Molson Coors’ future direction became more clear today following the announcement that the company will restructure its operations and slash its workforce.
Prior to late July’s second quarter earnings call, the company announced that CEO Mark Hunter would retire at the end of September, and Gavin Hattersley, the CEO of U.S. business division MillerCoors, would assume the president and CEO role.
Hattersley’s vision for a new Molson Coors Beverage Company became crystallized prior to today’s third-quarter earnings call with investors and analysts.
“We cannot wait and risk allowing the competition to continue passing us by, to outspend us, to out-innovate us and to outmaneuver us,” Hattersley said during the call. “We will move faster and free up resources. We will invest in our brands and our capabilities. We will regain the success of our past and we will create a brighter future for the Molson Coors Beverage Company.”
The $150 million annual savings will be reinvested in marketing to support core brands such as Coors Light and Miller Lite, drive innovation in non-beer products such as Cape Line Sparkling Cocktails and Arnold Palmer Spiked, and above-premium offerings such as Blue Moon and Peroni.
The prioritizing of beyond beer products is reflected in the company’s new name, effective in 2020: Molson Coors Beverage Company. This move makes Molson Coors the first among the world’s largest beer companies to remove “beer” or “brewing” from its name.
“Changing the name to Molson Coors Beverage Company might seem like a small change, but it’s a very deliberate reflection of where we see potential future growth, which for us is in beyond beer,” Hattersley said.
Among these beyond beer innovations is Vizzy, a 5% ABV, 100-calorie hard seltzer “infused with super fruits,” according to a slide during the earnings presentation. According to Hattersley, Vizzy will have “distinguishing characteristics to make it stand out from the competition,” which he believes the forthcoming brand “can leapfrog.”
Analysts questioned the Molson Coors’ performance in the hard seltzer category, thus far, as Henry’s Hard Sparkling Water held just 2% of the category’s market share as of mid-August, trailing far behind the combined 84% market share of category leaders White Claw and Truly Hard Seltzer, according to market research firm IRI.
“It’s a category that we need to do a much better job competing in and we need to do that in a meaningful way, and we plan to do that,” Hattersley said.
According to Hattersley, the company plans to revamp Henry’s next year, which he described as “bleeding a bit, as of late.”
As for flagship beer brands Coors Light and Miller Lite, Hattersley said the company-wide cost savings will fund “breakthrough marketing” such as Coors Light’s “Made to Chill” ads and Miller Lite’s new “It’s Miller Time” campaign, which encourages drinkers to unplug from smart devices and disconnect from social media.
“We’re going to be able to fund the good ideas without making the tradeoffs that we’ve had to make, potentially, in the past behind our bigger brands,” Hattersley said.
During Q3, Molson Coors’ company-wide revenue declined 3.2%, to $2.8 billion, while worldwide brand volumes declined 2.4%.
In the U.S., net sales during Q3 declined 2.3%, to $1.8 billion. The company’s U.S. depletions (sales-to-retailers) declined 3.9%, while shipments (sales-to-wholesalers) declined 6.2% for the three-month period ending September 30. The company said it expects brand volumes to converge for the full year.
The company’s Q3 performance in the U.S. was only slightly better than Q2 in which the company recorded a 2.9% decline in revenue, to more than $2 billion. Q2 depletions in the U.S. declined 4.8%, while shipments declined 6.7%.
For 2020, which Molson Coors is labeling a “transition year,” the company is estimating net sales revenue to be flat to down low-single digits.