http://www.businessweek.com/articles/2012-11-14/molson-coors-gets-a-black-eye-betting-on-hockey

Brewing

Body Check: Molson Coors's Sour Bet on Hockey


Body Check: Molson Coors's Sour Bet on Hockey

Photograph by David Madison/Getty Images

Canada is a country in mourning. A player lockout has blacked out the first two months of the National Hockey League season. Sadly for brewers, fans aren’t drowning their sorrows in beer. Molson Coors Brewing (TAP), the NHL’s official beer sponsor, says its sales in Canada are off by as much as 9 percent in the first four weeks of the current quarter compared with the same period a year earlier. Business is down 20 percent at Montreal’s La Station des Sports, where the bar, less than a mile from the Montreal Canadiens’ home ice at Bell Centre, is typically packed on hockey nights. “This hole can’t be filled,” says bar manager Terry Vasil. “Hockey is like religion here.”

Molson Coors Chief Executive Officer Peter Swinburn may seek financial compensation from the NHL for the games lost, he told the Canadian Press earlier this month. The lockout began on Sept. 16 after a collective bargaining agreement expired. A total of 327 regular season games through November are canceled, including the popular outdoor Winter Classic. NHL sponsors including McDonald’s (MCD), Hershey (HSY), Reebok (ADDYY), and Bridgestone (BRDCY) also find themselves in the penalty box.

As important as hockey is to Canadians, it’s equally important to Molson’s bottom line. Canada, where Molson Coors is No. 2 after Anheuser-Busch InBev (BUD), contributed 31 percent of the brewer’s $6.69 billion in sales last year. “Hockey generates a lot of beer occasions in Canada, whether it’s in bars, in home, or in the venues,” Dave Perkins, CEO of Molson Coors Canada, told Wall Street analysts earlier this month. “And it’s a really important part of how we activate behind our power brands, Coors Light and [Molson] Canadian.”

The lockout could strain the relationship between the NHL and Molson Coors, which began after the league jilted its longtime partner, Labatt Brewing. Molson, along with its U.S. joint venture partner SABMiller (SAB:LN), is in the second year of a seven-year, $375 million sponsorship deal with the NHL. Neither Molson nor the NHL would comment on the terms.

For brewers, these types of tie-ups are about more than stadium sales. Tony Ponturo, the former sports marketing chief for Anheuser-Busch, estimates that all sports stadiums in the U.S., for example, account for less than 10 percent of beer sales. The real action is in stores, which brewers festoon with shelf signs and product displays that celebrate a brand’s alliance with a league.

Deals such as Molson Coors’s are generally paid in installments during the season, at a kind of per-game rate, says Ponturo, now a partner at Kirmser Ponturo Group, an entertainment and management consulting firm. He speculates that Molson could choose to hold back the season’s first payment. “No game, no money,” he says. As for lost sales in stores, extracting payback will be almost impossible, says Michael Cramer, director of the sports and media program at the University of Texas at Austin.

Molson Coors’s exposure to hockey isn’t limited to its NHL sponsorship. The brewer and MillerCoors sponsor 17 NHL teams individually, and the Molson family owns a controlling stake in the Canadiens, widely considered the Yankees of pro hockey with 23 Stanley Cup championships to their name. The club’s owners, led by Geoff Molson, joined other teams in voting for the lockout. That’s what you might call an own goal.

The bottom line: A player lockout has taken the fizz out of Molson’s $375 million sponsorship deal with the National Hockey League.

Stanford is a reporter for Bloomberg News in Atlanta.

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