Molson Coors’ Net Sales Decline 9.7% in Q1; US Shipments Decline 9.5%

Molson Coors Beverage Company CEO Gavin Hattersley admitted that the first quarter of 2021 “was not the quarter we expected to have,” during a conference call for investors and analysts Thursday.

The combined effects of a cyber security attack taking down many of its internal systems, a winter storm suspending operations at its Texas brewery and prolonged on-premise shutdowns in Europe added up to a 9.7% decline in Q1 net sales, to $1.89 billion.

“To say that all of these events happening in a single quarter is unprecedented would be an understatement,” Hattersley said. “While we can’t control the weather, across the business we executed well on what was in our control as to how we responded to each event.”

Molson Coors’ Fort Worth, Texas-based production facility was offline for 11 days during the mid-February winter storm that crippled the state.

“Our team quickly implemented contingency plans to boost production, and get our core brands back to a stable inventory before Memorial Day,” Hattersley said. “Right now, we are shipping over 1 million barrels a week in the United States for the first time in nearly a year.”

The company’s overall production declined 11.9%, to 16.2 million hectoliters in Q1 compared to the same period last year. However, net sales revenue per hectoliter increased 1.8% overall and 2.4% in North America, as the company continues to shift its focus to the higher end of its portfolio as part of the revitalization plan it announced in 2019.

In North America, net sales declined 5.5%, which the company attributed to the February storm and subsequent brewery shutdown and the March cybersecurity attack; these losses were “partially offset by cycling brewery downtime associated with the Milwaukee tragedy in the prior year,” referring to the February 2020 mass shooting that took the lives of five employees and the gunman, who was also an employee.

Hattersley estimated downtime caused by the cybersecurity attack cost the company between 1.2 and 2 million hectoliters in production and shifted EBITDA between $120-$140 million, but recovery plans put in place by the supply chain team have been effective.

“By the end of March, we were a couple of hundred-thousand barrels ahead of where we were expecting to be,” he said.

Brand volumes — a measure that Molson Coors defines as including “an adjustment from sales-to-wholesaler (STW) volume to sales-to-retailer volume (STR)” — declined 7.3% in the U.S. Shipments (sales-to-wholesalers) declined 9.5%, driven by declines in the company’s economy and premium segments. In Canada, brand volume declined 10.8%; in Latin American, brand volume increased 10.8%.

Hard Seltzers Boost Net Sales Per Hectoliter

As Molson Coors increasingly shifts focus to its above-premium hard seltzer portfolio, net sales per hectoliter increased 4.1% in the U.S. driven by sales of Vizzy Hard Seltzer, Topo Chico Hard Seltzer and non-alcoholic energy drink ZOA, which Molson Coors makes in partnership with Dwayne “The Rock” Johnson.

Topo Chico Hard Seltzer, which Molson Coors announced last summer in partnership with Coca-Cola, officially launched on March 29, just before the end of the quarter. It captured 3.2% of the hard seltzer segment in its launch week, bringing the company’s overall hard seltzer portfolio to an estimated 7% share, Hattersley said. In Texas, one of the brand’s 16 launch markets, Topo Chico Hard Seltzer’s market share neared 20%, Hattersley estimated.

“We’re working with Coke to increase our supply of Topo Chico and it’ll be a little constrained, as we meet the huge expected demand for that brand,” he said.

Topo Chico will remain in limited markets until the company is “quite comfortable” it can meet the “substantial demand,” Hattersley added. In its first three weeks in market, off-premise dollar sales of Topo Chico have reached $7.6 million through April 18, according to market research firm IRI.

The brand is currently produced at third-party locations, and will continue to be for the rest of 2021, as Molson Coors continues a multimillion-dollar project at its Milwaukee and Fort Worth breweries to increase hard seltzer production by 400%.

Year-to-date through April 18, Topo Chico has gained a 0.7% share of the seltzer segment, according to data from Fintech and the National Beer Wholesalers Association. Vizzy Hard Seltzer, which Molson Coors launched in March 2020, has reached 3.1% share of the segment; Coors Seltzer, which followed in early fall 2020, has a 1% share.

Dollar sales of Vizzy — the nation’s fifth largest hard seltzer brand according to Fintech data — have reached $28.3 million year-to-date through April 18, according to IRI. In the past month, Vizzy launched a second variety pack and Vizzy Lemonade Hard Seltzer. Dollar sales of the latter have reached $1.6 million, according to IRI.

“Our Variety Pack No. 2 is already turning faster than our Variety Pack No. 1,” Hattersley said. “And Vizzy Lemonade is the second-fastest turning lemonade seltzer in the market.”

Vizzy Variety Pack No. 1 “moved faster in Q1 than all Bud Light Seltzer variety packs put together,” he added.

Investment in Core Brands

Increased marketing spend behind core brands Coors Light and Miller Lite as part of the revitalization plan boosted Coors Light to its “strongest category share performance since the first quarter of 2017,” according to Molson Coors’ Q1 earnings report.

Year-to-date, dollar sales of the Coors brand family increased 2.6%, to $755.3 million through April 18, according to IRI. The Miller Lite brand family’s sales were flat at $611.7 million. The Miller High Life brand family’s dollar sales declined 9.6%, to $121 million.

Dollar sales of the Blue Moon brand family increased 3.3%, to $106.1 million, driven in large part by Blue Moon Light Sky, which Molson Coors introduced in February 2020. The new entrant is the top share gainer in the craft beer segment thus far in 2021, Hattersley said. It accounts for 1.13% of all craft beer dollars year-to-date through April 18, according to IRI.

But dollar sales of Blue Moon Belgian White, the nation’s best selling craft beer, have declined 3.1%, to $82.1 million year-to-date through April 18 as the calendar cycles tough comps from last year’s pantry and fridge stock up period, according to IRI.

Molson Coors expects sales of Blue Moon, a beer “disproportionately focused on the on-premise, to improve as consumers gain the confidence to return to bars and restaurants,” Hattersley said.

“The reopening of the on-premise, and the move to large trusted brands is helping us particularly with Miller Lite, Coors Light and Blue Moon,” he said. “We’ve seen a tick up a couple of points in our share in the on-premise as the on-premise has reopened.”