Molson Coors' Premiumization & Other Efforts Aid: Apt to Hold?
Molson Coors Beverage Company TAP appears to be in good shape, thanks to the immense strength in its brands and strong performances across its portfolio. Smooth progress of the Acceleration Plan and the premiumization of its portfolio have been aiding results. The company has been seeing strong success in EMEA&APAC, Canada and Latin America. However, in the United States, it has plans on track to drive improvement.
Let us delve deeper.
Details on Molson Coors’ Strategies
Last year, Molson Coors introduced its Acceleration Plan, which had been built upon the success accomplished under its Revitalization Plan implemented in 2019. The plan looks to deliver growth in the coming years. The initiative revolves around five pillars, including core power brands’ growth, portfolio premiumization, beyond beer expansion, investment in capabilities and support to its people and communities.
The company has been aggressively focusing on portfolio premiumization, in both Beer and Beyond Beer, to boost the shape of its product portfolio. It has also been making impressive innovations, especially in Beyond Beer. TAP’s goal for its Above Premium portfolio is to reach nearly one-third of its brand net revenues, excluding contract brewing, in the medium term.
Molson Coors is among the largest brewers in the world. With a view to accelerate portfolio premiumization, it has been aggressively growing its above-premium portfolio. The company remains committed to growing its market share through innovation and premiumization.
TAP’s Brand Performance
Molson Coors consistently focuses on growing its core power brands’ revenues. The company’s core power brands comprise Coors Light, Miller Lite and Coors Banquet in the United States and key brands in the international markets such as Molson trademark in Canada, Carling in the United Kingdom and Ozujsko in Croatia.
Strength in Coors Light, Miller Lite and Coors Banquet appears encouraging. In the United States, Coors Light, Miller Lite and Coors Banquet, on a combined basis, volume share fell 0.5 share point of industry in the second quarter from a year ago. However, these brands were up 2 full share points from the second quarter of 2022, reflecting that the company retained about 80% of its peak share gains on the core power brands.
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Among these brands, Coors Banquet is performing really well. It registered brand volume growth of 13% in the first half of 2024 and gained share at the fastest rate in the top 15 brands within the beer category. The company also successfully launched a core power brand, Caraiman, in Romania, which has reached about 150,000 hectoliters since March. Further, it is also gaining from the successful launch of Madri, which registered revenue growth in double digits in the reported quarter.
Bottlenecks to TAP’s Growth
Molson Coors has been witnessing cost inflation with respect to materials and manufacturing expenses. In second-quarter 2024, the underlying cost of goods sold per hectoliter rose 2.9% in constant currency, mainly owing to cost inflation with respect to materials and manufacturing costs, deleveraged volumes and unfavorable mix on lower contract brewing volumes in the Americas segment, somewhat offset by cost savings. Though inflation moderated, the same remains a headwind in 2024.
The continued exit of Pabst contract brewing volumes is impacting the company’s results. This reduced second-quarter 2024 financial volumes by 580,000 hectoliters with decreases accelerating from the prior quarter. Also, first-half 2024 financial volumes were more than 900,000 hectoliters, indicating an above 50% fall in Pabst contract volume from the half of 2023. Management cited that Pabst is a headwind to total volume and net sales in the near term.
A Glance at Molson Coors’ Performance
Despite the headwinds, Molson Coors’ shares have been performing well on the bourses. Shares of this global manufacturer and seller of beer and other beverage products have gained 8% in the past three months compared with the industry’s 4.7% growth.
The company put up a stellar show in the second quarter, wherein the bottom and top lines beat the Zacks Consensus Estimate. Adjusted earnings of $1.92 per share increased 7.9% year over year and surpassed the Zacks Consensus Estimate of $1.68. Gross profit increased 9.1% year over year and the gross margin expanded 310 basis points to 34.6%. Solid results in the EMEA & APAC segment, owing to favorable net pricing, premiumization and higher brand volumes, have bolstered the overall performance.
The company has commenced a new multiyear project in the United Kingdom to boost its brewing and packaging capacity. Management projects 2024 net sales to increase in the low-single digits year over year on a constant-currency basis. Underlying earnings per share are estimated to rise in the mid-single digits. The aforementioned strengths are likely to boost TAP’s performance, thereby retaining the Zacks Rank #3 (Hold) company’s momentum in the future.
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Molson Coors Beverage Company (TAP) : Free Stock Analysis Report
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