Molson Coors writes off Canadian brands

Telecom and beer. Those are my only two areas of interest if anyone reading this thing doesn't glance beyond the last four posts.

Suffice to say, that's not true -- I've got a small business feature on a Toronto-based cigar company being published on Monday.

The following is after Molson Coors Brewing Co. wiped our beloved Canadian brands off their books on Aug. 6.

Jamie Sturgeon, Financial Post

Molson beer, once described as the one symbol of iconic Canadiana that the nation "could arguably slap a label on and sell around the globe," was further reduced to a footnote in the worldwide beer market yesterday after Molson Coors Brewing Co. wrote off the entire brand value of Molson in the United States.

Molson Coors Brewing Co. reported a US$51-million second-quarter charge as the beer brands' value was erased from the books after a prolonged period of declining sales combined with soaring freight and packaging costs, the company said.

The move is an accounting measure and does not have any direct impact on current operations for Molson brands, including Canadian, Canadian Light, Export and Golden, in the United States, according to company spokesman Paul De Laplante. But it is perhaps a symbolic one.

"The Molson brands in the United States are not as strong as they once were," said Edward Jones analyst Brian Yarbrough yesterday.

Molson paired with Denver-based Coors in 2005, after a series of missteps abroad. It was seen at the time as the loss of a Canadian icon, but many still speculated the U. S. parent could now grow the brand south of the border.

It hasn't.

Since the merger, U. S. sales of Molson brands have deteriorated to well under 10% of the combined company's U. S. portfolio.

"The brands have really been faltering," said Eric Shepard, the executive editor of U. S. industry publication, Beer Marketer's Insight. "It's one of the very few weak links, and certainly the performance of the Molson brands in the U. S. have just not done well."

By-the-barrel sales volume of Molson brands was 600,000 in 2007, according to Mr. Shepard, off from 825,000 in 2002. A steep decline from Molson's heyday in the mid-1990s when the then-independent brewer sold upward of 1.9 million barrels annually in the world's biggest beer market.

In comparison, Labatt, now owned by Belgium-based brewer InBev, has sold 1.6 barrels under its Blue and Blue Light brands in each of the past two years. Labatt "hasn't been able to grow but it has been able to hold volume," Mr. Shepard said.

"I guess [Molson Coors] felt it was time to alter the value of the brands."

The company reported a decline in second-quarter profit of 56% related to the brand writedown as well as another US$52-million in charges related to its MillersCoors venture.

Overall, Molson Coors' net sales rose 4.8% to US$1.76-billion, as the company sold 11.6 million barrels of beer, a 0.9% increase.

In 2002, Molson tepidly made a last-gasp attempt to join the global game and preserve its independence by buying Brazil's Cervejarias Kaiser. But "it didn't dare to introduce its own trademark brand into the world's fourth-largest beer market," wrote journalist Andrea Man-del-Campbell in 2007's "Why Mexican's Don't Drink Molson.'' Now it seems it's in retreat in the world's biggest.

"It's the one symbol of iconic Canadiana we could arguably slap a label on and sell around the globe," she wrote then.

"And yet we don't."

jasturgeon@nationalpost.com