by Pan Demetrakakes, Executive Editor
MillerCoors’ business is swelling up like a good head of foam.
The joint venture between Molson Coors and SABMiller, which will reach its first anniversary on July 1, showed sparkling results for the first quarter of 2009. Profits were up 51% compared with last year’s first quarter on a pro-forma basis (that is, calculated as though the venture had already been in place). Coors Light is one of the main engines driving this surge, with a 6% volume increase since 2006.
MillerCoors is one of a dizzying series of marriages among beer empires over the last few years. South Africa-based SAB, with a large international portfolio, merged with Milwaukee-based Miller in 2002. Canadian giant Molson merged with Colorado-based Coors in 2004, with the MillerCoors venture forming in July 2008. Shortly afterward, Belgian/Brazilian giant InBev acquired leading U.S. brewer Anheuser-Busch.
Mergers and acquisitions are nothing new in any industry, but MillerCoors is unique. The MillerCoors joint venture covers only the United States; SABMiller and Molson Coors compete everywhere else in the world. That can lead to some delicate situations when it comes to sharing ideas.
“We get advice from our legal counsel on how to set up firewalls. We’re very careful that we’re not sharing things that compromise the business relationship we have with SABMiller and Molson Coors,” says David Klante, vice president for engineering and packaging. They can share best practices on straightforward issues like filling and product protection with no problem, “but when it comes to a commercial innovation that would go beyond what we would consider good technical practices, that’s watched.”
Synergy energyBut within these confines, the MillerCoors set-up lays the foundation for some significant synergies, in both ideas and their execution. This is rooted in simple geography.
Of the eight major MillerCoors breweries, seven produce both Miller and Coors products, including all the breweries that had been owned by Miller. Before the joint venture, about 60% of Miller distributors also carried Coors products. (By federal law, alcohol producers can sell and deliver only to distributors, never directly to retailers.) Having production for both Miller and Coors products spread across the country means “we’ve cut hundreds of miles per load out of our national [transportation] footprint,” Klante says.
Broadly speaking, say MillerCoors execs, the joint venture combines Miller’s efficiency with Coors’ innovation. Coors Light owes its sales surge in large part to its marketing theme of “cold refreshment,” in which packaging plays a big role. Innovations include a Frost Brew liner coating on the inside of Coors Light and Coors Banquet cans and thermochromatic ink on Coors Light and Coors Banquet bottles that turns blue when the product temperature is just right. (Thermochromatic ink on cans was rolled out this summer.)
Of course, consolidating production and packaging is a difficult process. Simply put, the two companies had to learn, as Klante put it, “to make each other’s beers.”
Perhaps the farthest-reaching impact stems from the fact that, except for Blue Moon beer, no Coors products are pasteurized. (This is part of the basis for the “cold refreshment” theme.) Producing an unpasteurized beer with the same shelf life as pasteurized (about 17 weeks) requires filling it in an extra-clean environment, with filtered air and limited operator access, to minimize microorganisms. Miller was already familiar with this process, since Miller Genuine Draft, among other products, is unpasteurized. But Coors has done the process one better. In the flagship Miller brewery in Milwaukee, unpasteurized Miller products are filled and sealed in a closed-off room. But Coors has developed a kind of shroud that protects its unpasteurized products while taking up a much smaller footprint than the Miller cleanroom and allowing easier operator access. MillerCoors plans to put similar “clean shrouds” in the Milwaukee brewery to expand production of Coors products.
Accommodating differencesThere are other, more prosaic challenges in consolidating packaging operations. “We’re maintaining Coors heritage packaging on the primary container for cans,” Klante says. For its 12-ounce size, Coors uses a 209 can (diameter of 29/16 inches), while Miller uses the industry-standard 211 (211/16 inches). “That requires a unique and different set-up, and we had to acquire additional packaging capabilities to provide that different can diameter.” (All MillerCoors cans are supplied by Ball Corp.)
Wide-ranging harmonization also is underway for bottles. One significant difference is that Coors 18- and 20-pack bottles are drop-packed into cases, while Miller 18- and 20-pack bottles are end-loaded. The geometry in the cases is also different. “In the trade, at the point of consumption, the packaging would stack differently, let’s say on an end-cap or in a cooler,” Klante says. “So we are harmonizing that this year, and moving toward more Miller-style packaging for bottles.”
Besides harmonizing the Miller and Coors sides of the venture, MillerCoors is pressing ahead with packaging innovations. In addition to the color-changing ink and lining for Coors cans, recent innovations include:
• A “vented” can end for Coors Light that features a raised channel alongside the aperture, which provides a smoother pour.
• A resealable 16-ounce aluminum bottle for Miller Lite, introduced in April 2009
• Miller Lite cans printed with laser-etched cylinders for additional clarity and “pop.”
• “Peel and reveal” labels for the back of Miller Lite bottles, which can carry prizes ranging from T-shirts to sporting event tickets. “There are not many times a consumer gets the opportunity to interact with the bottle,” says David Gnadt, packaging development engineer for innovation, who masterminded the project.
Like every consumer goods company, MillerCoors has felt pressure to reduce and otherwise “green” its packaging, from both society as a whole and specific trade customers like Wal-Mart. The company has instituted several material-savings initiatives, including a reduction of all its 12-ounce cans to smaller diameter 202 ends; using thinner films for pallet stretch wrap; and a consolidated carrier basket, with less kraft board, for its premium Leinenkugel’s brand. Reduction initiatives being studied include replacing corrugated trays with flat pads, which Mark Dressel, manager of packaging materials, estimates would save more than 2 million pounds of fiber a year, and changing over to modified 202 can ends with even less material.
“Volume is a beautiful thing,” Dressel says. “It’s not very much metal out of each individual end, but, times billions, it adds up.”
At the brewerySome of those billions are brewed and bottled at the brewery complex adjacent to SABMiller’s U.S. headquarters in Milwaukee. (MillerCoors is about to open a corporate headquarters in Chicago.) The 90-acre complex, comprising three brew houses, is one of eight MillerCoors production facilities.
Brew house No. 3 bottles 8.5 million barrels of beer annually. It has one packaging line for cans and two for bottles. This is a result of consolidation; at one time, there were 11 packaging lines with top speeds of about 400 per minute each.
Bottle filling takes place on two 96-valve volumetric fillers from KHS USA that can run up to 1,400 containers per minute each. Filling is done at 32° to 34° F. to keep foaming to a minimum. Just before the bottles are capped, a minuscule jet of water is squirted into the bottle, causing a brief surge of foam that pushes air out, extending shelf life. (MillerCoors’ exclusive bottle supplier is O-I.)
Bottles of Miller High Life, Miller Lite and certain other products then go through a pasteurizer from the H&K div. of KHS. The pasteurizer is essentially a tunnel-style water bath that, in the course of a 50-minute cycle, heats the beer to about 140° F. and cools it back down to room temperature. A system of heat exchangers and water recovery keeps energy and water use to a minimum. Labelers from Krones apply metallized paper labels with cold glue, and an ink jet printer from Videojet Technologies provides date and lot codes. A quality-control system from Industrial Dynamics/filtec checks for missing crowns.
Some Miller products like Miller Genuine Draft, along with all Coors products, are unpasteurized. These go into a sort of cleanroom with HEPA-filtered air. The filler in this room uses an automatic chlorinated spray to sanitize outer surfaces continuously. Operators have to wear special outfits, dip their shoes in isopropyl alcohol and spray with alcohol any surface they touch. As noted above, MillerCoors plans to introduce a more compact shroud, devised by Coors, for future unpasteurized-beer lines.
Re-ship or bulk?Brew house No. 3 features a lot of flexibility when it comes to secondary packaging of bottles. Like many U.S. breweries, MillerCoors uses a “re-shipper” system for the six-packs that make up the bulk of its bottle configurations. The bottles arrive from O-I inside four six-pack paperboard carriers fitted inside corrugated cases. The empty bottles are plucked from the carriers, and the filled ones are returned. However, for 12- and 18-pack paperboard cases, bottles arrive in “bulk” form-that is, palletized on slip sheets. Systems from Krones and from the Riverwood International div. of Graphic Packaging Int’l erect the paperboard cases from blanks.
Combining these two methods requires careful planning. As Klante puts it, “With flexibility comes the obligation of managing the flexibility.” Specifically, the plant must avoid the gridlock that might result from mismatching the number of drop-in cases with erectable cases. This is accomplished in part by an intelligent material handling system that can route bottles from one kind of case packer to the other as needed.
Cans represent the majority (56% to 60%) of the packaging mix at MillerCoors, a proportion that roughly mirrors the U.S. beer market as a whole. Klante notes that, while bottles have greater visual and tactile appeal, cans are more convenient, lighter and easier to cool. They also run faster, topping out at about 2,200 containers per minute, and are easier to handle and store. The Milwaukee site fills between 2.4 and 2.8 million cans a day.
Cans, like bottles, require a step to push air out of the headspace before sealing. This is done with a “bubble breaker,” which deposits carbon dioxide into each can just before it is sealed by a seamer from Angelus Sanitary Can Machine Co. Filled cans then go through an X-ray inspector to check for proper fill levels. (This system can match individual cans to specific valves on the 165-valve filler, allowing personnel to trace a malfunctioning valve quickly.) Quality control workers take two sets of samples of filled cans from every shift, empty the beer and examine the seam integrity, using instruments to measure length, width and thickness.
MillerCoors uses systematic feedback to get workers to buy into the plant’s mission. Several rooms throughout the facility are designated for that purpose. Operators gather in these rooms about 15 minutes before the beginning of their shifts to discuss production issues. On the walls are charts with records of various production parameters, grouped into subjects including “safety,” “speed,” “quality” and “cost.”
For more information
Angelus Sanitary Can Machine Co.
Riverwood Int’l div. of Graphic Packaging Int’l
Videojet Technologies Inc.