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Report On Business Brewery scion Geoff Molson looks to hone his craft with company’s big bet on microbrewing

Geoff Molson, vice-chairman of Molson Coors Brewing Co. talks in the company’s brewpub, Batch, in Toronto on Aug. 24. The pub, which opened last year, is part of the brewing giant’s push to sell more of its craft beers, such as Creemore Springs and new microbrews that are produced on site.

Glenn Lowson/The Globe and Mail

Geoff Molson settles in at a table in the high-ceilinged, craft-beer restaurant that holds a key to the future of his eponymous global beer company.

It's no coincidence that the vice-chairman of giant Molson Coors Brewing Co. wants to meet at this brewpub. Called Batch, it feels like an indie restaurant but was launched by Molson in downtown Toronto last year to trumpet the brewer's own Creemore Springs craft beers and new microbrews being produced on site.

Sporting a pale pink shirt, open at the collar, under a charcoal suit, Mr. Molson runs through the roles he's played in his family's company over the years. "I've done it all," he says. "I've managed shelf space in a store; I worked in bars; I've called on customers; I've done marketing; and I've managed a whole distributing network in the U.S."

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Now, he's overseeing a company that's quietly mapping out a blueprint to roll out more of these types of craft-brewery-eateries in cities around the world.

In a flat or declining North American beer market, Molson is betting more than ever on craft beers – one of the industry's fastest-growing categories – to help lift the brewer's lacklustre sales in Canada and other major markets.

"This is high-growth in a no-growth environment," Mr. Molson says, pointing to the refrigerated display case of bottled craft brews at the restaurant's entrance and then to the glass of Creemore Lot 9 Pilsner on the table in front of him. "It's very important."

Molson has been struggling to make gains in a beer industry that it dominates with a handful of other global powerhouses. As young consumers shift to micro brands, Molson has been forced to shore up its craft-beer business.

The company, based in Denver and Montreal, acquired craft-beer maker Creemore in 2005, which was the same year Molson and U.S.-based Coors teamed up in what Mr. Molson repeatedly calls a "merger of equals." Since then, the company also scooped up B.C.-based craft-beer specialist Granville Island, partnered with Brasseur de Montréal and has been looking to bring in other microbrewers.

"It's definitely a priority for us to play a leadership role in that category," says Mr. Molson, a seventh-generation member of the prominent Molson family of Montreal. As for more craft-beer acquisitions: "We're always looking. We've got our ears and eyes open for the next opportunity."

Molson Coors is in transition. Last year, it swallowed full ownership of its U.S. beer business and gained worldwide control of the Miller brand in a $12-billion (U.S.) deal that transformed Molson into the third largest global brewer.

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As a result, the Canadian share of Molson's overall annual revenue of $11-billion dipped to about 13 per cent today from 22 per cent before the 2016 MillerCoors deal, while the U.S. share picked up by 22 percentage points to 70 per cent. (Europe makes up roughly 16 per cent and other markets, one per cent.)

To reflect the changes, Molson took a $495.2-million hit last year tied to the lower value of its core Molson brands in Canada and the smaller share they represent in the brewer's bigger picture.

Molson is still racing to catch up to market-leader Anheuser-Busch InBev SA, which owns Labatt in Canada. In its second quarter ended June 30, Molson's operating profit in Canada fell 22.4 per cent to $68.7-million, while sales slipped 4.3 per cent to $407.6-million.

But even as performance here weakens, Molson is looking to Canada to cash in. The company is expecting double-digit growth in the craft-beer segment at a time when once-frothy gains in that category are beginning to weaken in the more crowded U.S. microbrew market.

"Molson Coors has increased its offering of faster-growing craft and flavoured beers, which often carry a higher price point, but it has not been enough to entirely offset volume declines," adds Brittany Weissman, an analyst at Edward Jones in St. Louis, Mo.

In Canada, Molson's overall sales volumes have dropped over the past six years and, in the United States, over the past eight years, she notes. The company has been raising prices to help buoy sales and is expected to continue increasing prices by 2 to 3 per cent a year, she says.

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"Today there are fewer 'beer-only' drinkers as spirits and wines have increased in popularity," she says in a recent report. "Consumers are also seeking increased variety within beers. Craft (local) and import beers are increasingly popular along with flavoured beer, shandies and ciders."

Another report from market researcher Euromonitor says Canadian craft beer is still in the early stages of its life cycle and has plenty of room to grow.

Eric Shepard, executive editor of U.S. industry tracker Beer Marketer's Insights, says so-called "tap rooms" that marry selling craft beer and an eatery or bar (such as Batch), are an emerging trend. "It is probably the healthiest part of the industry right now," he says. "It's great marketing – you're marketing directly to consumers. It allows them [the companies] to talk to consumers and learn what they're looking for."

He says craft brews make up about 15 per cent of U.S. beer sales, while industry observers estimate that share is closer to 10 per cent in Canada.

Still, Mr. Molson acknowledges the dramatic shifts and challenges in the beer industry that are roiling the company.

His own favourite beer, Molson Export, is among those that have been in decline for years along with Molson Dry – another one he covets – and even the mainstream Molson Canadian. As a result, the company is focusing more on categories that are on the rise, including craft beers, while pumping up marketing of the big brands of Coors Light and Canadian. Molson is also targeting $550-million of overall savings from the Miller takeover in the next three years and "the company has a strong track record of cutting costs," analyst Ms Weissman says.

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"It's very tough," Mr. Molson says. "Everything counts and makes a difference. That's why we're innovating, that's why we're looking at craft brewers, that's why we're partnering and pushing our large brands as well. The story is not different from one large brewer to another."

To help bolster its craft beers, Mr. Molson says, the company is considering other acquisitions and partnerships, as well as the possibility of developing new brews at Batch.

He cites Belgian Moon as an example of one of Molson's craft beers that's doing well. The wheat beer, which was introduced in Canada in 2015, is the same as the popular Blue Moon south of the border, but it couldn't use the Blue moniker here because it was already owned by Labatt. Belgian Moon "looks heavy, it sounds heavy, but it's quite refreshing," he says.

But a big company such as Molson getting into the craft game raises questions about what constitutes a craft beer. Creemore, for example, was only available in Ontario before Molson acquired it. Now, it's sold across Canada. Some consumers don't consider it a craft beer any more, while others aren't aware of its big-brewer ownership.

While some brewers argue that only small batches can be considered craft, Molson believes that giving those beers a wider reach doesn't disqualify them from the category. "In our eyes, all brewing is a craft and making great beers is a skill that very few have," says Martin Coyle, chief marketing officer at Molson Canada. But if consumers don't see it that way, Molson may face the challenge of having to introduce new beers periodically to keep pulling customers in.

Meanwhile, the 2005 "marriage of equals" that Mr. Molson keeps referring to between Molson and Coors does not seem to play out on an operating level. The big decisions at Molson come out of Colorado, where chief executive officer Mark Hunter is based. The CEO in Canada isn't even in Montreal – Frederic Landtmeters works in the company's larger Toronto offices. Mr. Molson deflects several of my detailed questions to the CEO, saying he doesn't interfere with the day-to-day operations.

The Molson chairmanship alternates every two years between a member of the Molson family and one from the Coors family. Geoff Molson ended his two year term as chairman in May and was replaced by Pete Coors. But Mr. Molson, who is now vice-chairman and whose brother, Andrew, also is on the board, acknowledges that being chairman didn't make a big difference in how much time he spent on Molson matters.

"As a chairman, you do a little more, you're asked to go to things a little more often," he says.

But he underlines Molson's deep ties to Montreal. It plans to build a new brewery in the Montreal area for shipments of an array of brands potentially across Canada and to the United States (it is also building one in Chilliwack, B.C.) and is developing a plan to maintain a heritage presence at the 231-year-old site of its original location near Old Montreal.

Mr. Molson is comfortable in the beer world, having grown up with it at home – his father, Eric, was a veteran of Molson. Geoff Molson, now 47, worked a summer at the brewery before getting a bachelor of arts degree at St. Lawrence University in Canton, N.Y. and an MBA at Babson College in Boston. He got a job in media at Coca-Cola Co. in Atlanta and as a consultant in New York before joining the family-controlled Molson in 1999, first in the United States and then in Canada, rising to vice-president of marketing. Along with sitting on Molson's board today, he's owner and CEO of the Montreal Canadiens hockey team, which is his day job.

He still plays hockey once a week with friends and in a few tournaments every year. He often drives his four children, age 10 to 16, to hockey practices and games, including his one daughter, and to school in the morning before getting into work.

And it's his hockey role that gives him a high profile in his native city. His father, Eric, also headed the Montreal Canadiens, but he wasn't nearly as much in the public eye as Geoff is now.

"Back then, you couldn't google search Eric Molson and 150 pictures of the person shows up, stories about him," he says. "He was able to stay under the radar. For me, it's a lot harder. I didn't know a lot of what my father did. I was curious, I always wanted to work in the beer business. But my kids know way more than I knew. Either one of their friends sends them something or it will pop up on Twitter, whatever.

"The way my father brought me up – to be humble and respect people – you have to continue that. But at the same time it's so much high profile. … Bringing them [his children] up in a world with technology is totally different."

And the beer industry is totally different today, which brings him back to craft beers and Batch.

He still marvels at how Blue Moon became so popular. The beer, which was created in a small brewery in Denver, was on the verge of being discontinued. "And all of a sudden, something happened," he says, "People started talking about it. … It never stopped growing."

Now, Molson is counting on that kind of momentum for its craft beer in Canada.

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