Miller Lite brewer Molson Coors (TAP) says it will expand its U.S. soft drinks business through a strategic partnership with UK-based Fever-Tree, a maker of premium sodas, tonics and other spirit mixers.
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Starting February 1st, Molson Coors will assume exclusive commercialization rights to Fever-Tree’s lineup of tonics, ginger beers, colas and other cocktail mixers in the U.S., while it will also be responsible for co-manufactured production, marketing, sales and distribution of the brand in the U.S.
The tie-up is part of the U.S. brewer’s strategy to move “beyond beer” and into non-alcoholic drinks, including energy drinks, as consumers dial back on alcoholic drinks. Last year the company took a majority stake in zero-sugar energy drinks brand ZOA Energy.
Earlier this month shares in TAP fell after the U.S. Surgeon General called for new labels on beer, wine, and spirit bottles warning of cancer risks.
TAP Strategic Partnership Sends FEVR Soaring
Fever-Tree, which built its reputation in Britain on a resurgent market for premium gins, has been focused more recently on pushing its mixers in the U.S., where the demand is for darker spirits. Since this push started the U.S. has taken over as the company’s largest market by sales and Fever-Tree has become the top seller of tonic water and ginger beer in the country. In September, interim results showed a 10% rise in U.S. sales versus a 6% decline in the UK.
Molson Coors CEO Gavin Hattersley said, “The U.S. is our biggest global market by revenue, and the same is true for Fever-Tree.”
Fever-Tree CEO Tim Warrillow said the Coors Light brewer can help the company with the “scale and muscle” of a national network and supply chain expertise in the U.S. in both the on- and off-trade.
As part of the deal, Molson Coors has agreed to acquire an 8.5% stake in Fevertree Drinks plc (GB:FEVR), which rallied 20% on the news.
Is TAP a Good Stock to Buy?
Overall, Wall Street has a Moderate Buy rating on TAP, based on five Buys, eight Holds and one Sell. The average TAP price target of $63.32 implies 15% upside from current levels, with the shares falling almost 10% in the last year.
