Molson Usa: Building on the Fundamental Trusths
April 1, 2004
Molson Usa: Building on the Fundamental Trusths
After years of lackluster sales and little attention given to growing the Molson brand in the United States, Molson USA has made remarkable inroads in the U.S. beer business since its inception in 2001. Selling approximately 860,000 barrels of beer, which accounted for a 2.5 percent increase in sales in 2003, the company is on its way to being a major player in U.S. import category. Although there is no way to predict the future, the team at Molson USA is convinced it’s poised to become the third largest importer in the United States.
During the past three years since Canada-based Molson Inc. bought its U.S. business back from Miller Brewing Co., Milwaukee, and entered into a joint venture with Coors Brewing Co., Golden, Colo., Molson USA has been in a building phase.
Starting a beer business in the United States during a turmultuous era of slipping beer sales and stiff competition is a highly unpredictable venture. Fortunately, Coors’ contribution to the joint venture proved to be the support network needed to build a sturdy foundation.
“When we set up three years ago, the focus was really starting a new business, and setting up the infrastructure,” says Dave Perkins, president of Molson USA. “There had been some real supply challenges early on, and we were really working on the fundamentals. We had to build a sales team from within the Coors sales force and externally, and build the logistics capability.”
For Molson, the challenges also involved adjusting to a different culture of beer drinkers and a highly regulated industry in the United States. Winning over consumers with an import beer from across the border was one battle; winning over wholesalers and distributors tied to a three-tier system threw the company for a loop. The Molson USA team had extensive experience in a one-tier system in Canada, where the industry also owns its retail network, according to Perkins, and working through distributors and wholesalers was a new experience. But the team discovered that knowledge of an alternative operating system provided a unique perspective of the U.S. market and helped identify what part of business development it needed to focus on.
“There are some real strengths to [the three-tier system] and there are some challenges you have to deal with,” Perkins says. “[In the United States] you really have to work hard to build credibility and earn the attention of your distributors.”
“Finding out what matters to [our core consumer] and how we can best deliver that, what our distributors and retailers are looking for as well as how can we make it easy to do business with us has taken an unbelievable amount of our effort,” agrees Steve Breen, vice president of marketing. “We’ve been focused on just getting our game plan in place.”
After establishing credibility among distributors by forging new relationships, reinvigorating the market with a committed sales force and building an infrastructure, the Molson USA team focused on the brand.
By examining the portfolio of products, Perkins says the company made a decision to focus on the future growth of the brand and not try to reinvent Molson Golden and Molson Ice, which Molson first introduced into the United States. They planned programming and sales efforts strictly on Molson Canadian and Canadian Light, and discovered that the mix worked as Canadian quickly became one of the fastest-growing imports in the country.
“If you look at the Molson brand it is a brand that a couple of years ago had lost some of that [consumer] relationship in terms of relevance,” Breen says. “People knew that it was a quality brand, but in terms of young adults, guys 21 to 29 years old really didn’t think it had much of a place in their lives. So one of our jobs is building back that place in their lives.”
Establishing a distribution and sales network to get the product to market was important, Breen says. But the company also knew it was equally important that Molson USA build a connection with consumers to get product off the shelf. Marketing to the younger age group of drinkers who are developing their taste preferences and potentially committing to a brand for a lifetime is its current focus. However, it wasn’t always focused on the importance of adding younger drinking age consumers to the fold.
“There was a time when Molson started doing less marketing to that group,” says Breen. “So now it’s interesting to see that a fair bit of our consumption is among men who are 35 years old and older.”
Molson’s marketing team has been quick to pick up on what younger U.S. consumers are interested in and has successfully introduced packaging and campaigns that are appealing. As an added bonus, the new initiatives also have piqued older consumers’ interest.
“We said ’hey, we don’t want to alienate the current user group, but we have to get these 21- to 29-year-old guys,’ and that was a risk at the time,” says Breen. “But what it’s proving now is that guys are looking at our stuff and they’re still young at heart and they’re saying ’yeah, that’s my beer, and I like the things it’s doing’.”
Making its Mark
Molson USA has spent the past two years developing new packaging and promotions. Some of the ideas come from its parent company in Canada, while others are driven by retailer and distributor needs in the United States. The company depends on Coors as a sounding board for new ideas, and relies on Molson’s Canadian facilities to produce the packaging that other U.S. brewers can’t — one of Molson USA’s key strengths, according to Breen.
“We’re able to talk to [distributors, wholesalers and retailers] about their dreams,” he says. “We’ve been pleasantly surprised during the past two years when [the packaging group says] ’yeah, we can do that, we can try it out.’
“Then we take the package to consumers to make sure it’s going to be purchased off the shelf, and then we make it in small amounts
to put in stores and see how it does,” he says.
to put in stores and see how it does,” he says.
Among the major packaging innovations introduced during the past year, the 28-pack idea came from Canada, and 36- and 55-packs came from retailers in the United States, according to Breen.
Tailgating coolers, goalie-mask graphics on 5-liter kegs and catchy labels that are designed to start conversations have been Molson’s latest claims to fame.
“When I joined Molson one year into the joint venture, our first attempt in communication materials to try to sell Canada to Americans was ’If you drink Molson, you can be Canadian’,” Breen says. “As it turned out, most Americans were pleased to be Americans. This got us to look at another angle.”
They discovered through consumer research that the secret to marketing beer in the United States was in how people hold a bottle of beer, allowing everyone in the bar to see what they drink. They also found that men can spend a whole night in a bar with a friend and never speak to anyone else, and came up with a way to get people talking to one another. It launched the twin label campaign — a clever series of dual-labeled beer bottles featuring sayings such as ’I’m a multimillionaire with failing health’ or ’I’m with the band’ to start conversations.
“We started with 12 or 13 labels, and now we have 230 or 240 labels,” Breen says. The twin label campaign has caused quite a stir, proving to be a conversation starter and even prompting animated discussions about which labels are most appropriate to personalities of different bar patrons.
“When we go into bars, talk to bartenders and talk to distributors, none of them are seeing any signs of [the labels] wearing out or getting boring,” Breen says. “It’s cool because it speaks to who we are: we’re an import, but we’re approachable and fun; we know what it’s like to be in the bar, we like the bar.”
Connecting consumers is the theme in most of Molson’s U.S.-based marketing initiatives. Outside of the bar, the company has discovered it has a natural affiliation with sporting events such as hockey, which is an inherent Canadian product attribute, Breen says. It can’t compete with mainstream brands in financial sponsorships of sporting venues, however, and has focused on pre-game and post-game party planners to market packages such as a 5-liter keg featuring hockey face masks and coolers for outdoor grilling.
“Looking at packaging, people love the liquid so the liquid is something you don’t want to mess with,” Breen says. “But the packaging, the configurations, the convenience, all of those things are variables that you can optimize to really meet that person’s needs and keep it interesting for them as well.”
Molson USA prides itself on looking outside the box and approaching the market from a different perspective to undercut the competition. At a time when the beer market is increasingly moving toward low-carb options, the company has launched Molson XXX, a high-alcohol beer.
“We’re finding that American consumers, when they think about Canadian beer, think of full-flavor, good-tasting beers,” Breen says. “We recently introduced Molson XXX… and we’re seeing folks say ’hey, that fits with what Molson’s all about’ and we’re having some great success with it with fairly limited effort. That says that sometimes you do yourself more favors by not doing what everyone else is doing and doing stuff that is more unique that fits with your brand’s DNA and who you want to be.”
But don’t count Molson Ultra, Molson’s low-carb beer, currently only available in Canada, completely out of the Molson USA fold just yet.
“The question for us with Ultra is how do we scope that in a way that it makes sense to be a part of our family?” Breen says. “And if it doesn’t, it doesn’t, and that’s o.k.”
Molson USA is also turning to traditional media to get its message across. It has implemented a national print promotion that it expects to get people talking about the brand, and it has included radio as a component of Molson’s advertising mix in 2004.
Customers Speak Volumes
Listening to both consumers and distributors and acting on their feedback is Molson’s secret weapon against competitors in the fight for market share in the growing import category.
On the distribution and quality side, 2003 was a year for review at Molson USA. Looking at its Top 25 markets, a quality review program was implemented in which the Coors quality team surveyed accounts to determine Molson’s performance.
“The Coors audit folks have handhelds that scan all the products in the store, and a report is generated to determine our quality,” says Geoff Molson, vice president of quality and distribution development at Molson USA, the company he was involved in forming in 2001. “We learned that our distributors were very focused on supporting quality for us, which was a great learning, and our results were strong for an import brand.”
Developing distributor relationships is a more hands-on process for Molson, who handles Molson USA’s network of almost 600 distributors. During the past three years, as the business has developed, he has visited them all multiple times, he says. But maintaining an open relationship with its distributors is not the only goal. Molson also focuses on driving volume.
“[Driving volume] came from a process of getting out there and listening to [distributors], talking to them and getting feedback,” he says. “It always came down to tools that enable our success: from better communication to better information.”
To institute the ideas that had come from communication within the network, Molson formed a packaging quality group with Molson Inc. in Canada. The group was charged with finding ideas that would help boost volume sales and satisfy distributors needs.
“We came up with all of these ideas last year such as the 5-liter kegs, 36- and 55-packs and a couple new ones coming out this year, which is exciting,” Molson says. “So that process was developed and our retailers absolutely love it. It was a tough year last year in the beer business, and this was new and something to get excited about. Timing was good and we met a need and generated excitement in the beer category.”
Molson USA depends heavily on the expertise of its sales force, which in some markets, namely the Midwest and Northeast, sells the majority of its product. Through the joint venture, Coors handles sales in Molson’s non-core markets. However, in core areas such as Buffalo, N.Y., a dedicated Molson sales force is charged with sales activities. Sharing distributors between the two brewers has proved to be an advantage rather than a sticky situation, according to Molson.
“When there are opportunities to do things together, we work together and try to make it a contract that involves both breweries so we can become bigger as a whole company,” he says.
Hitting the Target
Molson USA’s sales strategy is centered around its core markets and taking a “local market approach” with a focus on on-premise accounts to get more people to drink Molson, says Vinny Prattico, vice president of sales. “We’re going in with a targeted approach, using media that reaches [consumers] the best. We not only have to have distribution but create opportunities for consumers to interact with the product.”
Prattico stresses that an important trend in the beer industry for Molson’s business has been consumer tendency to trade-up and purchase import beers. However, with the low-carb craze in full swing and flavored alcohol beverages and spirits taking business from the beer category, he says there is increased pressure to get consumers to look at imported products.
“We’re overcoming [competition from other categories] through our creative work and market approach in bars and night clubs promoting our products as a ’step up’,” Prattico says.
The marketing team has created on- and off-premise materials for wholesalers to get people excited about the brand. The company takes a ’free market’ approach to its marketing initiatives, giving wholesalers an opportunity to choose what works best in their markets.
“We provide [our wholesalers] with a full line of base point-of-sale materials to improve our visibility in stores and in bars,” Breen says. “We also have four different off-premise programs, so depending on the time of year, we offer thematic stuff that wholesalers can bring into the retail environment. On the on-premise side, we have a set of 12 monthly promotions, each promotion anchored around helping our guy get better and improve his success in the bar.”
In addition to hotbed markets in the Midwest and Northeast, Prattico says that it is focused on 16 markets, including key imported beer markets such as California and Florida, to reach its goal of being the No. 3 importer in the country. There also are other markets the company is watching closely.
“Eventually, we see expansion into the Southern markets,” Breen says. “The question is when. We’ve also started some efforts on the West Coast in San Diego. And we’re seeing incredible things in places such as Phoenix.”
Prattico says there’s a lot of opportunity for Molson across the United States, but the company isn’t doing anything too quickly, and is strategically planning its next move.
The main sales and marketing focus is on Molson Canadian, which makes up 37 percent of the company’s U.S. portfolio and is the fastest growing U.S. import of the Top 25, according to Prattico. However, Molson Ice — 32 percent of the portfolio mix — also holds an important position in the company’s offerings. With new products being introduced such as Molson XXX and Bavaria, a beer brewed by Molson’s Brazilian partner Kaiser, recently introduced in Florida, forecasting and category management are handled with help from Coors.
“We work very closely with Coors on category management,” Prattico says. “Retailers are looking at shelf space, which products are turning, their strategy of profitability and attracting consumers to their stores. Coors is involved in that and we utilize the Coors expertise in category management.”
With a dedicated Coors sales force and almost 80 percent Coors distributors on its side, Molson is able to focus on the brand and utilize both companies’ resources to sell at retail. The benefits of this arrangement make it a small importer with integral support from a major U.S. brewer.
Molson’s family-run Canadian-company roots instill a sense of pride in the business even across the border, which gives Molson USA the stamina to leave a lasting impression on the U.S. market as a significant importer. The company expects that relationship to remain strong, even as Molson Inc. undergoes a reorganization in Canada, effective this month. Kevin Boyce will serve as the new president and chief operating officer of Molson North America; Les Hine, chief marketing officer; and Dave Perkins, president of market development in North America. Perkins also leads the go-to-market strategy in Canada and the United States.
“We need to continue moving, and we will continue moving,” Perkins says. “It’s hard to say at this point what the drivers in three years will be. They will be different from today, but there still has to be an orientation or culture that is highly service-oriented and agile. Most important, that it has a strong beer culture.”
“The biggest opportunity is to continue to be a leader in worldwide beer industry,” Molson adds. “By that I mean delivering on growth commitments, earnings and market share and identifying opportunities to become bigger.”