The world’s fifth largest brewer reported top line sales of $1.17bn for Q3 2013 (-2%) but net income fell to $121.8m due to write downs in brand values for its StarBev business in Serbia and the Czech Republic.
Nonetheless, Molson Coors still beat analyst expectations with underlying profits of $268.1m (+7.7%).
But the beer giant is struggling in Canada – underlying pre-tax profit -13% to $130.6m, with Goldman Sachs analyst Judy Hong expressing surprise at the firm’s Q3 volume weakness, falling market share and margins.
Market leading beer Coors Light lost volume (high single digits) and market share, and success in above-premium beers – Molson Canadian Cider, Rickard’s Shandy and Coors Banquet were all launched – as well as volume gains for craft brands, failed to offset the slump.
Turning down the (premium) lights?
Peter Swinburn, Molson Coors CEO, told Hong that bad weather was partly to blame for weak volumes “but taking that to one side, it was a disappointing quarter”, with strong pressure to promote and keep prices low.
Stewart Glendenning, Molson Coors Canada CEO, said the company was lapping a particularly strong Q3 2012 in terms of Coors Light sales, when the brand was bolstered by the Coors Light Iced T launch.
Is that the whole story? Economic factors aside, Consumer Edge Insight survey results from June 2013 – of 2000+ US adults – found that those drinking less light beer cited ‘getting tired of the taste’ (27%), and ‘consuming more types of other beer’ (21%) above money worries (20%) as reasons to shun the category.
David Decker, president, Consumer Edge Insight, said the survey revealed “serious warning signs” for premium light beers in the US – doubtless there is some read across to Canada, although Coors Light is still growing slowly in the States – due to beer drinkers favouring stronger, more varied tasting imports and craft blends.
Changes are also afoot in regard to Molson Coors’ two key JVs in Canada, where the first change (at least) will cut the brewer’s market share down from 39% by a low single digit figure.
Losing Modelo brands in Canada
The company announced yesterday that it had agreed to exit a JV with AB InBev early – March 1 2014 rather than January 1 2018 – that covers the distribution of Grupo Modelo’s brands in Canada.
AB InBev will pay Molson Coors CAD $70m ($67m) to terminate the deal, while doubts persist over the future of the latter’s licensing deal with SAB Miller (via Miller Coors) to distribute its brands in Canada.
Molson Coors won a temporary injunction back in June to continue managing the SAB brands ahead of a full court hearing over the dispute – SAB blames low sales volumes and missed targets on its move to terminate the licensing agreement – after Molson Coors sued its partner back in January.
Mark Swartzberg, analyst, Stifel, Nicolaus & Co. asked Dunnewald whether losing the Modelo brands would affect Molson Coors’ market performance, in terms of competing for shelf space.
Noting the strength of Coors Light and Molson Canadian, and stronger sub-premium and value offerings, Dunnewald said the firm felt good about its beers, describing the market share impact as “relatively modest”.