The Molson way

A rare glimpse inside the family brewing empire.

In the big hall that bears his name in the brewery he started 221 years ago, a famous portrait of John Molson keeps watch. Painted in 1826, some 40 years after he invested in a little log brewery, Molson wears the countenance of success. Deservedly so. The brewery had expanded several times by this point, and his empire included steamships, a luxury hotel and a theatre. Molson was also president of both the Bank of Montreal and Montreal General Hospital. Look carefully at the picture and you can see what appears to be a little smirk, a curl of the lip, perhaps the beginnings of a self-satisfied smile.

Six generations and 181 years later, Geoff Molson waltzes into the Montreal brewer’s Bicentennial Room for a mid-morning interview carrying a bucket of popcorn and a cola. There’s a touch of John the Elder in 36-year-old Geoff, but whatever cold formality is left in the museum-like room quickly disappears. Company chairman Eric Molson’s youngest son isn’t exactly gregarious, but he displays a great deal of enthusiasm about the beer business, hockey and the grand old family firm he joined eight years ago.

This is clearly not Geoff’s great-great-great-great grandfather’s Molson. For one thing, his company is now Molson Coors Brewing Co. (NYSE: TAP), after a hotly debated merger with the third-largest U.S. brewer in 2004. For another, while Eric remained chairman following the deal and works from Montreal, Coors CEO Leo Kiely runs the combined entity from Denver. Molson Coors is clearly a product of 21st-century globalization and industry consolidation, yet each of the two companies is fighting to keep its identity, which is rooted in the past.

Take Molson’s Montreal headquarters on Rue Notre-Dame. It sits on top of the original brewery, and the caves where the beer was made are still there. If you can’t sense the past, some of the original brewery’s stones, which make up part of the floor in the visitor’s entrance, should remind you. Other artifacts sit behind glass upstairs, such as a set of Molsons Bank blank cheques and banknotes in various denominations, two very old Molson’s Ale wooden beer cases and a miniature replica of the steamboat Accommodation built in 1809. And then there are the people. John the Elder is only around in spirit, but the company wouldn’t be the same without a few living Molsons inside. Geoff is a vice-president of marketing for Molson Canada; eldest brother Andrew joined the board of directors following the merger (middle brother Justin is a landscape architect with no connection to the company). One son in operations; one son in ownership. “Having the seventh generation of the Molson family working in the business day-to-day is a great connector for our employees,” says Kevin Boyce, president and CEO, Molson Canada, “when they reflect upon the heritage and values that have led to Molson sustaining this business for over 221 years.”

That heritage never looked more in doubt than in 2004 when Eric, who has served as chairman since 1988, signed on to the Molson–Coors merger, creating the fifth-largest beer maker in the world, with large market shares in Canada, the U.S. and the U.K. It took a special bonus dividend of $5.44 for each Molson share to make it happen, and the merger is still a sore point with some, including Eric’s cousin Ian Molson, who saw the “merger of equals” as an outright takeover—and not an advantageous one for shareholders at that. Growing up Molson—especially on the brewing side of the family—it seems, isn’t easy. Eric, for example, was thrust into various executive roles when the sudden passing of his distant cousin, Percival Talbot Molson, just 10 weeks after assuming the presidency, left the company without a natural heir. Clearly, though, Eric is more comfortable out of the limelight. He’d probably rather be the brewmaster than company master. Responsibility for the stewardship of Canada’s second-oldest company lies heavy, but Eric’s sons were never forced into the company. They wanted in. And, more importantly, as Geoff, Andrew and others point out, they earned their way in.

“It was frustrating at a young age, because I wanted to work at the company so badly, but my father wouldn’t let me,” says Geoff. “He wanted me to work somewhere else and prove myself.” So he did, taking a job at Coca-Cola upon graduating from St. Lawrence University in New York, then getting an MBA at Babson College in Boston, followed by three years as a consultant at Kalchas Group in Manhattan. Finally, a chance to work at Molson came eight years ago when a change of CEO gave Geoff the impetus he needed to join the family company. Even then, he was only hired as a key account manager, an entry-level sales position, with responsibility for the restaurant chains Philthy McNasty’s and The Keg. “They’re both still ours,” says Geoff with a smile. “If they weren’t, I wouldn’t have told you about them.”

Geoff’s previous experience in strategy consulting made him an ideal candidate to study Molson’s relationship with Miller Brewing Co., which eventually dissolved in favour of a joint venture with Coors, and to work with the Coors family. At the time of the merger, bringing together the Molson and Coors families seemed like a recipe for disaster. One was Canadian. One was American. One was east. One was west. And they both built their businesses in different ways. But Geoff says the thing outsiders don’t understand is that the families’ passion for brewing was “really the essential ingredient” in getting the deal done. “In the past two years, we’ve had differences, identified them and figured out a way to address them together with the interests of building the beer business at the same time,” says Geoff. “And if my brother was here right now, he’d put up his hand and add ‘the shareholders.’”

Of that, there’s no doubt. After all, Andrew’s a lawyer by training, a corporate governance expert and a public relations executive as a partner at Res Publica Consulting Group, which controls National Public Relations and Cohn & Wolfe Canada. He even has a MSc degree in corporate governance and ethics from the University of London, Birkbeck College. Unlike Geoff, though, Andrew never thought he’d be a Molson employee. “I always felt as though I would be contributing to the family business by gathering experience outside the family business,” says Andrew. “My night shift was talking to Geoff and my dad about the future and the next 200 years, and so I saw joining the board as a responsibility, and a responsibility that I’m enjoying immensely.”

Spend any time with either Molson brother and you’ll find that they don’t suffer from the rich-kid syndrome that derails many family businesses. They’re equally adept at talking shop as they are hockey, kids and kid’s hockey, and they credit father Eric for instilling humility and responsibility in them from an early age. “Never walk into any situation and expect that you deserve something,” says Geoff. “The last thing you want is for anybody on your team or on someone else’s team to do something because Geoff Molson said to do it.” Ask around and you’ll discover the restrained Molson approach isn’t an act. “He enjoyed getting his hands dirty,” says Dave Perkins, global chief commercial officer at Molson Coors Brewing, of Geoff’s five-year stint with Molson USA. “When he was in the market, he always displayed the same work ethic by getting out with the sales folks and actually working the displays in stores. You’re not going to find him sitting back in his hotel room reading e-mail.” Mark Hunter, Geoff’s current boss and chief commercial officer, Molson Canada, chips in: “Geoff is a passionate advocate for our beer brands. He is respected both internally and externally and shows great humility when dealing with people.”

One former colleague of Andrew’s recalls that he was always low-key and understanding, but while others might order a Stella Artois or a Beck’s after work, Andrew would always say, “I’ll have an Ex.” During a recent lunch meeting at National Public Relations, a staffer jokingly admonishes him for not signing the lunchtime roster sheet. “Sign everything you have away,” he jokes, pushing the sheet across the table to Andrew. That will be quite a lot, considering Eric controls more than one-third of the voting shares in the company, which has a market cap of more than US$8 billion. That’s a much bigger entity than the old Molson company, but the rules of the beer industry have changed.

That the Molson boys have even agreed to interviews signifies a new direction in the company’s strategy. For one thing, there’s an unwritten family rule that a Molson only ever has his name in the newspaper three times: once for birth, once for marriage and once for death. But during the controversial Dan O’Neill days, even Molson execs shunned the media, speaking only when absolutely necessary or forced to by law, such as during the company’s quarterly announcements. Even when the news was positive—which it wasn’t very often—CEO O’Neill would unexpectedly clam up, leaving Molson watchers wondering what was going on. O’Neill left the company May 31, 2005, four months after the merger with Coors was complete, with a golden parachute worth $5.8 million in cash. If there’s one thing that hasn’t changed at Molson, it’s a disinclination to talk about those five years under O’Neill. Bring him up today and you might get an eye roll or an arched eyebrow, but the attitude is “the less said, the better.”

If O’Neill did one thing right, it’s that he successfully extricated Molson from a joint ownership deal with Miller and Foster’s for US$133 million, and refocused the company on brewing after it jettisoned its bewildering chemical and hardware retail units, including chemical maker Diversey and retailers Beaver Lumber, Home Depot and Réno-Dépôt. The only thing left is a 19.9% stake in the Montreal Canadiens (the rest having been sold off to George Gillett, a U.S. businessman, for $275 million in 2001) and various philanthropic ventures, including the Molson Foundation. Some, however, say that O’Neill’s biggest blunder—an ill-advised $1-billion purchase of Brazil’s second-largest brewer, Kaiser, in 2002—weakened the company so much that it forced the Molson family into “selling out” to Coors. It’s true that a Molson doesn’t run the company, but then the brewery has a fairly long history of delegating the CEO’s position to an outsider. Eric never wanted the job. As Geoff takes on more senior roles, it’s tempting to believe he’s being groomed for the top spot, though he disagrees—strongly. “It’s not a priority of mine to be the CEO some day,” says Geoff. “I don’t look at my career as if I want to be this or I want to be that. I look more from the perspective of building the beer business, and the opportunities will come.” As for Andrew, he’s more than content in his current role. “I’m having too much fun now, and it would take a lot to convince me to go somewhere else,” he says. “I really like my day job and I love the way I contribute to Molson Coors. My indecision is final.”

But both also agree the company must expand beyond the Canada–U.S.–U.K. triangle if it hopes to remain a force on the global stage. Rumours persist that InBev is getting ready to move in with Anheuser-Busch Cos.—a deal that would have little impact on Canada as Labatt already brews Anheuser’s Budweiser under licence, but would send shock waves throughout the industry, nonetheless. The resulting company would be the largest brewer by sales and volume, putting pressure on the rest of the Top 10, which include SABMiller, Heineken and Carlsberg, to make deals themselves. So far the InBev–Anheuser rumour is just that. But the Molson sons are fully aware of the stakes of globalization and the need to stay relevant. “There’s no question that our biggest priority today as we enter our third year merged is to continue to strengthen the base, which is U.S., Canada and the U.K.,” says Andrew. Geoff adds: “We’re interested in growth, we’re interested in being profitable and staying in the beer business. There are opportunities out there and we’re big enough to be able to look at them with the larger players in the world.”

Molson Coors executives better be aware of the stakes, too. Otherwise, John the Elder’s portrait won’t be there to keep watching over the brewery he created 221 years ago and his great-great-great-great-great grandchildren won’t have the chance to keep the Molson tradition alive.

Sidebar: Beer Battles

Watchdog put on a leash

More than just Labatt Brewing Co. execs were pleased when Ottawa’s competition watchdog lost its bid to delay their $201-million takeover of buck-a-beer rival Lakeport Brewing Income Fund. Read between the lines of the Competition Tribunal’s decision and you’ll find a message to the laggard Competition Bureau that it needs to be more sensitive to commercial realities when reviewing mergers and acquisitions.

“This is a victory for timing and certainty of closing,” says Brian Facey, one of the lawyers at Blake, Cassels & Graydon LLP who acted for Labatt. “The review period is going to be a whole lot shorter, even in complicated transactions. No more of this five months business.”

That doesn’t mean the floodgates will open on M&A activity, says Dany Assaf, a competition specialist at law firm Ogilvy Renault LLP, and the bureau still has three years to seek remedies on any deal post-closure. Ironically, Labatt might never have pressed its case if the bureau hadn’t burned it last year when it proposed buying Sleeman Breweries Ltd. That review took so long that Japan’s Sapporo Breweries Ltd. snapped up Canada’s third-largest beer maker in the meantime.

Lawyers for Labatt argued during the proceedings that there are plenty of discount brewers and that, in any case, it has no plans to shut down Lakeport. Bottoms up!