lager which grew volume by 8% and value by 13%.
As one buyer admits: "Because Carling is a power brand, supermarkets trash it at Christmas." Carling dropped to £9.49 for a 24-pack in Tesco last Christmas, 48p cheaper than Hofmeister, which Scottish Courage later delisted as it wasn't making any money.
Coors' chief financial officer, Tim Wolf, acknowledges that margins are an issue. "Periods of off-trade competitive price discounting, especially around big holidays, continue to be a risk factor," he says.
Wolf's sentiments back up Edger's fears, expressed in the Grocer last August, that aggressive retailer pricing could lead to a big beer brand being axed. These worries could also be behind Coors Brewers' decision to appoint three directors to champion its brands in the off-trade. In May it also plans to introduce "innovative pack formats" to encourage retailers to move away from selling on price.
But Carling still pulled in £21.1m worth of sales in the multiples last December alone, justifying 2003's beefed up marketing investment, which will be £37m.
But as one industry source says: "Do you really want to spend £37m marketing Carling to end up at £9.99 at Christmas?"
Rival brewers have applauded Coors' efforts to move Carling into the Scottish market. However, the extent of the challenge was confirmed in the four weeks to January 4 when the new kid on the block took just a 1.3% share of the standard lager market in the Scottish multiples, leaving Tennent's and Miller to enjoy a whopping 96%.
Meanwhile, expenditure on Grolsch has been upweighted to £12m, reflecting a good year that saw its volume in the off-trade market increase 35.2% and its value also grew by 38%. One senior beer buyer says Grolsch could even be Coors' strongest beer asset as Caffrey's and Worthington were forced to settle for third and fifth place respectively by volume in the off-trade ale market [ACNielsen MAT Nov/Dec 2002].
He explains:"It's just as well Coors doesn't just have Carling because if a disproportionate amount continues to be sold clearly then the brand could still be damaged beyond repair long term."
{{ANALYSIS }}
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