BRAND IN TROUBLE: Molson melts the Ice

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Sometimes you have to know when to fold. That's essentially what Molson USA is doing with Molson Ice, a casualty of higher-spending consumers and a category that's going the way of low-brow malt liquors.

As the Ice age dawned in 1993, the Canadian exporter was first out of the box with Molson Ice. One year later, the brand sold 16 million cases, making it the company's largest U.S. product, leaving big-name brewers like Anheuser-Busch Cos. scrambling to follow suit. But sales had tumbled to 6.1 million cases by last year, according to industry publication Impact. Now, Molson is radically changing tack.

Molson USA has a new president, David Perkins, former president of Molson Ontario/West, succeeding Blair Shier, who departed in August. The brewer-reduced to less than a 1% share of the total U.S. beer market and a 4% share of imports-is seeking a new ad agency. MDC Communications-backed Crispin, Porter & Bogusky, Miami, is competing with Bcom3 Group's D'Arcy Masius Benton & Bowles. A third agency-Interpublic Group of Cos.' Carmichael Lynch, Minneapolis-is also said to be circling the $8 million Molson USA business. Incumbent D'Arcy's Toronto office-Bensimon Byrne D'Arcy-created the popular "Rant" ad, featuring a Canadian man railing about his misguided Southern neighbors. A decision is expected in November.

Moreover, Molson, after inking a distribution and marketing joint venture with Coors Brewing Co. in January, is shifting the focus to its two smallest brews, Molson Canadian and Canadian Light. In July, the company broke its first-ever U.S. ad campaign for Molson Canadian, an effort from D'Arcy showing friends on a road trip to Canada's wide-open spaces. A humorous D'Arcy ad breaks toward the end of this month. Under Mr. Perkins, Molson will continue the strategy of boosting ad spending from among the U.S.'s top six imported beer advertisers to the top three, with most of its spending coming in the back half of the year.

Molson Canadian received $592,600 in measured media in the first half of 2001, with nothing put toward Molson Golden or Ice, according to Taylor Nelson Sofres' CMR. Last year, Molson Canadian received $3.4 million and Golden $1.7 million in spending, according to CMR. With Molson's lead markets in the Northeast and upper Midwest, ad buys are local. Executives said outdoor ads would be the primary support for Ice and Golden.

Turning the tide will be tough. Of last year's top 20 imported beers, only three saw sales drop: Molson Ice (down 22% to 450,000 barrels in its seventh year of declines), Molson Golden (down 12%, continuing a four-plus year drop to 300,000 barrels) and Molson Canadian (down 13%, for the first time, to 175,000 barrels), according to Beer Marketer's Insights. Molson Canadian, however, is seeing growth in seven of its top 10 states, the company said. Molson attributed the decline for all three brands to its marketing partner at the time, Miller Brewing Co., which is struggling to right its own top brews: Lite and Miller Genuine Draft.

Selling people on Molson Canadian is a daunting task, considering the fact that consumers associate the company most closely with Molson Ice. "The image is that Molson was Ice-heavier. It wasn't perceived as a drinkable beer," said one insider. Molson Ice is 5.6% alcohol by volume, compared with 5% for Canadian and most other beers. The category, therefore, is similar to malt liquor, mainly composed of high alcohol single-serve sales in the inner city. Mr. Perkins , however, said he had not abandoned Ice, which he called an important brand.

Molson tried to turn things around starting in 1996, when it began divesting itself of non-core holdings such as a chemical cleaning business and the Montreal Canadiens hockey team. By December 2000, it had used some of the proceeds to buy back shares from Miller and Foster's Brewing Co., then sold Coors half of the U.S. joint venture. The deal gave Molson access to a vast sales network, while Coors got an import to distribute and access to Canadian breweries to help it meet demand. Under the deal, Molson will handle branding and field marketing, which Miller had administered.

"Getting consumers to think of a Canadian import as a premium import is our biggest challenge," said Brian Jamieson, VP-group account director at Bensimon Byrne D'Arcy. "People in Buffalo [a top market] are seeing TV from across the border [where Canadian is Molson's top brew] ... and they're seeing it advertised as a mainstream brand."

Mr. Perkins said despite economic concerns, imports had boomed over the past few years and don't appear to be slowing.

One large Molson distributor said he's optimistic about the joint venture, the plans for the brand. "They just needed to have a flagship. Depending on your geography, it could've been Golden or Ice, or it could've been Canadian. You need to have a clear-cut flagship so all advertising-be it print or TV or whatever-has the same feel," he said.

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