Molson Coors recorded both top- and bottom-line growth – in addition to volume declines – in Q1 2023, the company announced today.
“Net sales increased 5.9% reported and 8.2% in constant currency, primarily due to positive net pricing and favorable sales mix, partially offset by a slight decline in financial volume,” the company wrote in a press release detailing its Q1 earnings.
Financial volumes, which Molson Coors defines as “owned or actively managed brands sold to unrelated external customers within our geographical market” – akin to shipments (sales to wholesalers), declined -0.2% globally. This was “primarily due to lower volumes in the Americas segment,” which were “partially offset” by financial volumes increases elsewhere in the world.
Brand volumes, which are similar to depletions (sales to retailers), declined -2.1% overall, driven by a -1.5% decline in the Americas.
In the Americas business unit, financial volumes declined -0.5% “primarily due to industry softness.” U.S. brand volumes declined -1.2% “driven by softer industry performance and lower economy portfolio volumes.”
For Q1, price and sales mix contributed +7% growth to net sales in the Americas, which were up +5.6% overall, to $1.939 billion. Net sales per hectoliter increased +7.1% due to price and sales mix, offset by a -1% decline in currency, for overall +6.1% growth.
The company’s income before taxes declined -41.3% on a reported basis, in part due to inflation of “materials, conversation and energy costs.” These were offset by Molson Coors cycling the recording of the $56 million a jury ordered it to pay Stone Brewing in the trademark infringement lawsuit between the two companies and the non-cash impairment charge the company took on Truss, a now-dissolved joint venture with Canadian cannabis firm Hexo, which has since been acquired by Tilray.
Molson Coors also invested $181 million toward modernizing and increasing its internal production capabilities at its Golden and Fort Collins, Colorado, facilities. Of that investment, $65 million went directly to the Fort Collins facility, allowing the company to produce the majority of its beyond beer or “flavor innovation” brands. New packaging lines will go online this month.
Molson Coors Not Factoring April Trends into Full Year Guidance
Coors Light and Miller Lite – Molson Coors’ top-selling brands in the U.S. – have benefitted from conservative boycotts of Bud Light after that brand partnered with Dylan Mulvaney, a transwoman influencer to celebrate her one-year anniversary of transitioning. However, those boycotts began in April, after Q1 ended.
For the week ending April 22, Coors Light recorded double-digit increases in both dollar sales (+20.5%) and volume (+13.3%), as did Miller Lite (+21% in dollar sales and +13.6% in volume). Both brands have gained share in the domestic premium segment, but neither have caught up to Bud Light, which accounted for 31% of domestic premium dollars in the seven-day period. Coors Light had a 23.8% share, followed by Miller Lite at 21.1%.
Year-to-date through March 26, which includes most of Q1, Molson Coors’ off-premise dollar sales increased +2%, to $1.573 billion, compared to the same period last year at off-premise retailers tracked by market research firm Circana. The company’s volume declined -4.2%.
Molson Coors is not factoring April growth trends into its full year guidance at this time, as “nobody has any idea if these [trends] are going to continue,” CEO Gavin Hattersley said during today’s call with investors. The company is projecting low-single-digit net sales and income growth in 2023.
“Obviously, our focus right now is on our brands completely and not looking at what our competitors are or aren’t doing,” Hattersley said “I’m particularly proud of the work that we’ve done over the over the last three years because we’ve built our brands very deliberately and, given we’re seeing progress across our portfolio as a result of that, that tells us that our strategy is working. So, no matter what happens with our competitors, we’re going to continue to make the right, direct decisions for our brands and the long term health of our brands.”
Should the trends continue, Molson Coors is “in a good place” to deal with higher volume demands and supply needs, Hattersley said. Several analysts questioned Molson Coors’ supply, given the company’s history of out-of-stock problems. However, the company made sure its inventory levels were high coming out of 2022, higher than previous years, allowing the company to adapt to the volume spike and be positioned “as good as we could have been,” Hattersley said.
“Frankly, we’re living in such uncertain, volatile times,” Hattersley said. “So it has been our practice when we can to make sure that we’re at the top end of where we would like our inventory to be.
“Obviously, we weren’t planning for this,” he continued. “Our distributors were very supportive in building inventories towards the back end of the year, and we’ve kept up that momentum in the first quarter. So, we’re positioned as well as we could be from a supply point of view. We’ll just have to see how that plays out.”
Beyond Beer Growth Expected to Continue as Innovations Cycle National Launches
Next month, Simply Spiked Lemonade, Molson Coors’ flavored malt beverage (FMB) offering made through a licensing agreement with Coca-Cola, will lap its expectation-shattering launch.
The 5% ABV FMB launched nationally in a four-flavor variety 12-pack and 24 oz. single-serve cans last June, and the demand caught Molson Coors “a little bit by surprise,” with the company unable to keep up, Hattersley said. Despite facing tough year-over-year comps, Hattersley said Molson Coors is “very confident” it can meet the elevated demand expected this summer and continue to record growth.
“Although we’re going up against strong comps, in many respects, that could have been even stronger and that’s what we’re going to take advantage of,” Hattersley said.
Molson Coors has also since extended the Simply Spiked family with Simply Spiked Peach and a new variety 12-pack, which began rolling out in late March.
Topo Chico Hard Seltzer, another product out of Molson Coors and Coca-Cola’s courtship, cycled its own national launch in January and was able to record brand volume growth in the quarter. The brand has since expanded with a line of spirits-based, ready-to-drink (RTD) canned cocktails, which are now available in more than 20 U.S. markets. Topo Chico Hard Seltzer ended Q1 as the No. 4 hard seltzer brand in Circana-tracked off-premise channels, and is on track to be the No. 3 brand, overtaking Bud Light Seltzer, Hattersley said, although he did not give a timeline for when the brand would reach that mark.
Both Simply Spiked and Topo Chico Hard Seltzer are expected to gain shelf space during spring resets, with retailers making more space for FMBs and RTDs, and taking away from craft and smaller hard seltzer brands. Molson Coors’ early readings of retailer plans suggest the company will grow both distribution points and physical shelf space this year for both its beyond beer offerings and its core beer, Hattersley said.
Molson Coors Not Seeing Significant Price Pullbacks
Analysts once again brought up A-B’s recent price rollbacks in some markets – similar to questions asked last week of Boston Beer Company leadership during that company’s earnings call. Hattersley said Molson Coors hasn’t seen any competitors make pricing moves “to the degree that you may have seen been reported.”
“It certainly isn’t a full-market thing, it’s not a full portfolio thing and certainly not half of last year’s full GR [gross revenue],” Hattersley said. “We have seen some increase in brewer-funded levels, but hard to say where that’s all going. But certainly it’s not as widespread as you might have read in the media.”
Molson Coors implemented two above-trend price increases in 2022, equivalent to a combined +10% increase versus prices in Q4 2021. While there is still “plenty of time” before Molson Coors has to make any decisions for fall pricing, the company plans to revert to historical levels, between +1% and +2%, during the back half of the year.
While there hasn’t been significant trade down as a result of last year’s price increases, there has been an increase in value package purchases, Hattersley said. Along with seeing growth in the sale of single-serve 19.2 oz. cans in Q1 – a trend continued over from Q4 2022 – Molson Coors saw an increase in larger pack size purchases by consumers with higher household income levels.
“This, combined with channel shifting behavior among the same consumers, suggests an increased focus on finding the best value even if it requires shopping at multiple stores,” Hattersley said.