The Worrisome Decline in Molson's Market Value

molson-canadian-beer-true-canadian-taste-small-21691I used to joke that my grandfather was quite possibly the only American customer of the Canadian brand of beer, Molson. While he may not be the worlds biggest lush by any judgement his fridge is always stocked with at least half a case of Molson which eclipses the sparse offering of American options like Budweiser or Yuengling. Even he enjoyed the irony that as a die-hard patriot that advocated buying only American goods that he wouldn’t give up his beer from our friendly neighbors from the north.

In 2005 when Coors bought Molson to form Molson Coors Coors estimated that Molson was worth $4 billion. A sizable investment for the company that at the time was attempting to fight Miller to be America’s number two beer.

Yet it seems that the Molson brand, to my grandfathers horror, might be in trouble. Coors now values the Molson brand at $2.9 billion, a significant loss since their acquisition less than a decade ago. Coors is reporting that the Molson brand’s fair market value is only 10% higher than its carrying value which has dropped from 14% just last year. This fall in market value means that the Molson brand is nearing a market value that could hurt profits and threaten the longevity of the Molson brand all together.

Yet the good news is that so long as Molson fans continue consuming healthy quantities of the Canadian beer then the brand’s value shouldn’t be an anchor around the neck of the second largest brewery in the world. While the accounting and investment numbers don’t paint a pretty picture Molson has reported good numbers for its Canadian operations suggesting that not all hope is lost.

The concern that we’ve noted time and time again is that with a decrease in sales across the board in the mass market breweries like MillerCoors will they attempt to float faltering brands with a decrease in quality or simply unceremoniously end the life of brands that have stood the test of time. There is really no way in knowing.

I do know that if Molson were to downsize they will still have a loyal customer for life; my grandfather.

Source: The Wall Street Journal