Molson Coors Brewing Company: Conflict Resolution in the Aftermath of a Merger In the mid-1990s a dispute began developing between

rival factions of the Molson family for control of the Molson empire, including the Molson brewing business. Eric Molson and Ian Molson were pitted against one another in this struggle for control. Eric and Ian clashed at board meetings, with their differences becoming increasingly intense and embittered. At a January 2003 board meeting, Eric announced a review of Molsons corporate governance. While a surprise to the board, the review was nonetheless conducted. The governance report recommended eliminating Ians position as deputy chairman. Ian confronted Eric but nothing was resolved. At the following November board meeting, the recommendation to eliminate Ians position was defeated. At the May 2004 meeting three board members, including Ian, resigned in protest over Erics leadership of the company. The remainder of the board chose to reaffirm Erics status as chairman. At the companys annual meeting the following month, Ian and four other members of the family-controlled board refused to stand for reelection. Meanwhile, Molson Inc. and Adolph Coors Co. initiated merger talks. The two companies had been working together since 1998, with each company distributing the others products in its home territory. The major hurdle to the proposed merger was the feud between the two factions of the Molson family. Eric, who along with allied family members controlled more than half the voting shares, favored the merger. Ian, with

approximately 10 percent of the voting shares, was against the merger. A shareholder agreement between Ian and Eric prevented either one from transferring or selling his voting shares without the consent of the other. Eric maintained that he had found a legal way to circumvent the agreement. Ian, on the other hand, was preparing to offer as much as $4 billion to acquire Molson Inc. in order to prevent the merger with Coors. On July 22, 2004, the two companies jointly announced the merger of Molson and Coors. As a result of the merger, Molson Coors became the third largest brewer in the United States and the fifth largest in the world, operating primarily in three mature markets Canada, the United States, and the United Kingdom. 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. Even nearly three years afterwards, the merger is still a sore point with some, including Erics cousin Ian Molson, who saw the merger of equals as an outright takeover and not an advantageous one for shareholders at that. Nonetheless, just[t]wo years after the highly publicized merger between U.S. brewer Adolph Coors Co. and Canadian brewer Molson, the management problems anticipated by many analysts most notably a power struggle between two longstanding brewing families have yet to come to pass. In fact, Molson Coors Brewing Co. is leveraging the strength of its family-based culture to strategically focus on brand building and growing its domestic and international beer business.

How has Molson Coors Brewing avoided being decimated by conflict? Molson Coors CEO Leo Kiely, in describing how they were able to successfully merge two companies with strong cultures and traditions, cited two key factors. One factor involved investing local teams with the responsibility for their markets since the markets of the pre-merger Molson and Coors did not overlap much. The second factor was celebrating the two companies common features a strong family heritage and a passion for brewing beer. According to Kiely, the first priority after the merger was to get a good balanced team in place. After the merger of Molson and Coors, the senior management team was reorganized by drawing in people from both companies and both families and by establishing executive headquarters in both Denver, Colorado and Montreal, Canada. Eric Molson serves as chairman of the board and Peter Coors serves as vice chairman. Eric Molson works from Montreal, Canada, and CEO Leo Kiely, from the Coors side, runs the merged company from Denver, Colorado. Other members of both the Molson and Coors families play active roles in the business. Another major factor in avoiding debilitating conflict was the similar business interests and heritage of the two companies. Geoff Molson, a seventh-generation family member working in the business, says the thing outsiders dont understand is that the families passion for brewing was really the essential ingredient in getting the deal done. Geoff Molson continues, In the past two years, weve 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. Although the merged company reflects 21st century globalization and

consolidation within the brewing industry, each of the two companies is fighting to keep its identity, which is rooted in the past. Regarding the Canadian side of the merger, Eric Molson says, Since 1786, playing a part in the community has been the Molson tradition a tradition that is woven into the cultural fabric of Molson and our family, and continues to thrive today. We are very proud to be part of this country, from coast to coast. A similar perspective applies to the Coors traditions. Indeed, the family aspect and community involvement of both Molson and Coors define the separate histories of Molson and Coors as well as the present times of the merged Molson Coors Brewing. Will the two families of Molson Coors Brewing be able to continue working together amiably as they grapple with the challenges of an increasingly globalized and consolidated brewing industry? Addressing this dilemma became increasing more complicated on October 9, 2007 when Molson Coors and SABMiller PLC announced plans to merge their United States operations. The Molson and Coors families did not want to sell the entire brewing company to SABMiller, and consequently the companys operations in Canada and the United Kingdom will remain independent of SABMiller.

SOURCE: Frank R., and Cheney, E. (2004) Canadian Club: A Brewing Family Feud Poses Risks for Molson Beer Empire, The Wall Street Journal, eastern edition (June 29), p. A1; Cheney, E., and Frank, R. (2004) Molson Chairman Resists Calls for Ouster Amid a Family Feud, The Wall Street Journal, Eastern edition (June 23), p. B46; Frank, R., and Berman, D.K.

(2004) Molson, Coors Talks Heat Up, But a Deal Faces Several Hurdles, The Wall Street Journal, Eastern edition (July 19), p. B2; Molson Press Release. (2004) Molson and Coors Announce Merger of Equals to Create Worlds Fifth largest Brewer. http://micro.newswire.ca/release.cgi?rkey=1207225107&view=534540&Start=0 (accessed July 22, 2004); Kesmodel, D. (2007) Boss Talk: How Chief Beer Taster Blended Molson, Coors, The Wall Street Journal, Eastern edition (October 1), p. B1; Landi, H. (2007) Go Global, Think Local: With a strong foundation in North America, the worlds fifth largest brewer is on the move, Beverage World (July), p. 46; Holloway, A. (2007) The Molson Way, Canadian Business (April 9), Vol. 80, No. 8, p. 36 (4 pages); Holloway, A. (2007) Eric Molson, Canadian Business (May 21), Vol. 80, No. 11, p. 94; Kesmodel, D., and Ball, D. (2007) Miller, Coors to Shake Up U.S. Beer Market, The Wall Street Journal, Online edition (October 10), pp. A1+. This case was written by Michael K. McCuddy, The Louis S. and Mary L. Morgal Chair of Christian Business Ethics and Professor of Management, College of Business Administration, Valparaiso University. Discussion Questions 1. From your perspective, were the consequences of the conflict between Eric Molson and Ian Molson positive or negative? 2. What ineffective techniques for managing conflict are evident in the case? 3. What effective techniques for managing conflict are evident in the case?