E-Malt.com News article: Canada: Can Coors Banquet beer help Molson Coors?

The Molson Coors Brewing Company and its Canadian subsidiary, Molson Coors Canada, Inc., are known for iconic brews such as Molson Canadian, Coors Light, Carling, Blue Moon, Keystone and thanks to a joint venture with SABMiller, the company added the Miller line to its portfolio. However, there is one mystical brew that always seems to have beer drinkers going out of their way for more — Coors Banquet beer.

So why Banquet beer? According to legend, miners in the late 1800s threw celebratory banquets and Coors was the beer of choice because of its superior craftsmanship. Of course, this is a rumor being spread by Molson Coors, but it sounds good.

There were times in the US east of the Mississippi River when the absence of this beer was a mystery to everyone. Supposedly, due to the lack of pasteurization and preservatives, the beer required more expensive refrigerated transportation to prevent spoilage. Coors finally crossed the mighty Mississippi in 1981.

Now it is Canada’s turn to be introduced to this beer. Many Canadian beer drinkers have been asking for Coors Banquet.

It would appear the results of the rollout have been impressive. According to a press release by the company, demand was tested by bringing 16,000 cans to bars in Calgary during the Stampede past summer. The supply was expected to last 10 days, but was gone in 48 hours. This was just a precursor to what turned out to be strong demand with some retailers calling it one of the biggest successes in years according to the company.

Despite volume weakness, Molson Coors was able to improve on several metrics during the third quarter including a nearly 8% increase in after-tax earnings. The company also saw margins expand 20 basis points to 41.6%, EBITDA grow 0.6% to $464.3 million, free cash flow increase $1.8 million to $756.8 million and net debt reduced by 10.5% to $3.48 billion.

That was the good news. Unfortunately, like many large brewers, the company continues to see poor consumer demand. While the company has seen good demand in Canada for its above-premium beers including the above mentioned Coors Banquet, Canadians appear to be losing a taste for the company’s market leading Coors Light brand as volumes and market share declined. The only other bright spots in the Canadian market were in the brewers craft brands as well as a market share increase by the popular Molson Canadian brand.

The European market was slightly better as sales volume increased a modest 0.7% as the cost of goods sold declined by 0.2%. This combined with favorable exchange rates allowed the company to show an underlying pretax income increase of 5.7% for the European business.

The MillerCoors joint venture continued to show strong results on the bottom line thanks to a strong pricing environment, cost reductions and a better brand mix. The joint venture recorded an 11.7% increase in underlying net income to $363.8.

In other international markets, the company produced strong growth in Mexico and Latin America along with higher pricing in China. However, weakness in the Ukraine and Russia license markets affected the overall international business.

Consolidated underlying net sales slipped 2% to $1.17 billion and underlying after tax income per share (non-GAAP) was up 5.8% to $1.45 per share which beat the analyst consensus estimate of $1.39 per share by 4.3%.

As a whole, it was not a bad quarter for Molson Coors and investors have been rewarded as the stock is up substantially from the multi-year lows experienced just one year ago. However, the Canadian market continues to be a problem.

Given Canada accounts for a big part of total sales, it is important that the company protect its turf. The warm welcome received by the release of Coors Banquet could be the first step to light a fire under the Coors Light brand as the fanfare around the Coors trademark should improve. However a dispute with SABMiller over a license agreement where Molson Coors distributes labels such as Miller Lite in Canada could further decrease sales if SABMiller is victorious in court. Additionally, it is uncertain what impact the tension created by this situation will put on the highly successful MillerCoors joint venture in the States.


13 November, 2013