Starbucks, Seattle, announced yesterday that it plans to close about 600 underperforming company-operated stores in the United States. The closures include 100 stores announced earlier this year. In addition, the company says it expects to open fewer than 200 new U.S. company-operated stores in 2009.

 

The majority of the store closures are scheduled to occur during the second half of 2008 and the first half of 2009. The company says it hopes to place many of the displaced employees into available positions at nearby Starbucks stores.

 

In a message to employees, Starbucks Chief Executive Officer Howard Schultz said the move was “the most angst-ridden decision we have made in my more than 25 years with Starbucks,” but he added, “part of transforming a company is our ability to look forward, while pursuing innovation and reflecting, in many cases, with 20/20 hindsight, on the decisions that we made in the past, both good and bad.”

 

The stores identified for closure are located across major U.S. markets, and approximately 70 percent of them were opened since 2006. The company said the criteria included locations that were not profitable at the store level and not projected to provide acceptable returns in the foreseeable future. In addition, the company said current and anticipated economic trends were factored into the decision.

 

In other Starbucks news, the company plans to rollout new beverage options in its health and wellness lineup, beginning July 15, as well as a new iced beverage concept from Italy that will be introduced first in Southern California. Read more of Starbucks comments on the store closures.

 

 

Anheuser-Busch rejected InBev’s purchase offer of $65 per share last week, saying it was “financially inadequate and not in the best interests of Anheuser Busch shareholders.”

 

“InBev’s proposal significantly undervalues the unique assets and prospects of Anheuser Busch,” Patrick Stokes, chairman of the company, said in a statement. “The proposed price does not reflect the strength of Anheuser-Busch’s global, iconic brands Bud Light and Budweiser, the top two selling beer brands in the world, with Budweiser selling in more than 80 countries today. The proposal also undervalues the earnings growth actions that the company had already planned, which have significant potential for shareholder value creation; the company’s market position in the United States, the most-profitable beer market in the world; and the high value of its existing strategic investments.”

 

The company said the board studied the proposal with independent financial and legal advisers, and that the board’s independent directors also met alone to consider the offer.

 

In its response to the offer, A-B said it has an “accelerated earnings growth plan that 1) expands our cost initiative through an enhanced productivity plan that we refer to as the Blue Ocean effort to deliver more than $750 million in savings through 2009 and $1 billion in savings through 2010, while furthering environmental sustainability; 2) extends the strong revenue growth from our brands that we’ve seen over the past five years; and 3) drives additional volume growth for core brands through new consumer opportunities and for our successful, higher-margin new products.”

 

The company said it will implement a new early retirement program to be offered to salaried employees in the third quarter of this year, with the goal of reducing its salaried workforce by 10 to 15 percent. In addition, A-B plans to accelerate its 2009 price increase plan, moving 95 percent of its actions to September and October of this year.

 

“Our pricing actions are expected to cover over 85 percent of our volume, with increases targeted on a brand, package and market basis. Overall, we expect to achieve 4 percent revenue per barrel growth, including mix, for 2008 and 2009,” W. Randolph Baker, vice president and chief financial officer at A-B, said during an analyst briefing on Friday.

 

In a message to employees, A-B Chief Executive Officer August Busch IV said, “We know this company better than anyone else and we know where we can effectively reduce costs without compromising quality, which we will never do.”

 

In its response to A-B’s rejection, InBev Chief Executive Officer Carlos Brito said the company remains committed to its original offer. “Our firm proposal of $65 per share reflects the full and fair value of the company,” he said in a statement. “The proposal is backed by fully committed financing, and provides immediate certainty of value in a weakened stock market environment. Our firm proposal was rejected in favor of a newly formulated management plan with significant execution risks.”

 

InBev said its preference is, “to enter into a constructive dialogue to achieve a friendly combination that comprehensively addresses the interests of all constituents. At the same time, InBev remains committed to the combination and will pursue all available avenues that would allow Anheuser-Busch shareholders a direct voice in the process.” Read more about A-B’s plans and see InBev’s response.

 

 

The U.S. Conference of Mayors adopted a resolution at its annual meeting encouraging cities to phase out “government use of bottled water and promote the importance of municipal water.” The resolution cited the availability of high-quality water in most public locations, stringent testing mandates for municipal water and the use of fossil fuels to package and transport bottled water products among the reasons for the move.

 

The American Beverage Association, Washington, D.C., called the resolution “sound-bite environmentalism,” and Senior Vice President Kevin Keane added, "…we certainly encourage mayors and their staff to learn the full facts about plastic water bottles and their impact on the environment, as well as how the beverage industry is leading the consumer products industry in reducing its impact on the environment. " See the resolution and read the ABA’s response.

 

 

SABMiller and Molson Coors Brewing Co. completed the merger of their North American businesses on Monday, saying the new company will “be a dynamic brand-led U.S. brewer with the scale, resources and distribution platform to succeed in the highly competitive marketplace.”

 

“MillerCoors will be entrepreneurial, with the ability to operate with speed and agility in the marketplace, backed by the powerful combined resources of two exceptionally successful companies,” said Leo Kiely, chief executive officer of the newly combined company. “We will drive profitable growth and bring new energy to the U.S. beer industry.”

 

The companies each named five directors to the board of directors, including Pete Coors as chairman and Graham Mackay as vice chairman, as well as Molson Coors’ Peter Swinburn, Sam Walker, Stewart Glendinning and Dave Perkins, and SABMiller’s Malcom Wyaman, Nick Fell, Johann Nel and Sue Clark. Read more about the new company.