Molson Coors posts strong quarter even as its American business struggles
Molson Coors posted $588.8 million in net income for the fourth quarter of 2017. Sales rose 4.5% to $2.58 billion, compared to $2.47 billion for the fourth quarter of 2016. The company reported brand volume worldwide of 22.4 million hectoliters, which was down 1.1% due to lower volume in the U.S. and internationally, partially offset by growth in Europe and Canada. Overall, sales in the U.S. slipped 0.6% to $1.72 billion from $1.74 billion.
The company said it expected $210 million in cost savings this year, increasing its three-year savings target to $600 million of all-in savings by 2019.
"2017 marked the first full year of the bigger, stronger Molson Coors, and our full year results demonstrated balance and progress against both our bottom-line and top-line goals," Mark Hunter, Molson Coors' president and chief executive officer, said in a statement. "Integration, synergies and costs savings were all delivered on or ahead of plan by engaged employees around the world who are aligned behind our First Choice for consumer and customer ambition."
Molson Coors said its domestic retail sales declined 3% percent during the fourth quarter due to lower volume in its premium light brand, while U.S. sales to wholesalers dropped 1.5%. In contrast, sales were up in Canada, Europe and internationally.
The company is in a similar situation as other large U.S. brewers with lagging domestic sales. With close to 70% of Molson Coors' income coming from this country, even a 29% sales hike in European sales for the quarter and a 19% increase from its international segment aren't going to solve the problem.
Molson Coors and AB InBev now have 90% of the U.S. beer industry following major acquisitions in the past couple of years. Two years ago, Molson Coors purchased the remaining 58% stake it didn't own of MillerCoors. But, as millennials turn to craft beers, wine and cocktails, they're feeling the pinch. As a result, beer volumes dropped 1.8% globally in 2016, according to IWSR.
Meanwhile, the two competing giants have been busy acquiring other, smaller brewers to diversify and help prop up their bottom lines. In 2016, Molson Coors' U.S. division, MillerCoors, acquired Revolver Brewing Co. and purchased a majority stake in Terrapin Brewing Co. But that is only part of the company's business, and craft beer sales are slowing.
Molson Coors, whose brands include Miller Genuine Draft, Miller Lite and Coors Lite, among others, continues to be challenged in its core U.S. business and can't keep relying on foreign sales and M&A activity to solve the basic underlying dilemma.