New Brands Help Molson Coors To Grow Share Of Canadian Beer Market
Market share grows despite increases in flagship brand beer prices.
November 4, 2010 By The Canadian Press
MONTREAL – Molson Coors Brewing Co. grew its share of the Canadian beer market in the summer even though it raised prices amid continuing economy uncertainty.
The Montreal- and Denver-based company said its Canadian market share grew by nearly one full share point, with volume increasing by 2.5 per cent even as the Canadian beer industry as a whole suffered a 1.8 per cent decline in volume.
Molson Coors made inroads in all provinces except Ontario, where higher prices for flagship brands Coors Light and Molson Canadian were blamed for a slight drop in sales.
Combined with gains in the two preceding quarters, the company has captured an additional one per cent share so far this year.
“It comes down to what we’ve done – it has nothing to do with the competition,” CEO Peter Swinburn said in an interview.
Molson Coors has benefited from the introduction late last year of several new brands and the relaunch of Molson Canadian and Molson Export.
Among the hits have been Molson M, Canadian 67, Rickard’s Dark, Keystone Light and Miller Chill, he said.
“Each one of these brands has actually been successful and that’s an incredible strike rate and I think that it reinforces and gives evidence to the confidence we have in the Canadian team and the way they’ve been able to communicate with the consumers,” Swinburn said.
Molson’s Canadian net sales after excluding excise taxes increased 9.3 per cent to US$539.8 million from US$493.8 million.
Swinburn attributed part of the improvement to a turnaround of Molson Canadian following five years of decline as it tied a relaunch to the Vancouver Olympics.
Its second-largest Canadian brand has 480,000 fans on Facebook making it the world’s second most followed beer, after Heineken, Swinburn said.
Overall, Molson Coors, which reports in U.S. dollars, said its net income increased by nine per cent, driven by a 34 per cent increase in equity income in MillerCoors, its U.S. joint venture with SABMiller.
It earned US$256.1 million, or $1.37 per share, for the three months ended Sept. 25 on higher prices and cost cutting, even though it sold less beer. That’s up from US$235.3 million, or $1.26 per share, a year ago.
The company has been raising prices in the sluggish economy to protect its brands from being seen as too cheap, even if the amount of beer sold suffers as a result. U.S. volumes have suffered as consumers continue to face a challenging economy.
Revenue excluding excise taxes rose 2.5 per cent to US$875 million. But beer sales volume fell four per cent.
Excluding several one-times items, earnings were $1.28 per share, surpassing analyst expectations. Analysts polled by Thomson Reuters had forecast Molson Coors earnings would remain virtually unchanged at US$1.14 per share on revenue of US$882 million.
Molson Canada president Dave Perkins said key factors constraining Canadian sales were poor weather in September and the weak economy, which is causing consumers to remain cautious.
“We continue to feel very positive about what we’re seeing on an underlying basis in Molson Canadian and Coors Light,” he told analysts.
“The brand equity is strong, the reaction we are seeing from consumers to our programming is very strong so we’re feeling good there.”
Morningstar analyst Philip Gorham said the outlook for Molson Coors appears weak.
“The sluggish economic recovery and austerity measures in the U.K. are likely to continue to hinder a rebound in demand, and we expect Molson Coors’ three core markets to remain soft for the remainder of the year,” he said in a report.
But Kaumil Gajrawala of UBS expects improving MillerCoors volumes in the fourth quarter will help accelerate profit growth as it enters 2011 with strong pricing and improving volumes.
Molson Coors employs 15,000 people at 18 breweries and operations in more than 30 countries.
Molson Coors has an indirect investment interest in Foster’s (ASX:FGL) through a type of derivative arranged through Deutsche Bank. The derivative’s value rises with an increase in the value of Foster’s stock.
Molson is in the process of unwinding its swap position by January to realize a gain that Swinburn said will be tens of millions of dollars. It had closed 16 million out of 90.1 million outstanding shares by the end of the quarter. By Nov. 1, it had settled 40 per cent of the swaps.
The Molson Coors Brewing Co. was formed in 2005 following the merger between North American family-run breweries Molson Inc. and the Adolph Coors Company.
Founded in 1786, Molson is the largest Canadian brewer with seven breweries, including boutique breweries Creemore Springs Brewery Limited and Granville Island Brewing, and 3,000 employees located across the country.