Molson Coors hurt by weak US demand, softness in beer industry
- Molson Coors posted sales of $2.33 billion during its first quarter — a drop of 4.8% — due in part to "a softer-than-anticipated start to the year" in the beer industry that hurt sales and profitability. Still, the company behind Miller Lite and Coors Light recorded a profit of $278.1 million. Sales fell in all three of its biggest markets, the U.S., Canada and Europe.
- Sales in the U.S., by far its largest region, fell 5.8% to $1.65 billion. The beer maker cited "overall industry softness with our U.S. brand volume" as contributing to the drop. During the quarter, U.S. volume fell by 3.8% due to reduced shipments in the premium light segment and poor weather that lowered demand across the beer industry. Worldwide volumes decreased 3.1%.
- Molson Coors CEO Mark Hunter expected improving conditions during the remainder of the year. "We do not see these results as indicative of our full-year performance versus our plan, and we remain committed to delivering our 2018 guidance," he said in a statement.
Molson Coors, the manufacturer of popular brews such Blue Moon, Molson and Crispin Cider, is ailing from the same problems that are plaguing the rest of the beer industry.
Consumers are moving away from flagship beers that have long defined the industry, turning instead to craft and Mexican brews along with wine and spirits. Efforts to diversify into other areas such as ciders, the introduction of low calorie and low- or no-alcohol products catering to the health and wellness trend, and the purchase of craft breweries have not been enough to offset this decline.
Molson Coors is particularly vulnerable as U.S. sales make up roughly 71% of its total, meaning domestic problems domestically are going to have a more noticeable impact on the company than competitors with more global sales. The disappointing earnings announcement Wednesday caused the company's stock to plunge $8.53, or 11%, to $63.15 — a new 52-week low.
Similar to competitor AB InBev, Molson Coors has faced a prolonged period of challenges. Shipments in its MillerCoors U.S. operations have dropped nearly every year since 2009. During that time, its market share has fallen by 5% to 25% in 2017, according to the Beverage Marketing Corporation. The group noted that AB InBev and MillerCoors have lost a combined 13.4% share of the U.S. market since 2009 — more than the total 9.4% current market share of Constellation Brands, owner of Modelo Especial and Corona.
Molson Coors has tried to offset the decline by introducing a new light beer called Two Hats with quirky ads to appeal to millennial drinkers who are less status conscious and more budget conscious. It has purchased craft brewers Revolver Brewing and Hop Valley Brewing, among others, and expanded its reach into other beverages after purchasing Aspall Cider, a nearly 300-year-old maker of premium ciders and specialty vinegars.
Molson Coors will need to continue to grow beyond its core beer products that are struggling to resonate with U.S. consumers, especially millennials and other young drinkers. It's also conceivable that Molson Coors could look to merge with another beer maker such as Heineken to expand its reach globally and widen the roster of brands it offers while squeezing out cost efficiencies from the transaction.
So far, major beer makers have shown that efforts to look outside the company to improve their product offerings have failed to meaningfully offset the decline taking place in core parts of their businesses. Unless conditions and consumer preferences suddenly change, big brewers will have to do something bigger to stem the decline.
- Molson Coors Molson Coors Reports 2018 First Quarter Results
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