Blog: Don't blame it on Brazil
Chris Brook-Carter | 29 January 2004
Canada's number one brewer Molson has hit troubles, with third-quarter net income falling to 35 Canadian cents a share from 52 Canadian cents a year earlier. Revenues declined to C$623.3m from C$641.3m.
A flat domestic market aside, the majority of the woes stem from Molson's decision to enter the Brazilian beer market, with the purchase of Kaiser.
Kaiser has just not performed to expectations. Its sales have fallen 23% in the quarter and it is losing market share.
However, Molson's CEO Dan O'Neill continues to defend the decision to go into South America, despite the rocky road. His argument, quite rightly, is based on profit potential rather than the here and now.
On a conference call with analysts, Daniel O'Neill said: "The Brazilian opportunity expanded the profit potential and remains as such. It may be delayed from the original plan, but it represents a large opportunity for profit growth."
And Molson points to the success of AmBev in Brazil as evidence of the potential of the market. And indeed, it was a failure in Molson's structure in the country rather than the dynamics of the market itself that are to blame for the disappointing results.
Molson has been putting in place a direct-selling network across Brazil, but the implementation has been delayed - a delay that coincided with a series of heavy investments from the competition.
But Molson's structural changes to Kaiser's sales force are all but finished. The company is now armed with 1,200 sales staff across six regions in Brazil.
And, Sao Paulo apart, the newly-established direct selling organisations all showed growth compared to the same period last year. In fact, excluding the Sao Paulo region, Kaiser's December sales would have been ahead of the previous year third quarter.
It is worth, therefore, taking O'Neill at his word for the moment and giving Molson more time to prove its Brazilian venture's worth.
It's a bank holiday here in the UK on Monday (25 August). just-drinks' team will be taking a well-earned lie down. ...
Poland is hardly noted for its cider consumption, but all this could be about to change. ...
Here's a brave move by the folk from Camerata at Paulie's in Houston: a wine-related parody of Summer Nights from Grease....
Here's a round-up of the top stories on just-drinks last week, featuring The Coca-Cola Co and Monster Beverage Corp, Constellation Brands, Anheuser-Busch InBev and Australia's wine producers....
- Interview - Bacardi global marketing boss, whisky
- Comment - Hybrid Spirits: Innovation or Laziness?
- Constellation grapples with glass as reality bites
- Brewers Feel Prolonged Russian Winter
- Focus - Heineken's H1 Performance by Region
- Mast-Jägermeister targets UK off-trade boost
- Diageo doubles intake for spirits start-ups scheme
- Second senior exec to depart Bacardi
- Portman finds against Diageo "mix it up" tagline
- Bacardi sees North America president step down