US: Coors outsources UK keg management
Adolph Coors Company today announced that its Coors Brewers Ltd. (CBL) operating subsidiary in the UK has reached an agreement with a UK unit of Denver.-based TrenStar, Inc. to outsource the ownership, procurement and tracking of kegs and casks.
Under the 15-year container management services agreement, TrenStar will acquire CBL's keg and cask inventory and provide ongoing container management services for Coors in the UK, including installation of radio frequency identification (RFID) tags on each container and the use of container tracking technology. As a result, Coors will receive an up-front cash payment for its UK keg and cask inventory, avoid future capital expenditures for new containers, and begin "per-fill" payments to TrenStar for container management services.
"Our keg management agreement with TrenStar is a significant and highly beneficial move for Coors," Tim Wolf, chief financial officer for Coors said in a statement. "The arrangement will provide opportunities for more effective use of cash, further debt reduction, and increased returns on capital."
Peter Kendall, chief executive officer of CBL, said: "The sale of our keg and cask inventory, together with the outsourcing of related services, will improve our retail trade service levels, significantly increase container asset utilisation and reduce container loss rates, all of which will help us drive sales and profitability. This transaction also creates the possibility for a number of UK brewers to move toward a single pool of containers in the future, which would further increase container utilisation rates, efficiencies and service levels."
The company estimates that the agreement will increase CBL cash flow by approximately US$70m in 2004. This improvement is composed of an immediate cash payment of about $50m from TrenStar for CBL's approximately 1.2m kegs and casks, along with capital spending avoidance partially offset by tax effects of the transaction.
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