Helped by the setbacks of its competitor AB Inbev, Molson Coors posted growth in quarterly sales and net profit that had not been seen since the merger between Molson and Coors breweries in 2005.
Dollar sales increased 11.8% to US$3.26 billion in the quarter ending June 30. Even volume sales were up a rare 2.8% in the quarter. Net profit, meanwhile, jumped nearly 50% to US$387.2 million.
Despite the good news, Molson Coors shares fell almost 5% to US$66.52 on Tuesday. Even though the company has upgraded its guidance for 2023, these new targets imply a slower pace of sales and profits in the second half of the year. However, the stock is up 29% since January 1.
Sales are expected to grow 8-10% in fiscal 2023, compared to a forecast of 5% previously. Pre-tax profit is expected to grow 25% in one year. The previous target estimated the upside at only 5%.
Asked about the expected slowdown in growth in the second half during the conference call with financial analysts, the Canadian-American brewer’s senior management explained that the company would end a contract brewing contract in the coming months, which would hinder its growth.
In addition, a less favorable comparison in the second half will also come into play. The brewer had raised its prices by 5% last year in the fall. Sales in the first half of 2023 therefore compare with lower prices in 2022. This will no longer be the case by the end of the year. In Canada, too, the comparison worked in favor of the brewer. Last year, the Montreal-area plant suffered an 11-week strike that ended just before the end of the second quarter. The work stoppage had weighed on sales in 2022.
That said, the spectacular growth experienced by Molson Coors is mainly due to the setbacks of its competitor AB InBev.
Bud Light, which was the best-selling beer in the United States, was the subject of controversy in mid-March when a transgender influencer, Dylan Mulvaney, posted a video on her Instagram account to promote a contest . The company had prepared a can of Bud Light with his picture on it. American conservatives have called for a boycott. The brand’s sales have suffered since.
In the United States, Modelo, distributed by Constellation Brands, thus became the best-selling beer in place of Bud Light.
According to Statista, there were 67,000 drinking places in the United States in 2021.
In Canada, Coors Light has become the top-selling light beer. According to data from Beer Canada, from January to May, Coors Light’s sales volume increased 4.3% year-on-year. Meanwhile, shares of Budweiser and Bud Light fell 0.22% and 3.8%, respectively.
“Over the past three years, our strategy has resulted in our brands being demonstrably stronger in 2023 than they were in 2019. So while we didn’t plan for the biggest brand in our main competitor could lose almost 30% volume in the quarter, if that had happened in 2019, we certainly wouldn’t have seen the same profit in terms of sales as in 2023,” said Gavin Hattersley, President and Chief Executive Officer of Molson Coors, by teleconference.
Molson rebuilt two of its Canadian breweries, streamlined the number of its economy brands and diversified into non-beer alcoholic beverages like sparkling waters. She also reduced her heavy debt. The net debt to earnings before interest, taxes, depreciation and amortization ratio fell to 2.5 times at the end of June.
The alcoholic sparkling water niche saw its sales explode in 2020-2021 before falling from 2022.
“It is true that we have seen larger than expected declines in the alcoholic sparkling water sector,” the Molson Coors boss acknowledged on Tuesday. The beverage company, however, argues that other products, such as Simply Spiked Alcoholic Lemonade, make up for the setback seen in sparkling waters.
Molson Coors does not intend to watch the parade pass with folded arms. It has released an additional $100 million in marketing budget for the remainder of 2023. “We intend to invest very heavily to take advantage of the momentum,” Hattersley told financial analysts. Hence the additional $100 million spent on marketing. Our task is to maintain the gains we have achieved. »
