Miller to Buy 'Energy Beer' Brands From McKenzie
Miller to Buy 'Energy Beer' Brands From McKenzie
SABMiller PLC of London said it reached an agreement with McKenzie River Corp. to acquire its caffeine-laced "energy beer" Sparks and Steel Reserve brands for $215 million, in a move designed to lure young drinkers of Starbucks Corp.'s frappuccinos and energy drinks like Red Bull.
The move is almost certain to intensify the battle that is brewing over a small but growing part of the lackluster American beer market: energy beer. These beers, which often include caffeine and caffeine-like substances, have been surging in popularity. Sparks is a caffeinated alcohol malt beverage flavored with ginseng, guarana and taurine and has a citric taste. Steel Reserve is a lager beer.
Demand for energy beers appears strong. SABMiller's Miller Brewing Co. says the Sparks brand, for instance, had a compound annual growth rate of 107% between 2003 and 2005. Last year, it sold 270,000 barrels of the product. The acquisition from McKenzie River, San Francisco, expands Miller's portfolio of energy beers. It already markets Mickey's Stinger, a malt liquor that features more caffeine than a cup of coffee, and two caffeine-like substances: guarana and taurine. Malt liquors generally have more alcohol than beer. Mickey's, for instance, has 7% alcohol by volume, compared with 4.5% that is typical of most American beers. "Sparks and Steel Reserve will have an immediate positive impact on our growth profile," said Norman Adami, president and chief executive of Miller Brewing.
The companies plan to announce the deal today.
U.S. brewing titan Anheuser-Busch Cos. offers two different beers -- Tilt and B(e) -- with caffeine, ginseng and guarana. Anheuser is also test-marketing another caffeinated beer, Natty UP. The category has attracted a number of recent entrants. One new energy beer is Moonshot, produced by a small Boston company, New Century Brewing Co. Moonshot was introduced in 2004 and has since been reformulated, company CEO Rhonda Kallman said. "High-volume domestic beer drinkers are looking for a pick-me-up, particularly after drinking several. And...their preference is to stay in beer." So she reformulated Moonshot and added more caffeine. The total now is 69 milligrams, which she says is about equal to a cup of coffee.
Sparks and Steel Reserve are already brewed by Miller under an agreement with McKenzie River. Miller said completion of the transaction is subject to review by U.S. antitrust authorities. Miller also agreed to develop new products with McKenzie River founder and President Minott Wessinger.
Critics say energy beers simply serve to mask underlying intoxication. "I think it's just another clear way to keep people drinking more," says George Hacker, director of the alcohol policies project at the Center for Science in the Public Interest, a nonprofit advocacy organization.
