Molson Coors Beverage Company CEO Gavin Hattersley stressed that the “outcomes” of the company’s 2-year-old revitalization plan are beginning to materialize. Those outcomes became frequent talking points during the company’s second quarter 2021 earnings report.
“That’s an important shift,” Hattersley said.
Those outcomes delivered what Molson Coors described as its “best quarterly top-line growth in more than a decade” and net sales revenue that nearly reached 2019 levels during the quarter.
Hattersley ticked off several pillars of Molson Coors’ Q2 performance, including what he called the best brand mix in the U.S. since the inception of the MillerCoors joint venture in 2008 and “above premium brand volumes” that made up “a record-high portion” of the company’s U.S. portfolio.
In the U.S., shipments increased +1.2% during the quarter, while depletions declined -4%, which the company attributed to a “de-prioritization of non-core SKUs in the economy segment while the above premium and premium segments grew versus prior year.” Recall in Q1 the company posted declines in both depletions (-7.3%) and shipments (-9.5%)
Indeed, Hattersley notified the company’s wholesalers today that Molson Coors is discontinuing nearly 100 SKUs, primarily within the economy segment but including some slower moving Coors Light, Miller Lite and Coors Banquet SKUs, “to simplify, streamline and premiumize our portfolio.”
The company will discontinue outright 11 brands, including:
- Milwaukee’s Best Premium
- Henry Weinhard’s Private Reserve
- Keystone Ice
- Hamm’s Special Light
- Keylightful
- Icehouse Edge
- Magnum
- Mickey’s Ice
- High Life Light
- Steel Reserve 211
- Olde English HG 800.
Earlier this month, Molson Coors discontinued Coors Hard Seltzer in the U.S.
The discontinuation of those economy brands and SKUs follows a deprioritization effort of “non-core, slower moving brands and SKUs” in the segment earlier this year following a system outage. Hattersley said about 70% of the company’s Q2 share losses were due to the pausing and discontinuing SKUs within the economy segment.
“This move brings real benefits for all of us,” Hattersley wrote. “We will significantly free up brewing and materials capacity for our core, above-premium and innovation brands. We will improve the flexibility of our supply chain. We will be able to better focus our resources and investments on higher-opportunity brands and packs.
“And, critically, we will be able to improve shipments to you, our distribution partners.”
As such, within its economy portfolio, the company has set four priorities — Keystone Light, Miller High Life, Steel Reserve Alloy Series, and Icehouse — moving forward.
The portfolio will be streamlined to 10 brands within four subsegments:
- Economy Light: Keystone Light and Milwaukee’s Best Light
- Economy Regular: Miller High Life and Hamm’s Regular
- Economy Ice: Icehouse and Milwaukee’s Best Ice
- Malt: Steel Reserve Alloy/Tiki Series, Steel Reserve High Gravity, Mickey’s and Olde English.
“Our continuing lineup reflects where consumer choice is trending and is well-positioned to win with today’s legal-aged beer drinker,” Hattersley wrote.
During Thursday’s investor call, Hattersley proclaimed that “the headline is simple,” offering “Premiumization is here to stay at Molson Coors.”
“We’re going to invest bigger behind our fast-growing global hard seltzer portfolio, and we’re going to permanently streamline our smaller portfolio of legacy brands,” he declared.
The premiumization efforts are being driven by “the strong growth” of its hard seltzers, Vizzy and Topo Chico, in the U.S., Hattersley said. Those brands doubled the company’s share within the segment in Q2, pushing the company closer to its goal of a 10% share of the U.S. hard seltzer segment by the end of the year.
“We’re on our way to becoming the No. 4 spot in the segment despite new entrants in 2021,” Hattersley said.
Hattersley touted the successful launch of a Vizzy Lemonade variety pack, and the recent launch of a Vizzy Watermelon variety pack. He added that Topo Chico Hard Seltzer has “exceeded expectations” in the 16 markets where it’s sold, with demand outstripping supply.
“With supply improving, we are now positioned to be more aggressive in marketing this brand,” he added.
The plans are to take Topo Chico Hard Seltzer national when the company can fulfill demand in states such as Texas, where the brand holds a 10% share of the segment, Hattersley said.
In Canada, Hattersley noted that the company holds more than 50% share of the hard seltzer market between its Vizzy and Coors Seltzer brands. Although Coors Seltzer was discontinued in the U.S. after 10 months in the market, the brand has been successful north of the border.
Asked about the slowdown of hard seltzer growth, Hattersley said the company anticipated that the growth rates wouldn’t continue at elevated levels of recent years.
“It was really no surprise to us that this rate of growth slowed because the category was cycling last year’s huge comps, and we’ve said in the past that seltzers were a beneficiary of the on-premise shutdown because it had such distribution exposure in the off premise. As the on-premise has reopened, there’s less distribution there.”
That said, Hattersley added that even if the segment is growing at 10%, 20%, 40%, there’s nothing else in the beer category growing off that base growing at that rate.
In the U.S., Molson Coors’ net sales increased 8.2% during the quarter, as net sales per hectoliter on a brand volume basis increased 6.9% during the quarter due to the company’s portfolio premiumization efforts and new brands.
Hattersley also highlighted the contributions to top-line growth from core brands Coors Light and Miller Lite and the return of the on-premise channel.
“With on-premise accounts reopening in a big way across the U.S., the brands were at 97% of their total 2019 STR [sales to retailers] volume in the second quarter,” he said.
Coors Light and Miller Lite depletions increased 1.7% and 3.2% during Q2, respectively. Hattersley said he hasn’t been able to discuss both brands’ quarterly growth in “the last 15 years or so.”
Blue Moon Light Sky, which was the No. 1 new beer item in 2020, is growing double digits, and Leinenkugel’s Summer Shandy’s brand volume has increased 10% year-to-date, Hattersley said. Meanwhile, the Yuengling joint venture will launch in Texas in a few weeks, as shipments will commence next week and hit retailers by August 23.
Non-alcoholic energy drink ZOA — Molson Coors’ partnership with “The Rock” Dwayne Johnson — is another brand that Hattersley said has “already surpassed our expectations for the entire year.” He added that the ready-to-drink coffee market is estimated to reach $4.3 billion in 2021, and “La Colombe is ranked No. 1 in the above premium category,” and the brand is gaining distribution in national and regional retailers in the drug and convenience store channels.
Meanwhile, Truss Canada, Molson Coors’ Canadian joint venture with Hexo, now holds more than 50% share of the Canadian cannabis beverage industry, and seven of the top 10 SKUs in the country, Hattersley said.
Nevertheless, the on-premise channel is still in recovery for Molson Coors. Chief financial officer Tracey Joubert said the on-premise channel accounted for about 13% of the company’s net sales revenue in North America during the quarter. That’s compared to about 60% during Q2 2019. In the U.S, Molson Coors reached more than 80% of its 2019 on-premise levels during the quarter.
Within on-premise outlets that are open in the U.S., Hattersley said he believes the company is gaining share. He added that the company has the capacity to push Vizzy into the channel. Topo Chico supply is “a little tight,” but the company plans to push the brand in bars and restaurants in the near future.