US – US multinational drink and brewing company Molson Coors has completed the sale of its Irwindale brewery property in California to Irwindale Brew Yard, a subsidiary of Pabst Brewing Company for US$150 million.
The brewing company is also in the process of review its portfolio with the aim of dropping some SKUs it produces in response to a can shortage that spiked by increased demand for canned take away drinks.
Commenting on the sale of the brewery, Molson Coors chief financial officer, Tracey Joubert said: “The sale of the Irwindale facility allows us to streamline our operations for greater efficiency across our network and further strengthen our liquidity.”
The Irwindale facility was used to produce brands such as Miller Lite, Coors Light – soon to be renamed Coors – and several brands for Pabst.
Molson Coors says it has now transitioned the production to its breweries in Golden, Colorado – which is currently going through a multi-hundred-million-dollar overhaul – and Fort Worth, Texas.
Aluminium can shortage
The explosion in hard seltzers, sparkling waters and a growing push by beverage makers to turn to aluminium because of the recyclability of cans compared to plastic has squeezed the supply of the popular packaging material.
Consumers also are drinking more at home with bars, restaurants and other establishments closed or experiencing less business because of the coronavirus, increasing demand for cans.
Ball, the world’s largest manufacturer of cans, told investors early last month that the U.S. market is short 10 billion cans in 2020, according to the Washington Post.
The can shortage has provided a catalyst for beverage companies including Coca-Cola, Pepsico, and now Molson Coors to streamlining their offerings to better position themselves to come out stronger from the pandemic.
Coca-Cola plans to cut its 500 brands by more than half. So far, it has cut or announced plans to end production of Tab, Odwalla and Zico.
At PepsiCo’s Frito-Lay division, Chief Customer Officer Mike Del Pozzo said in July it could end up trimming 3% to 5% of its pre-pandemic offerings in stores.
“From a complexity point of view, from a brewery point of view, I would expect that we will have less SKUs coming up when we come out of this pandemic than we did coming into the pandemic.”Molson Coors CEO – Gavin Hattersley.
Associated benefits of trimming product offerings
A smaller product line allows beverage companies to focus on those items that are in highest demand or are the most profitable and have the highest margins.
With the pandemic straining revenues and companies struggling to cut on costs, this reality couldn’t be more relevant than it is now.
With fewer products being made, manufacturers can spend less time changing production lines while shipping and stocking what they do make more easily. Their marketing dollars also can be directed toward fewer brands.
At the same time, cutting brands, especially those that are redundant allows manufacturers and retailers to fill the space with new offerings that could attract shoppers and grow the category much like hard seltzer did in alcohol.
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