Financial Analsis

Molson Inc. was established in 1786 and is the 15th largest brewery in the world (FP Infomart, 2004). The company produces a variety of different beers, including Molson Canadian, Rickard's, A Marca Bavaria, and Kaiser. To support these brands and to increase its market share, Molson has established operations in Canada, the USA, and Brazil (Molson, 2004a).

This report will evaluate Molson's current operations and financial statements to determine the price range at which an investor should be willing to purchase one of the company's shares. To put the ratios in perspective, Molson's financial performance will be compared with the industry average as well as with its main competitors: Anheuser-Busch, SABMiller, and Interbrew. Although many ratios were examined, only those that gave an indication of the company's risks or that were significantly different from its competitors' were included for discussion. The information used in this report was drawn from a variety of sources, up to and including the date of November 11, 2004.

The beer industry in North America has become relatively stagnant, with growth of only 1 to 2% per year. This trend is primarily a result of increased consumer preference for other alcoholic beverages, such as wine and spirits (Datamonitor, 2004). In addition, large breweries like Anheuser-Busch and Interbrew dominate the market both domestically and abroad, which makes it difficult for smaller players to achieve a competitive advantage. Innovative international brands as well as local microbreweries have also been gaining increased consumer attention, at the expense of mid-sized brands like Molson (Bogolmony, 2004).

In order to cut costs and to improve their competitive positions, breweries have been consolidating both nationally and globally (CNEWS, 2004). The new strategic priority for large breweries has been to expand into overseas markets, especially those in South America and China, where the industry is growing rapidly (Datamonitor, 2004).