just On Call - MillerCoors stirred, but not shaken
MillerCoors stays upbeat on turning volumes around
Poor demand for MGD 64 and a slip in volumes for Miller Lite proved a drag on MillerCoors' beer volumes in the first half of 2011, the brewer said today (2 August). High unemployment and a 15% rise in average petrol prices in the US in the first quarter mean that MillerCoors' core consumers - young men - are drinking less beer, according to group CEO Tom Long.
So far, the brewer has offset weak volumes with price rises, something that helped to keep net sales broadly flat against the same period of the year before, at US$3.83bn.
Cost savings, meanwhile, boosted the brewer's profits, with operating profits up by 6% on the same period of 2010, to $645.1m. Net profits rose by 5.6% to $633.4m.
However, cost savings are slowing down as synergies from the combination of Molson Coors and SABMiller businesses come to an end. This, together with heightened pressure from fuel and commodity prices, is putting MillerCoors' lack of volume momentum in the spotlight.
Long remained resolutely upbeat on a conference call with analysts today. "I think you should have some confidence that we can innovate," he said. He added that above-inflation price increases have so far held and that the brewer plans to continue with this strategy.
The group is also seeking to back its brands with renewed marketing investment, including a greater focus on "multicultural sports sponsorship". On Miller Lite, Long said that the group knows that it "needs a campaign to bring new users in".
Tenth & Blake, which this month celebrates its one-year anniversary, has performed well for MillerCoors in the craft and import beer sectors, driven by Blue Moon. However, Long would not say how significant this business is to overall group performance.
MillerCoors' chief financial officer, Gavin Hattersley, said that there are "no plans to announce a new cost [savings] number", after the group reaches the end of its current $750m synergies progamme at the end of 2012. So far, the company has reached $711m of that target.
SABMiller's Chinese joint-venture, CR Snow Breweries, could get a second chance to dig its claws into Kingway Brewery and mount a stronger challenge to Tsingtao in the country's Guangdong province....
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