Canada: Molson Coors investing $60 million in its Toronto plant to try something different

Frederic Landtmeters is an optimist.

As he guides one of the country’s oldest brands into a new era, the Belgian president of Molson Coors Canada has to be, the Record reported on August 30.

“Something one of our colleagues in the industry said to me, literally, was, ‘This industry is doomed to decline forever.’ I mean, no. There is growth,” says Landtmeters, during a tour of the company’s biggest Canadian brewery just off Highway 427.

But the growth isn’t coming from beer.

Since per capita beer consumption peaked at 128.5 litres per drinking-age Canadian in 1973, it’s been virtually all downhill, mirroring trends around the world.

In 2020, the latest year for which Statistics Canada data is available, that number stood at 69.6 litres. As beer has fallen, wine has been on the rise. In the past few years, demand for “ready to drink” beverages, from hard lemonade to alcoholic kombucha and hard seltzers, has been soaring.

And it’s the biggest beer brands that have been suffering the most.

In a recent report, Morningstar equities analyst David Swartz said the company’s former mainstays are holding Molson Coors back.

“These trademarks that once were a strength are now mostly albatrosses, in our opinion, largely declining in relevance and volume,” Swartz wrote.

In its most recent quarter, Molson Coors saw profits plunge to $47.3 million (U.S.), from $388.6 million a year earlier.

Like other breweries around the world, Molson Coors is trying to adapt to this new reality. In the last year, the company has invested $100 million into the world of hard seltzers, including a $60-million investment in a new production and packaging line for seltzers at the company’s Toronto facility.

The company also has a joint venture with cannabis firm Hexo, as it looks to collaborate on THC and CBD beverages. And in the U.S. last fall, the company launched Five Trail whiskey, a blend of bourbon and single malt that uses barley from the Coors malthouse in Golden, Colo.

The shift beyond beer has also been met with a name change; in early 2020, Molson Coors Brewing Company was reborn as Molson Coors Beverage Company.

Removing “brewing” from the name surely would have come as something of a shock to John Molson, who founded North America’s oldest brewery in 1786, and Adolph Coors, who co-founded the Coors Brewing Company in 1873.

That move — and the shift to such drinks as papaya-passion fruit Vizzy seltzer and Topo Chico lemon-lime seltzer — had its skeptics. Some of them were even within the company, Landtmeters admits.

“I don’t know which one of the two was the bigger challenge, but I know something for sure: the one that we always underestimate is the internal one,” says Landtmeters, who moved to Canada for his current role in 2016, after spending time as managing director of the company’s U.K. and Ireland operations.

But skeptics who assume that a company pushing three separate brands of seltzers can’t also be focused on beer are suffering from a lack of imagination, Landtmeters argues.

“The continued focus every day, every week, every month is: ‘it’s not at the expense of.’ It’s also revitalizing Coors Light, revitalizing the Molson brand. And we’re not going to give up on those,” Landtmeters says. “Until further notice, the premium lager segment is still the largest one in the market. And it is our legacy. And it is our bread and butter. And we can’t give up on those brands — and we won’t.”

In addition to the $60-million investment in the Toronto brewery, which can produce up to five million hectolitres (500 million litres) of beer per year, Molson Coors also spent $600 million on a brand-new brewery in Longueuil, Que. The Longueuil brewery, which opened late last year, replaced the company’s Montreal plant.

If there’s one thing Landtmeters isn’t particularly worried about, it’s the growth of the legalized cannabis market. While there were some doom and gloom forecasts predicting legalized pot was going to eat into beer’s market share, those haven’t come true, he says.

“Who knows what the future will bring, but at this point I don’t see a reason to say recreational cannabis is eating the beer industry’s lunch,” says Landtmeters, while also suggesting that lending the Molson brand to joint-venture pot products isn’t in the cards — at least for now. Don’t expect a Molson Canadian cannabis drink any time soon.

“I’d prefer never to say never, but I wouldn’t put my money on it,” he says. Anything coming out of the joint venture is likely to have a separate brand.

Veteran beer author and consultant Stephen Beaumont has some sympathy for what large brewing companies such as Molson Coors are facing: trying to find a path forward while your former mainstays are sinking isn’t easy.

While they’re in decline, the company’s best-known brands are still bringing in hundreds of millions of dollars in revenue each year. The balancing act between investing in potential growth areas while not ignoring the biggest sources of revenue is a tricky one, Beaumont says.

“If there’s a way to do it, I think Molson Coors is probably doing it best. Having said that, I’m not 100 per cent convinced that there’s a way to do it.”

“Today’s marketplace dictates that you need to be almost a futurist to figure it out. Who would have predicted the meteoric rise of hard seltzers, and who would’ve predicted their crash just a few years later?” says Beaumont, noting that some companies — notably Boston Brewing Company — have had to write down significant chunks of excess hard-seltzer inventory because of slowing sales.

Molson Coors’ investment in hard seltzer is a perfect example of the dilemma big companies face, Beaumont says.

“It was really weird timing to say, ‘We’re gonna double down on hard seltzer.’ It just doesn’t make a whole lot of sense to me, right as the sheen was coming off the market.”

But Landtmeters insists that there’s still plenty of life in the seltzer market. Perhaps more importantly, though, the new production and canning line is also designed to be adaptable, to make sure the investment isn’t wasted on a flash in the pan. On a recent visit, the new line was packaging 1,600 cans of Molson Ultra per minute. A day later, it could have been Vizzy seltzer.

“We all know how much we’ve invested. We also know how collectively we’re going to feel if it turns out that seltzer, for example, is dead tomorrow,” says Landtmeters. “First, that’s not going to happen. But second, if that would happen, we need to make sure that investment is not a writeoff but can be converted into the next big thing.”

Still, while there’s a risk in making big investments — whether it’s new equipment, cannabis beverages, or even buying up craft breweries — there’s a risk in standing still, says marketing consultant and author Alan Middleton.

The trickiest thing for any big company, says Middleton, is figuring out which new products will work, and which ones won’t. When your main products are in decline, creating new ones is even more vital.

“You’ve got to have enough experiments going on that you don’t bankrupt the place, but enough that you can search for the next one or two that can really take off,” says Middleton.

For now, though, Landtmeters is confident Molson Coors is heading in the right direction.

“I think our future is bright. With a few years behind us now in Canada, we’ve made some steps, we’ve placed some big bets. I think you can say our transformation journey is now well underway.

“I think internally and externally, we’re creating that belief in change. And I think we’re becoming really credible as a beverage company. Which is what we’re going to continue to be going forward.”

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