Beer Marketer's Insights - “Don’t Get Overly Anxious” About Soft US Beer Volume or “Small, Volatile” Qtr, Hunter Suggests

Despite tuff Q1 numbers for MillerCoors (shipments -6.7%, underlying EBITDA -12.2%) and fact that US beer in a funk, Molson Coors CEO Mark Hunter advised against over-reaction on conference call this morn. Q1 just 14% of annual profits and Q1 2018 a “small, volatile quarter” marked by a few “big events,” as noted in this morning’s Express. Then too, US remains a very large and very profitable market, with margin pool expanding. It’s still a “great place to compete,” Mark pointed out, so gotta “be careful not to get overly anxious,” even about overall category softness, or “unduly concerned by short-term trends in industry demand.” Turning that around takes time, he reminded, as he’s seen in other countries. In Q1, total US STRs down about 2.3%, Mark said, while MC STRs -3.8%. So, MC mkt share performance in line with recent history, Mark and MC prexy/CEO Gavin Hattersley said several times on call. Weather a big factor in lousy Q1 for beer, with especially “awful” Feb. Gavin added some color to outsized shipments hit from issues at Golden brewery. Impact greatest in Central states, Pac NW and to “limited degree” in Great Lakes, not so much elsewhere. While MC’s “made progress” in fixing issues, “not fully caught up yet.” Recall, Molson Coors report said it expects to reverse Q1 under-shipment of 383K bbls in back half of yr, not Q2. Golden one of world’s “largest, most complex breweries,” reminded Gavin, and he expects rollout of new ordering system at other plants to be “smoother.” Pressed on share losses in above premium (MC continues to gain share in premium and below premium, that’s part of “consistency”), Mark and Gavin returned several times to high-end brand plans that mostly launched in Q2 and MC very excited about: Sol (“early results very promising”), Arnold Palmer Spiked Tea, Henry’s Hard Seltzer in slimline cans, new Blue Moon brands/pkgs, Crispin Rosé and Leinie Shandy. Redd’s performance remains “unsatisfactory,” Mark acknowledged, but still a big, profitable brand for MC. Then too, MC’s acquired craft brewers “far outpacing” craft segment, new Coors Light creative hitting in Q2, Zima’s returning for longer period, etc. MC Got 2%+ Pricing in Q1; Maintaining Guidance Tho rev per bbl up 1.4% in Q1, there was negative 90 basis pts of mix (most of that packaging mix, not brand mix), so 2.3% in net pricing, said Gavin. Fed excise tax had modest impact on net sales/bbl, about 50 basis pts. So, MC’s pricing “pretty consistent” going on 4 qtrs, mix “should improve” with efforts in above premium and Gavin’s seeing “nothing terribly different” in pricing environment vs prior years. Net-net: even tho not much to celebrate in Q1, especially in US, and TAP stock price down 13% at presstime, Molson Coors guidance for the year unchanged, Mark stressed several times. That includes: underlying free cash flow of $1.5 bil, plus or minus 10%, continued cost savings (approx $210 mil this yr) and low single-digit cost of goods/bbl increase across it key mkts.

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“Don’t Get Overly Anxious” About Soft US Beer Volume or “Small, Volatile” Qtr, Hunter Suggests

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