In February, Molson Coors Beverage Co released its full-year results for 2021. The now-multi-category group posted a 4.7% lift in sales from the year, driven by a healthy showing in the closing quarter. Here, Just Drinks picks apart Molson Coors’ numbers over the last five years and considers the trends that are set to shape the future for the company and the categories Molson Coors operates in.
The past few years have seen the gradual transformation of the business renamed Molson Coors Beverage Co at the start of 2020. Under CEO Gavin Hattersley, a pure beer player with a narrow geographical reach has ventured out into new categories: hard seltzers, spirits and cannabis beverages.
Such moves are recognition of the need for Molson Coors to evolve in order to survive and thrive, lessening the company’s historic reliance on mainstream beer brands such as Coors Light and Miller Lite, and moving into more profitable parts of the marketplace. Hard seltzers in particular have become a strong focus as the business endeavours to source US$1bn in sales from its 'Emerging Growth' division by 2023 - an ambitious target, but one that the company is confident of achieving.
Despite the axing of Coors Seltzer in the US, Molson Coors’ hard seltzer strategy is pushing ahead, buoyed by the success of Topo Chico - produced, marketed and sold in an agreement with brand owner The Coca-Cola Co - and with ambitious growth plans in Canada and Western Europe.
Compared to the bold moves around hard seltzers, other beyond beer initiatives have been more cautious, but there have been cannabis beverages as part of the Truss Beverage Co joint venture, distribution of RTDs, soft drinks and energy drinks, and the launch of American whiskey Five Trail.
At the same time, Hattersley has been ruthless in the post-COVID axing of underperforming, less profitable brands, with some 100 SKUs culled since 2020. The removal of 11 economy brands in the US incurred the wrath of some wholesalers, but Molson Coors has stood by the strategy. There are signs that the approach is bearing fruit, with 2021 seeing a 4.7% upturn in global sales to top US$10bn - the first such increase in a decade - and similarly positive forecasts put forward for 2022. 'Beyond Beer' has played its part in this, but importantly the twin marquee beer brands of Coors Light and Miller Lite also returned to growth.
The positive trends will be welcome for a company that is in the midst of a multi-year overhaul of its biggest brewery in Colorado that will cost hundreds of millions of dollars to complete.
These recent and current moves form part of a longer-term transformation that has seen the shuttering of the company’s Denver HQ in favour of a move to Chicago, the reduction of four regional hubs to two (North America and EMEA & APAC) and the sell-offs of operations in India and breweries in California.
The big question is whether the big changes are now complete for the business, or whether there is more to come, with much attention focused on Molson Coors’ European activities and persistent rumours of their planned sell-off.
Regional Performance Trends
Tracing regional sales trends over the past five years is complicated by Molson Coors’ restructuring at the start of 2020, which saw the group’s four regional hubs - The US, Canada, Europe and International - reduced to two: North America (comprising the US, Canada and Latin America), and Europe, since renamed as EMEA & APAC (everywhere else).
The current shape of the business, with its huge reliance on North America, was dictated by the 2016 acquisition of the remaining 58% slice of MillerCoors for $12bn, creating what was then the world’s third-largest brewer by value, and fifth-largest in volume terms.
Sales outside North America rose dramatically in 2021 following the difficulties of COVID the year before, but even after surging by 19.6% to more than $1.8bn, they are still dwarfed by North America’s dominance - sales in the region rose 2% to just under $8.5bn.
The US and Canada remain Molson Coors’ biggest markets, followed by the UK.
- North America
Even as sales elsewhere have grown at a faster pace, the US continues to account for roughly two-thirds of Molson Coors’ global sales. And, as the business targets opportunities in premium and speciality beers, it remains hugely reliant on key brands Coors Light and Miller Lite. This state of play has proven difficult over the past five years, given the state of the mainstream beer market in the US, leading the company to attempt to breathe new life into its two major beer labels. In 2021, this appears to have paid off, as both returned to growth.
Elsewhere in the region, much attention has been focused on acquisitions and innovation, involving hard seltzers, RTD cocktails, wine spritzers, flavoured beers and hard ciders, plus soft and energy drinks, targeted craft beer buys via the company’s Tenth & Blake arm, and cannabis beverages through the Truss Beverage Co JV with Hexo Corp, signed in August 2020.
The most notable capital investment is the long-term revamp of the company’s biggest brewery in Golden, Colorado, with a bill running into the hundreds of millions of dollars. In April 2022, Molson Coors announced that changes would lead to a 35% reduction in waste, a 30% increase in carbon capture, and a 30% reduction in energy costs.
Savings have included the axing of 350 jobs at MillerCoors in August 2018, the $150m divestment of the Irwindale Brewery in California to Pabst in November 2020, and the culling of 11 economy brands in the US, announced in July 2021.
This move - part of the much larger rationalisation spurred by the impact of COVID - proved unpopular with some US wholesalers, but was defended by Hattersley on the basis that the underperforming brands were dragging on margins and complicating brewery operations.
There has also been notable investment in Canada, including a spend of $100m announced in May 2021 to quadruple hard seltzer production there.
- EMEA & APAC
The 2021 performance of the newly renamed EMEA & APAC region for Molson Coors constituted a partial recovery after an especially difficult 2020, when COVID-enforced on-premise closures sent sales spiralling by -28%. The near-20% uptick in 2021 regained a great deal of that lost ground.
While speculation surfaces periodically that the company might look to sell off its European operations, for the moment the focus is on premiumisation and diversification, including a big bet on the future of hard seltzers in the UK and Western Europe, and ventures into other non-beer spheres of activity. These have included a gin launch from craft brewer Sharp’s, a cider offshoot from Carling and a number of distribution additions, including Rekorderlig flavoured ciders, RTDs from Miami Cocktail Co and hard seltzers from Bodega Bay.
Seltzer investment has included the announcement in June 2021 of a new canning line for Three Fold, Molson Coors’ local player in the field, which has introduced a draught version into the UK on-premise.
While Europe remains firmly part of Molson Coors’ global activities, the company sold its India arm in February 2021 to Singapore investment group Inbrew Holdings, including two breweries and the Thunderbolt brand.
Brand & Category Performance Trends
The return to growth of Coors Light and Miller Lite in 2021 was significant. For all the buzz around 'beyond beer' and that bullish $1bn revenue target for 2023, Molson Coors still needs its two core brands to perform. Now, thanks perhaps to the pursuit of a younger consumer base via increased digital activity, the tide may be turning.
The company has been relatively quiet on the craft beer front lately - possibly in recognition of the challenges facing a lacklustre and crowded segment in the US. In January 2022, Molson Coors announced the discontinuation of its Saint Archer brand, selling its San Diego brewery to Kings & Convicts Brewing Co.
Otherwise, the company has focused on older acquisitions, such as Sharp’s in the UK and Granville Island in Canada, and smaller moves such as the April 2021 purchase of a minority stake in Tru Colors, a premium-plus beer based in North Carolina with a mission to combat gang violence.
In the US, Blue Moon has been the focus of continued innovation and may provide a template for success elsewhere. Molson Coors believes that spin-offs like Moon Haze Flavoured Pale Ale and Blue Moon Lightsky Tropical Wheat have helped re-establish the brand and enabled it to stand out from the crowd.
The company is refining its approach to hard seltzer as the fast-growing segment begins to mature, with Hattersley acknowledging that rapid growth will now be harder to come by - but refusing to buy into gloomy predictions of its implosion.
Nonetheless, fortunes here have been mixed: Coors Seltzer began strongly, shifting 500,000 units in its first month on the market, but was dropped in July 2021 in the US after failing to live up to expectations. Beer-branded seltzer was cast aside in favour of pure plays such as Vizzy’s and the hugely successful Topo Chico, which the company sells in the US on behalf of The Coca-Cola Co.
Given the US demise of Coors Seltzer - the brand extension still sells in Canada - the deal for Topo Chico looks like sound business. By May 2022, Topo Chico was said to be the fourth best-selling hard seltzer in the US (behind White Claw, Truly and Bud Light), with a market share of 5% (higher in some states) - leading the company to realistically target an overall 10% share of the seltzer market in the future.
Hard seltzer remains a mainly Stateside story, but Molson Coors doesn’t believe this will remain the case, ploughing investment into Canada, the UK and Western Europe. The extension of the Topo Chico agreement to cover Canada from summer 2022 gives the company grounds for optimism on this score. Meanwhile, it continues to push Vizzy’s in the US, now supported by Proof Point, a premium spirits-based RTD that uses vodka, whiskey, rum and Tequila.
Beyond beer is rounded out by another tie-up with Coca-Cola and its Simply juice brand, Simply Spiked Lemonade, unveiled in January 2022, and the August 2021 launch of Five Trail American whiskey, made in collaboration with Bardstown Bourbon Co, but labelled intriguingly as Coors Whiskey Co. Meanwhile, the company continues to make selective launches in cannabis beverages through Truss Beverage Co, including the launch into Canada in November 2021 of two non-alcoholic but beer-themed beverages under the Bedfellows Liquid Arts brand: Haus Mates and Indie Pals.
But, it’s not all about owned brands: the company has increasingly targeted distribution deals for everything from La Colombe non-alcoholic coffee RTDs to Superbird Tequila-based premixes - and Dwayne 'The Rock' Johnson’s health & wellness energy drink Zoa, which Molson Coors said in February 2022 had already far surpassed sales expectations for the entire year.
Molson Coors Beverage Co faces a number of challenges and opportunities in 2022, including:
- Core strength - It bears repeating that, for all the hype surrounding the fast-growing 'beyond beer' part of the business, Molson Coors still needs Coors Light and Miller Lite to fire on as many cylinders as possible in the US. While 2021 showed positive signs for both brands, the company will need to keep its eye on this particular ball in the future.
- Right-sizing seltzers (I) - Molson Coors has bet big on hard seltzers, and in particular appears convinced that future growth will come - partly, at least - from outside the US. The jury’s out on hard seltzers’ global potential, although it seems reasonable to assume some degree of success in Canada. Will the same phenomenon occur in Europe? Doubts remain.
- Right-sizing seltzers (II) - The cooling of hard seltzers in 2021 showed how quickly trends move in this part of the market. While rumours of its demise were clearly overstated, the correction shows how vitally important it is to constantly review activity as the segment matures and diversifies. Smart moves into new, allied areas - such as Proof Point’s spirits-based seltzers - will be increasingly important now.
- In good spirits? - It may just be a branding construct, but might the inclusion of the term Coors Whiskey Co on the label of Five Trail American whiskey, launched in the US in 2021, hint at further incursions into full-strength spirits from the company? The connections between beer and whiskey are clear, and success for Five Trail could be the beginning of a whole new strand for the business.
- Distribution gains - We tend to focus, understandably, on the brands that companies own directly, rather than those they sell on behalf of other people. However, Molson Coors has signed a number of potentially lucrative third-party agreements lately, from pure distribution deals such as Zoa and La Colombe to the highly successful tie-up with Coca-Cola for Topo Chico. These look increasingly important to the group’s future success.
- Trimming the fat - Gavin Hattersley has shown himself capable of making some pretty ruthless decisions when needed to balance the books. The merciless axing of dozens of SKUs in recent years illustrates this, as does the willingness to endure the ire of wholesalers when culling economy brands in the US. Will he extend this philosophy to larger chunks of the business in the future - including, potentially, its European operations?