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    SUPPLIER NEWS

    Coors-Molson Deal in the Works; Altria profits rise, despite Kraft's earnings decline.

    NEW YORK -- The Wall Street Journal reported Monday that merger talks between brewers Molson Inc. and Adolph Coors Co. are intensifying. The negotiations are at a sensitive stage and could fall apart, the newspaper said, citing unspecified people familiar with the matter.

    Several hurdles remain for any potential deal, most notably a feud among Molson family members who control the Montreal-based company's voting stock. Last month, deputy chairman Ian Molson, cousin of chairman Eric Molson, quit amid succession concerns at the 218-year-old company. A shareholder agreement between Ian and Eric Molson forbids either from selling or transferring their voting shares without the consent of the other.

    Although terms of a possible deal still are being discussed, one scenario calls for Molson chairman Eric Molson to be named chairman of the combined company, while Leo Kiely, chairman of Golden, Colo.-based Coors, could be CEO, the Journal said.

    In other supplier news, Altria Group Inc., the parent of Philip Morris USA, Philip Morris International and Kraft Foods Inc., said on Tuesday that second-quarter profits rose, despite Kraft's earnings declining 26 percent.

    Altria earned $2.63 billion, or $1.27 per share, compared with $2.44 billion, or $1.20 per share, a year earlier. Analysts expected New York-based Altria to earn $1.24 to $1.31 per share, with a mean target of $1.28, according to Reuters Estimates.

    On Monday, Kraft reported its second-quarter profit dropped 26 percent to $698 million, or 41 cents a share, as costs for dairy products and marketing rose.

    "Second-quarter results were solid overall and were aided by strong currency and a favorable tax rate," said Louis C. Camilleri, chairman and CEO. "Our domestic and international tobacco businesses performed well and continued to implement effective strategies for long-term growth. Our domestic tobacco business continued its momentum, with a particularly strong increase in Marlboro's retail share. Our international tobacco business performed well, but continues to face challenges in France, Germany and Italy. Outside those difficult markets, PMI's performance is strong and growing, and I am confident that PMI can achieve its long-term growth targets.

    "Kraft's quarterly results reflect ongoing challenges, including high commodity costs," Camilleri said. "However, I remain optimistic that Kraft will achieve better results in the second half and over the long term as it executes against its sustainable growth plan."

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