Molson Coors’ US Shipments Decline More Than 7 percent

Molson Coors’ today reported a worldwide net dollar sales decline of 2.1 percent in the third quarter, highlighted by the company’s continued struggle to regain market share in a crowded U.S. marketplace.

During Q3, Molson Coors’ global brand volumes increased 0.6 percent while its revenues per hectoliter increased 2.9 percent worldwide and 1.2 percent in the U.S.

However, Molson Coors’ domestic shipments to wholesalers (STWs) decreased 7.2 percent while sales to retailers (STRs) declined 2.9 percent for the three-month period ending September 30.

Year-to-date, domestic sales to retailers have declined 2.3 percent while sales to wholesalers have dropped 3.8 percent, the company reported.

Molson Coors CEO Mark Hunter characterized the company’s U.S. sales as “more sluggish than anticipated.” He added that the company is focused on gaining share domestically in the premium segment, growing sales in above-premium and stabilizing its economy brands.

Gavin Hattersley, the CEO of the company’s U.S. division, MillerCoors, and Hunter, once again restated the organization’s goal of reversing downward domestic trends and returning the unit to growth in 2019. Since 2008, MillerCoors has suffered domestic volume losses of about 11 million barrels.

Hattersley noted that premium lights had a “tough summer” in the U.S. for several reasons, among them: spirits brands discounting their products, on-premise traffic declines, changes in shopping behavior and the short-term negative impact on sales of hurricanes Irma and Harvey.

Hattersley also pointed out that the company had one fewer selling day during the quarter and blamed lower distributor inventories on the “higher than planned levels” at the end of Q2. He added that distributor inventories at the end of the most recent quarter were in line with 2016 levels.

“We’ve had almost a 50 percent reduction in out-of-stocks compared to the last year,” he said.

Hunter highlighted the success of the company’s above-premium brands, such as Blue Moon and Leinenkugel’s, sales of which have increased 20 percent year-to-date and now account for nearly one-fifth of the company’s global volume.

Hunter said sales of Blue Moon Belgian White continue to grow in on-premise channels, gaining velocity and tap handles, which he attributed to the brand’s long-time orange slice decoration “ritual.”

Meanwhile, Hunter called 2017 a “record-breaking year” for Leinenkugel’s Summer Shandy with volumes up “in low double digits.”

“We’ll build on the success next year through a number of packaging and shandy innovations,” he said.

Additionally, Hunter said the company’s four craft brands — Texas’ Revolver, Georgia’s Terrapin, Oregon’s Hop Valley, and San Diego’s Saint Archer — along with its Colorado Native brand are growing at “double digit rates well ahead of the overall craft segment.”

Looking ahead to future quarters, Hunter said the company has strengthened its above-premium portfolio by reaching a 10-year distribution deal with Heineken on Mexican import label Sol. Hunter also sees “high potential” in the Arnold Palmer Spiked tea and Two Hats line of fruit-flavored light beers.

“We’re confident that we have the right plans to achieve growth and we’ll continue to execute with relentless focus while looking for further build, borrow and buy opportunities for additional above premium scale,” he said.

During a call with investors and analysts, Cowen & Company’s Vivien Azer asked Hunter about a competitor, Constellation Brands, and that company’s recent $191 million investment in Canada’s Canopy Growth Corporation, a marijuana company. She was curious whether or not Molson Coors, which maintains a headquarters in Canada, was eyeing the space.

“I think the main thing is to make sure that we don’t get caught in some sort of adrenaline rush,” said Hunter, who revealed that the company had formed an exploratory team to look into cannabis. “We’re very thoughtful, very purposed, very clear in how we want to respond to both what could be challenges and what could be opportunities.”