Sparks & Steel Deal

Miller acquires McKenzie River brands, creates relationship with Wessinger

Published in CSP Daily News

MILWAUKEE -- Miller Brewing Co. parent SABMiller PLC has reached an agreement with The McKenzie River Corp. to acquire the Sparks and Steel Reserve brands for $215 million and form a new product development partnership with McKenzie River under the leadership of founder and President Minott Wessinger.

Launched in 2002, Sparks is a caffeinated alcohol malt beverage. Flavored with ginseng, guarana and taurine, the brand is known for its citric taste. Steel Reserve, launched in 1987, is a high-gravity lager that is slow brewed for a minimum of 28 days.[image-nocss] p>

The deal immediately strengthens the Miller portfolio with two fast-growing and profitable brands that are defining their respective product categories and far outpacing overall industry growth. Miller also expands its innovation capability and expertise by aligning itself with an entrepreneurial pioneer with a proven track record of creating highly successful, first-mover brands like Steel Reserve and Sparks.

"Sparks and Steel Reserve will have an immediate positive impact on our growth profile," said Norman Adami, president and CEO of Miller Brewing, Milwaukee. "In addition, our new product development relationship with Minott Wessinger connects us with a very special guy when it comes to innovation."

Under Wessinger's leadership, the Sparks and Steel Reserve brands have grown at triple and double digits respectively. Miller plans to build on their innovative and highly differentiated positionings and continue their growth by leveraging Miller's marketing, sales and distribution platforms.

"I'm very excited about the new relationship with Miller and confident that they will take Sparks and Steel Reserve to the next level with great marketing and sales support," said Wessinger. "The U.S. beverage market is changing rapidly and there are tremendous opportunities for us to create new brands that bring value to consumers, wholesalers and retailers."

Both Sparks and Steel Reserve are already brewed by Miller under a contract brewing agreement with San Francisco-based McKenzie River. Under the new agreement, the parties have also agreed to a long-term contract brewing relationship. The majority of Sparks and Steel Reserve volume is currently distributed by U.S. wholesalers who also carry Miller brands.

Sparks achieved a compound annual growth rate of 107% between 2003 and 2005, selling 270,000 barrels in 2005, the company said. Sales of Steel Reserve have grown at a 35% compound annual growth rate between 2003 and 2005 with a total of 1.39 million barrels sold in 2005, it added.

McKenzie River has successfully built national distribution of both the Sparks and Steel Reserve brands through seeding in independent convenience stores followed by expansion into chain c-stores and supermarkets. Miller intends to increase the channel penetration of the brands, it said.

Besides acquiring great brands, Miller also gains access to Wessinger's creativity and entrepreneurial winning streak through a formal product development relationship. "Our new relationship with McKenzie River will enable Miller to tap into emerging consumer trends and leverage new brands through our national system of distributor partners," Adami said.

Completion of the transaction is subject to the customary review by U.S. antitrust authorities.