Beer Marketer's Insights - Being MillerCoors: Sales Soft, Production Issues, Low Share in High End; Yet Confident

MillerCoors facing familiar and new challenges in Spring 2018: volume continues down 3% in Nielsen all-outlet data thru 3/24, and now it’s got pressing production/logistics issues at its Golden brewery. Those issues prevented many Western distribs from getting beer they needed, especially Blue Moon and Coors Banquet. Couldn’t have come at much less opportune moment; sales already soft just before MC late-Mar natl sales convention. MC ceo Gavin Hattersley got kudos for bluntly acknowledging situation at convention. Called out “significant headwinds” including “challenges that we’ve brought on ourselves, like inventory levels.... We haven’t had a strong start to 2018.” But “hang in there with us,” Gavin implored distribs. “We are working around the clock to get inventory back to the levels you need.” Against challenging backdrop, Gavin expressed continued “confidence” in MC plan and that it could get back to growth by 2019. While many distribs exasperated by glitches in Golden, remains to be seen how much these shortages affect overall results. Meanwhile, MC remains under shared in high end where growth is at in beer these days, tho it is stepping up efforts there. MillerCoors has just 8 share of $$ in high end in IRI, Constellation showed at its recent Gold Network Summit. And of top 25 growth brands in high end, MillerCoors has none of ‘em so far in 2018, consultant Bump Williams showed in his Apr newsletter. MC’s biggest competitive challenger, Constellation, sells 70% of its beer thru MillerCoors distribution network. Several of its largest distribs already generate more gross profit $$ from Constellation portfolio. While some would see this as a challenge/headwind for MC, MC paints this as oppy to partner with its distribs that already dominate growth segments. And also to drive growth/better compete vs AB with MC brands it claims are complementary. MC will make big push on Sol, “one of the most heavily supported brand launches in many years for MillerCoors,” sez MC. So far it has nada in segment that’s 11 share of industry volume. AB spent millions on Montejo and Estrella Jalisco but hasn’t made headway; it’s less than 0.5 share of Mexican imports. MillerCoors biggest high-end brand, Blue Moon, especially affected by Golden brewery issues. Many sizable distribs told INSIGHTS they were simply out of draft. Impossible to protect all Blue Moon tap handles. What caused Golden glitches? MC finally made transition to one combined ordering system (DRIVE), but new system couldn’t communicate with Golden warehouses. Beer sat there. “During the first few weeks of implementation, our ability to package, load and ship beer was significantly constrained,” chief supply chain officer Fernando Palacios wrote distribs Mar 23. That “resulted in inventory and out-of-stock issues for many of you.” MC expects “to resume full operations by the end of April, so that we will be positioned for a successful summer selling season.” MC acquired craft, under Tenth and Blake umbrella, remains a bright spot. Total Tenth and Blake up 31% YTD thru Mar 24 in Nielsen all outlet. All 4 acquired craft brewers far outpacing craft segment, still have significant expansion opportunities, but they remain small. At convention, MC pointed to 4 economy brands growing double digits: Keystone Light, Keystone Ice, Hamm’s and Steel Alloy. Overall, MC gaining share of subpremium and premium segments that are 2/3 of biz. Yet those segments are very soft, so MC declines stubbornly persist. What’s more, in economy segment, MC increasingly resorts to price, including 15-packs of Keystone Light, and now Mil’s Best, low-priced Hamm’s and Two Hats intro (off to very modest start; sold just 11,000 cases YTD thru Mar 25 in IRI multioutlet + convenience). In all-important Chi mkt, MC down 8% for 12 weeks Mar 25 in IRI foodstores. So MC got more aggressive on price, including $9.99 30-packs of Miller High Life at leading chain Jewel Osco. Adds up to picture of increased pressure on MC volume. If current trends continue, MC will have lost over 20% of its volume in its first decade, tho it has built profit tremendously. Distribs view MC as weakened competitively, but it’s stronger financially. How MC can strengthen mkt position remains perplexing challenge for MC.

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Being MillerCoors: Sales Soft, Production Issues, Low Share in High End; Yet Confident

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