Molson Coors’ shipments in the Americas outpaced depletions by more than 750,000 hectoliters (more than 639,000 barrels), exceeding the company’s already inflated expectations for Q1 as it prepares for elevated summer sales, leadership shared today on a call with investors and analysts.
Shipments increased +7.5% in the division, which includes the U.S. and Canada, while depletions increased +5.3%.
“For the first quarter, our shipments certainly were higher than what we were expecting,” CEO Gavin Hattersley said. “We were obviously planning to ship higher than our brand volumes, but our supply chain team did a tremendous job actually exceeding our expectations each and every week.
“We have a strike down in Fort Worth, [Texas] and we have a contingency plan and our contingency plan is working better than we had originally expected,” he continued.
Union workers from Molson Coors’ Fort Worth facility have been on strike since February 17 after the Teamsters and Molson Coors failed to reach a new three-year contract. Employees have asked for pay raises and an end to a tiered system for healthcare and retirement benefits.
Teamsters have rejected multiple contract offers that included less than $1 pay raises, the latest of which was rejected on Sunday, according to a post on the Teamsters’ Instagram page.
“Texas Teamsters overwhelmingly voted down yet another insulting contract offer from Molson Coors on Sunday – a disrespectful package that put pennies in new wages on the table for the 420 workers who brew, package, and warehouse Coors, Miller, and other beers,” the Teamsters wrote.
“For most workers, Molson Coors has consistently offered about $1 in wage raises under a new agreement, and for some classifications of workers less than that,” they continued. “The brewing giant hauled in $12 billion last year.”
Molson Coors’ “contingency plan” has been to assign “current employees” to handle brewing, packaging and delivering beer from the facility. With no indication of when the strike could end, Molson Coors is confident it can function throughout the year with no significant cost impact.
“The cost related to the contingency plan has not been material, and we don’t expect it to be material, so we do not expect it to be material for the balance of the year based on our current projections,” CFO Tracey Joubert said during today’s call.
“Our supply chain is doing a tremendous job keeping up with supply and our contingency plan,” Hattersley added. “We’re outperforming our contingency plan every single week.”
The significant increase in shipments for the quarter was both planned and unplanned, according to Hattersley, who noted that some of the inventory increase was intentionally made to meet demands following spring resets, which are still playing out. Coors Light and Miller Lite increased shelf space around +13% in large format grocery and c-stores so far, and more is expected as retailers could adjust space as late as July, Hattersley said. Molson Coors is also expected to grow distribution for its brands this year, including a nearly +20% increase in distribution for Coors Banquet, which is “not a small brand for us,” Hattersley said.
“We wanted to make sure that our distributors had sufficient inventory to meet the demands, which we knew were going to come from a shelf reset point of view, and to continue fueling the momentum behind our brands, and so that was planned,” Hattersley said.
What was not planned was the company’s supply chain team exceeding expectations “on a consistent week-over-week basis” in response to the Fort Worth strike.
“Where it’s left us is that we have our inventories in a very healthy place for us to meet the demands of the shelf resets – which are taking place as we speak – to meet the demands of our base of volume – which is substantially higher today than it was more than a year ago, behind the momentum of of our brands – and then also to continue to meet the demands of our distributors and retailers as we move through the through the strike in Fort Worth,” Hattersley said.
Despite Optimism, Molson Coors Still ‘Cautious’ About Full-Year Beer Trends
Despite a high performing Q1, Molson Coors has maintained its full-year guidance of low-single-digit net sales growth and mid-single-digit underlying income growth.
Multiple analysts on today’s call questioned why leadership was “optimistic” about growth continuing throughout the year, but didn’t have higher expectations for full-year results. Hattersley responded that the company is increasingly “cautious” of beer trends, particularly after a “pretty choppy” April.
“The first two weeks of April were pretty grim from an industry point of view, and did bounce back a little bit in the third week, but we’re still down,” Hattersley said.
“We’re living in very volatile times [and] I do think that inflation is proving to be a little more sticky than folks expected, and interest rates are higher and staying for longer,” he continued. “So I do see cautious behavior from consumers. And when you lump all of these things together, that does … lead to us being a little bit more cautious and prudent as to how we see the industry going forward. … We won’t know exactly what’s going to happen with the U.S. beer industry until we’re through summer and we see what transpires in summer.”
Q2 also brings year-over-year comps for some of Molson Coors’ largest growth numbers following the conservative-led boycott of Anheuser-Busch InBev (A-B) and its Bud Light brand, which started in April 2023. Hattersley cautioned listeners to be wary of “a lot of noise” coming from Q2 comps, particularly on a week-by-week basis, as it’s “going to be hard to credibly measure what was happening on a weekly basis.”
‘Actively Working to Improve’ Blue Moon Trends
Blue Moon continues to record declines in scans, with year-to-date dollar sales declining -5.2% and volume -7% in Circana-tracked off-premise channels, through March 24. Molson Coors is “actively working to improve” the craft beer brand, which is still the No. 1 craft brand in total U.S. multi-outlet + convenience channels.
In Q1, Blue Moon received a packaging refresh, so that the brand now “appears in retail as a family as opposed to different brands,” Hattersley said. Blue Moon was also featured in a “Made Brighter” campaign across media channels, Blue Moon LightSky was rebranded as Blue Moon Light, and the company launched Blue Moon Non-Alcoholic. The latter is already a “top-selling new non-alc brand” for 2024, and is “providing a nice halo for the overall Blue Moon family,” Hattersley said.
“There have been about 30 non-alc beer launches in the U.S. this year, as well as increasing competition,” he said. “So [that] is a truly strong sign as the brand continues to gain distribution and share.
“As we all know, the craft segment has had fairly significant challenges over the last couple of years, and because we’re the biggest brand in that space, we’re not immune to that,” he continued. “We are committed to reinvigorating this brand, notwithstanding the challenges in the overall craft space – it’s been around for a long time, it’s a great brand, it’s got wonderful iconography, and we think we can change the momentum of this brand.”
Flavor-Forward Offerings Having ‘More of a Positive Impact’ Versus a ‘Transitory One’
Molson Coors is confident that its beyond beer offerings will have more sticking power than the quick rise and fall of segments such as hard seltzer.
Simply Spiked, its flavored malt beverage (FMB) brand with The Coca-Cola Company, increased brand volume +35% in the U.S. in Q1. The company also expanded the brand with the launch of Simply Spiked Limeade in both single flavors and a variety pack, and the latter has become the No. 1 new item in the “flavored alternative segment,” Hattersley said.
Molson Coors promoted Simply Spiked with investments around March Madness, and will continue to focus on sports as the “primary passion point for Simply Spiked consumers” throughout the year.
Additionally, Happy Thursday, a line of 4.4% ABV non-carbonated sugar-based refreshers, launched this month, and while “it’s still early days” for the brand, Molson Coors has “seen a very positive response from consumers so far,” Hattersley said.
“The work that we’ve done as a category is having more of a positive impact than a transitory one,” Hattersley added. “I would suggest that the work that we’ve done around flavors, non-alcohol beers, [and] the moderate impact of all of these things are positive for the overall beer industry. And I don’t believe that those are transitory.”
“Our move into flavors more broadly, as opposed to [hard] seltzers specifically, it’s been very positive for us as we’ve driven into the consumer trend of wanting flavor and moving around within flavor more actively than perhaps has happened in the past,” he continued.
Hattersley also noted the company is exploring how it can participate more in the non-alcoholic non-beer space, which it plays in with ZOA, an energy drink brand backed by Dwayne “The Rock” Johnson. Hattersley said Molson Coors needs “to have more than just ZOA in the non-alc space” and “that can come from internal development, as opposed to buy[ing].”
Other Highlights:
On the changes in self space at retailers … Hattersley said there has never been “such a dramatic shift in shelf space before.” However, he doesn’t believe the overall beer industry will see any “large expansion in space,” but rather the space already given to the category will continue to shift and change.
“Certainly craft and flavor – more specifically, seltzers – will get less space,” Hattersley said. “And then there’s obviously the big structural shift in the premium light space moving from our biggest competitor to ourselves.
“But overarching, I don’t see much change one way or another from an overall beer category point of view,” he continued.
On consumers trading down … Hattersley said he does not see any significant changes in consumer habits when it comes to trading down in response to inflation. However, he has seen a shift in what pack sizes consumers are reaching for.
Trends are happening in both “extremes” of pack sizes, he said. Some consumers are looking for single-serve cans and small packs, while others are seeking large formats, causing “a little bit of a squeeze” for mid-tier pack sizes such as 12-packs and 24-packs, Hattersley said.