Industry trying to get a handle on MillerCoors
By
Staff writer
Published October 15, 2007 : Page 01
Beer has historically been the lifeblood of sports, from the sale of suds at venues to the beer companies soaking up sports media.
So last week’s news that Miller and Molson Coors were merging their U.S. operations inevitably led to questions about what it meant for the sports properties and sports media, which have found marketing support in the beer category as reliable as the start of a new season.
Will Anheuser-Busch have to go on defense
against an energized competitor?
“We’re all trying to figure out if the pitcher is half-full or half-empty,” said Sergio Del Prado, vice president of sales and marketing for the Los Angeles Dodgers, a team whose five-year deal with Anheuser-Busch is up for renewal. “Normally, you’d think reducing the top three competitors to two means less money in the market, but it looks like Coors and Miller are combining forces to take on Bud, which should mean a bigger spend by every big brewer.”
Miller and Coors, the No. 2 and No. 3 brewers in the U.S., respectively, announced plans last week to merge their U.S. businesses into the new MillerCoors, which would cut as much as $500 million in corporate costs. The two would combine for a 30 percent domestic market share and more than $425 million in annual media spending, as measured by TNS Media Intelligence.
Anheuser-Busch has a domestic share of around 50 percent and an annual media budget of better than $510 million.
So does the corporate marriage mean more spending in an attempt to dethrone A-B, or less as the new challenger looks to find the $500 million in synergistic savings?
Ad spending (in 000s)
Miller
Property/
Partnership
Coors
14 teams
NFL
League and 10 teams
6 teams
NBA
7 teams
6 teams
MLB
2 teams
5 teams
NHL
None
None
MLS
FC Dallas
RWI Racing; Penske Racing, including primary sponsorship of NASCAR Nextel Cup No. 2 Dodge driven by Kurt Busch
Motorsports
NASCAR; NASCAR Nextel Cup No. 40 Dodge driven by David Stremme
4
Speedways
None
Insight Bowl, Gaylord Hotels, Music City Bowl, athletic programs at Oregon State, San Diego State, University of Cincinnati
College
AutoZone Liberty Bowl, Bell Helicopter Armed Forces Bowl; athletic programs at University of Colorado and University of Denver
None
PGA Tour
FBR Open; Phoenix Open
Miller Park (Milwaukee); 11 title-sponsored facility sections, such as the Miller Lite Atlanta Lounge (Georgia Dome)
Naming rights
Coors Field (Denver), Coors Events Center (University of Colorado), Coors Light Deck (FirstEnergy Stadium, Reading,Pa.)
14 teams
Minor league baseball
15 teams
Ultimate Fighting Championship, Houston Rodeo, World Series of Poker
Other
Professional Rodeo Cowboys Association; ING New York City Marathon
None
Media
NBC’s ”Sunday Night Football”
Bartle Bogle Hegarty; The Bravo Group; Wieden & Kennedy; Y&R
Ad agency/agencies
DraftFCB Worldwide
GMR Marketing
Sports marketing agency
Genesco
$77.5 million
2006 sports ad spending
$87.6 million
Sources:
SportsBusiness Journal archives, Nielsen Media Research, Miller, Coors
“I see this initially spurring more competition nationally, but ultimately pouring a lot more dollars into local sports marketing, where a lot of the beer battles are fought,” said Keith Wachtel, senior vice president of corporate sales and marketing at the NHL, where A-B has been a league corporate sponsor since 1994. “Coors has done a lot of big national deals that they will look to tie in more locally, and Bud will look to defend its historically strong turf — teams and venues. And while this is being touted as a domestic merger, you wonder if this will mean the new company will bid on any global [sports] properties, which have pretty much been A-B’s domain.”
Added OMD/Optimum Sports director of sports media Tom McGovern, “Miller and Coors are doing this to create clout, so they’ll certainly be spending behind it.”
Still, there were divergent opinions.
“Normally, when you remove a player in a category, you end up with fewer dollars being spent on sponsorships; that’s what we saw with Nextel and Sprint,” said Bob Reif, the former IMG and IRL marketer, whose Audible Sports and Marketing handles sponsorship sales for the St. Louis Rams, including the team’s A-B sponsorship, one of the largest beer deals in the league.
So sports fans might want to brace themselves for the “official light ice import beer” of your favorite team. “When you end with the same revenue demands from a category and fewer players, properties inevitably carve it up into smaller pieces,” Reif continued. “We’ve certainly seen that happen in financial services as that sector consolidated.”
The question of which beers will be marketed with which sponsorships is a heady one. Coors has an NFL league deal and recently added the NASCAR series sponsorship. Both Coors and Miller have a ton of team deals (see chart, this page). Sponsorship contracts typically have an “assignment” clause covering changes in ownership — meaning properties will able to squeeze MillerCoors for more dollars if it wanted to use its already pricey NFL rights for Coors Light in some areas and Miller Lite elsewhere.
“The real question is whether they will keep the brands separate while taking advantage of the efficiencies of having one sponsorship,” said Steve Lauletta, a former Miller sports marketer, now president of Chip Ganassi Racing. “How do you make a NASCAR sponsorship work for Miller in Green Bay? What drives beer sales are local and regional preferences, that’s what makes national marketing directives difficult and adds another level of complexity here. Whatever happens in terms of a combined MillerCoors, this is something that will get A-B back to spending and you’ll notice they didn’t feel they had to keep some of their biggest national properties like NASCAR and the NFL the last time they were up.”
MillerCoors will certainly gain advantages in distribution and bulk media buying, and be able to adopt Proctor & Gamble’s formula of surrounding the competition with more brands on retail shelves. As far as sponsorship sales, let the auctions begin.
“I see more competition for top properties, which will produce bigger numbers there, but this will probably hurt middle and lower-tier sports and teams,” said Gary Stevenson, whose OnSport consultancy was purchased by Wasserman Media Group in June. “Where I really see things heating up is in media — the new [MillerCoors] company will get budgets and be able to go after media buys they could never justify before.”
However, A-B’s Super Bowl media stranglehold is safe — the 18-year-old deal that grants America’s largest brewer alcoholic beverage exclusivity runs through 2012.
Coors’ Leo Kiely will be the CEO of the new venture, and he has been CEO of Molson Coors. Other key executives making the decisions on sports spending will be Tom Long, Jackie Woodward and Dockery Clark at Miller.
Meanwhile, most of the industry was dismissive about the meaning of the reporting structure change at A-B that sees top marketers, including vice president of global media and sports marketing Tony Ponturo, reporting to new marketing chief Dave Peacock, 38.
Ponturo, perennially named as one of the most powerful people in sports by this publication, continues to direct A-B’s media and sports marketing, although he now reports to a man who was once an intern in his department, instead of reporting to CEO August Busch IV.
“An interesting management challenge,” observed Stevenson, “but he [Ponturo] is still the best and brightest, so I don’t see any industry impact. With his two biggest competitors merging, there are more important concerns right now, so it doesn’t matter who he reports to.”