Molson Coors is making its first significant move into the Mexican import category.
The company today announced that it had inked a 10-year agreement, via its MillerCoors U.S. division, to import, market and distribute Heineken’s Mexican-made Sol brand.
Terms of the licensing arrangement were not disclosed, but it was described in a press release as mutually beneficial for both companies.
“Given the steady growth of the Mexican import segment in the U.S. over the past few years, the addition of Sol represents a key addition to our portfolio,” Molson Coors CEO Mark Hunter said via a press release.
For its part, Heineken will be able to focus more attention on selling its two more popular Mexican import offerings — Dos Equis and Tecate. Year-to-date volume sales for Dos Equis were up 3.8 percent through May 13, according to market research firm IRI Worldwide. Sales for Tecate, however, were down 10.4 percent during the same period.
In an interview posted to its “Behind the Beer” blog, MillerCoors CEO Gavin Hattersley said that, over the years, advisors from both inside and outside the company had suggested that the lack of a Mexican import brand was holding the company back.
“Given the sustained growth we’ve seen with Mexican brands, that’s a fair point,” he said. “MillerCoors explored ways to get into that part of the business over the years, including looking at buying a Mexican craft brand, but there was no clear or scalable way to do it. You can’t, after all, create an authentic Mexican brand out of thin air.”
Over the years, however, MillerCoors has attempted to do exactly just that. In an effort to capitalize on some of the momentum within the Mexican import space, MillerCoors last year introduced Zumbida, an aguas frescas-inspired beverage made with corn syrup, barley malt, yeast, hop extract, sucrose and apple juice concentrate.
The company also tried to go after Mexican import drinking occasions with Miller Chill, which was launched in 2007. Brewed with lime and salt, Miller Chill was billed as a cross between a “great light beer from America and the chelada-style from Mexico.” That product was discounted in 2013, however.
With Sol, MillerCoors gets a true Mexican brand that can compete in a red-hot import segment that was up 11 percent year-to-date through May 14, according to IRI.
Founded in 1899, Sol, a 4.5 percent pale lager, had been a part of the Heineken USA portfolio since 2004. Sol officially entered the global Heineken portfolio following the company’s acquisition of the Cuauhtémoc Moctezuma Brewery in 2010, a press release noted.
Despite getting its hands on a more authentic Mexican import, MillerCoors could still run into execution issues at the distribution level. According to MillerCoors spokesman Marty Maloney, about 80 percent of Sol volume is already sold through the company’s network of distributors. MillerCoors is hoping to align at least a portion of the remaining 20 percent not currently covered by its wholesalers.
“We will explore opportunities to move more of the volume to our network based on local laws, distributor priorities, and related considerations,” Maloney wrote to Brewbound in an email. “We believe that we can achieve our goals around this brand, leveraging MillerCoors’ marketing expertise, execution capabilities and strong distributor relationships.”
Maloney added that MillerCoors planned to “invest significantly to grow the Sol brand.”
“We are confident that our distributors will see the potential of this brand and get behind it,” he wrote.
Asked whether sales of Mexican import brands from Constellation or Heineken USA, which are sold throughout the U.S. by many MillerCoors distributors, would be “cannibalized” by the company’s plans to ask for increased focus on Sol, Hattersley said he “expects volume to come from a number of sources.”
“Our intention is to differentiate Sol so that it drives incremental growth for our portfolio and our distributors’ portfolios,” he said. “A wide range of U.S. consumers are looking for an authentic and refreshing Mexican beer, and we think Sol is just the brand to deliver.”
Heineken will have an opportunity to reacquire the import rights & responsibilities for Sol once the 10-year term has expired, the release also stated.