In February, Molson Coors Beverage Co released its full-year results for 2020. The now-multi-category group posted an 8.7% dip in sales from the year, driven by a near-30% top-line tumble in Europe. 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.
Most of the big multinational brewers are in some form of transition in 2021 – either in terms of geography or category, as they diversify beyond beer and into other strands of the beverage industry. Over the past five years, however, particularly in the 18 months since Gavin Hattersley stepped up to the role of CEO, none have undergone quite so radical a rethink as what is now known as Molson Coors Beverage Co.
Even the name, changed in late 2019, serves as an indication of the way in which the group has pivoted in the recent past, explicitly positioning it to target categories beyond its core business of selling beer – including hard seltzers, spirits, RTDs, soft drinks and cannabis beverages.
But, there’s more to the shift under Hattersley: Molson Coors is more reliant than its rivals on mainstream beer in the US, which is hardly in great health right now, leaving it with no option but to target the higher growth potential of the craft and speciality segments – and to undergo a major restructuring exercise.
The latter has seen the closing of Molson Coors’ Denver HQ, with the company moving to Chicago, and the consolidation of its four regional hubs into two: North America (US, Canada, Latin America) and Europe (everywhere else). More recently, the company has sold off its business in India, as well as divesting a brewery in California and beginning the hugely costly, multi-year transformation of its biggest brewery, Golden in Colorado.
The streamlined nature of Molson Coors’ new corporate structure gives a clue to the geographical imbalance of the company’s global footprint. With no significant activities in Asia or Africa, and a patchy presence in Europe that is strongly reliant on the UK, North America was responsible for 85% of Molson Coors’ 2020 sales – and Europe just 15%.
How should the company address that imbalance? There has been persistent speculation that it might sell of its European operations – the rumours resurfaced most recently in June 2020 – or that there might be an even bigger deal involving Heineken.
For now, Hattersley remains focused on rightsizing the business for a post-COVID world, and chasing non-beer opportunities with the aim of sourcing more than US$1bn in sales from them by 2023. Given that that’s only a couple of years away, there’s plenty still to do.
Regional Performance Trends
One early outcome of Hattersley’s restructuring plan for Molson Coors was the reorganisation, from the start of 2020, of the company’s business units. Previously divided into the US, Canada, Europe and International, they are now grouped into North America (comprising the US, Canada and Latin America) and Europe (everything else, including Europe, the Middle East and Africa, plus Asia-Pacific).
The reorganisation makes five-year comparisons complicated, but the fact that North America accounted for 85% of 2020 sales ($8.24bn out of $9.65bn) illustrates the regional spread of the business – or rather, the lack of it. The region is home to Molson Coors’ two largest markets (the US and Canada), with the UK running third.
The reliance on the US market, in particular, is a consequence of the company’s acquisition of the remaining 58% of the MillerCoors JV in 2016 for $12bn, which made it the world’s third-biggest brewer by value, and fifth by volume. The acquisition lifted annual sales above $11bn in 2017, but they have seen a slow decline since, culminating in the 8.7% fall in COVID-hit 2020. This constituted a middling performance compared to the company’s peers, Anheuser-Busch InBev (sales down 3.7%), Carlsberg (-8.4%) and Heineken (-11.9%).
Molson Coors has stood by its early forecasts of a mid-single-digit sales rise in 2021, despite the negative effects of bad weather and a cyber attack in the first quarter.
- North America
Sales growth for Molson Coors on a global scale is largely dependent on its performance in the US, which accounts for about two-thirds of group sales. Its performance in the country – for all the talk of diversification into non-beer segments – is heavily reliant on the form of lead brands Miller Lite and Coors Light.
Recent market trends tend to pull the company in two different directions: growth in areas such as speciality and premium beers, plus hard seltzers and other non-beer activities, trying but failing to offset declines for the big two brands. A key priority for Molson Coors is to stop the rot for its brace of flagship brands,
Meanwhile, a raft of smaller-scale acquisitions and new product launches over the past few years encompasses hard seltzers, RTD cocktails, wine spritzers, flavoured beers and hard ciders, alongside targeted craft beer acquisitions by the company’s Tenth & Blake arm.
Molson Coors’ owned hard seltzer stable – Vizzy, Coors and Henry’s Hard – has been supplemented by an agreement with The Coca-Cola Co to make, distribute and market its Topo Chico hard seltzer in the US.
The company has also moved into the arena of cannabis beverages via its joint venture, Truss Beverage Co, with Hexo Corp. It’s early days, but the first products were launched into Canada in August 2020, and the US in January 2021.
The effects of the company restructuring under Hattersley have been felt in this region more than anywhere, including 350 job losses at MillerCoors in September 2018, the $150m sale of the Irwindale Brewery in California to Pabst in November 2020, and the commencement in October 2020 of a multi-year, multi-hundred-million-dollar overhaul of its largest production centre, the Golden Brewery in Colorado that is also the home of Coors.
North America proved relatively resilient in 2020, with sales slipping 4.3% to $8.24bn, with sales in the US only down by 3%.
However, in March, the company warned that its Q1 2021 performance would be affected by a combination of bad weather in Texas and a cyberattack that led to delays and disruptions to production and shipments (something which also impacted trade beyond North America).
The catch-all Europe region – which includes everything outside the Americas – is dominated by the UK, Molson Coors’ third-largest market. The company’s presence elsewhere was diminished in February 2021 with the sale of its India arm to Singapore-based investment group Inbrew Holdings, including two breweries and the Thunderbolt brand. Under the terms of the deal, the breweries will continue to brew Molson Coor beers under licence.
The region has also seen the rebranding of Coors Light as simply Coors, announced in October 2020 alongside a new marketing campaign with the strapline ‘Keep it Fresh’. First launched in the UK, the new look is being rolled out across the EMEA and Asia-Pacific areas.
The UK in particular has seen many examples of Molson Coors’ increasing diversification, from craft brewer Sharp’s developing a gin brand to the company’s distribution of Rekorderlig flavoured ciders, and a move by lager brand Carling into regular cider. The UK arm is also distributing RTDs from Miami Cocktail Co and Bodega Bay hard seltzer.
The company has also announced (in April 2021) a deal to distribute Tarquin’s Gin and Twin Fin Rum (from the UK’s Southwestern Distillery), premium mixers from Lixir Drinks and the Jimmy’s Iced Coffee brand throughout Western Europe. The move comes from Molson Coors’ Beverage Hub, a Western European team focused on RTDs, spirits, adult soft drinks and hard seltzers such as Three Fold.
Sales for Europe have hovered around the $2bn mark for the past few years, but the group’s heavier presence in the region’s on-premise saw it bear the brunt of the impact of COVID-19 during 2020: full-year sales were down 28% to $1.43bn, and plummeted by 39% in the fourth quarter alone as further lockdowns were imposed.
Speculation persists that Molson Coors could look to offload its European operations, resurfacing in June 2020 through reports in M&A publication Dealreporter. The company has steadfastly refused to comment.
Brand & Category Performance
The 2016 acquisition of the entirety of the MillerCoors US business gave Molson Coors total control of two powerhouse brands in Coors Light and Miller Lite – but also left the group exposed to the downturn of mainstream beer in the US in the years since. No amount of innovation and diversification, in the short term at least, can make up for the declines of two brands of that scale, so the company’s attempts to release some of the pressure on its big names have been accompanied by determined efforts to shore them up at the same time.
There have been bids to tap into a younger audience through an enhanced digital presence, the repackaging of Coors Light in the US in August 2020, a joky pre-Christmas ‘Beerman’ ad campaign for the brand in late 2020, as well as – moving onto the broader Miller franchise – the first packaging revamp for Miller Genuine Draft in its 36-year lifespan, announced in February 2021.
It’s hard to assess the impact of these measures in a year as unusual as 2020; off-premise sales rises of 6% (Coors Light) and 8% (Miller Lite) seem positive enough – but how much of that extra trade was brought by ‘pantry-loading’ Americans drinking at home instead of in their local bar?
Molson Coors’ craft beer activities are handled by its Tenth & Blake arm, but the company’s moves in this area date back a decade and more to acquisitions like Creemore Springs and Granville Island in Canada, and Sharp’s in the UK. Since then, there have been a few bolt-ons – Saint Archer, Terrapin, Hop Valley, Revolver and Atwater Brewing in the US; Pardubicky in Czech, and Hop Stuff Brewery & Taprooms in the UK. Most recently – in April 2021 – Molson Coors has taken a minority stake in Tru Colors, an above-premium beer business in North Carolina that aims to combat gang violence.
Ventures have become more selective – possibly because of the struggles that the craft segment is currently suffering in the US. A joint-venture with DG Yuengling & Son, signed in January 2021, will see Molson Coors brew the Pennsylvania company’s beers at its plant in Fort Worth, aiming to expand Yuengling’s geographical reach beyond its eastern heartland.
Fine Company, a start-up craft brand, was launched into three eastern Canadian provinces in November 2020, and there has been increased innovation in the speciality spectrum for the company’s more established brands too, including the limited-edition Molson Common Bond, made using a hop extract taken from JP Wiser’s whisky, a Canadian distiller owned by Pernod Ricard.
Then there is the launch, in April 2021, of Coors Pure, an organic, 3.8% abv beer with 92 calories a can and a wellness angle reminiscent of hard seltzers. Earlier plans to launch a similar product called Coors Peak were quietly abandoned in favour of Pure.
Molson Coors’ approach to hard seltzer has mirrored that of rival Anheuser-Busch InBev, but on a smaller scale: a portfolio of standalone products (Vizzy, Henry’s Hard) and a diversified beer brand (Coors). To this, in the US, has been added the production, marketing and distribution of Coca-Cola’s Topo Chico.
The company makes much of Vizzy’s wellness claims (antioxidants), and it’s clear that it’s betting bigger on the ever-expanding Vizzy range than on ‘heritage’ brand Henry’s Hard Seltzer, the market share of which has steadily declined.
Coors Seltzer is also a priority, selling a reported 500,000 cases in its first month after launch in August 2020. There are plans for another seltzer launch, Proof Point, later in 2021, targeting the premium-plus segment with real spirits among its ingredients.
Molson Coors has set itself the bullish target of sourcing more than $1bn in annual sales from non-beer activities by 2023 – a bold move that has kickstarted a raft of launches, acquisitions and new ventures, including the acquisition of California-based Clearly Kombucha in 2018, and of a stake in soft drinks producer LA Libations in November 2019.
The latter has already spawned the launch (announced in September 2020) of probiotic sparkling water Huzzah, and plans for an as-yet-unnamed nootropic drink (reputed to aid mental focus), plant-based soda Madvine and grain-based milk alternative Golden Wing.
The company has also taken a stake in a chai tea business (Bakhti), and launched wine spritzers through Movo and hard ciders via Crispin. A trial of ‘hard’ coffee RTDs with La Colombe was abandoned, but Molson Coors is now distributing the company’s non-alcoholic coffee RTDs in US convenience and drug stores.
These moves constitute a series of small steps, rather than game-changing developments – moves like the distribution of Tequila-based RTD Superbird for Casa Komos Beverage Group, or of Dwayne ‘The Rock’ Johnson’s health & wellness-focused energy drink Zoa.
Meanwhile, the Truss Beverage Co cannabis joint venture with Hexo Corp has yielded its first products for the Canadian market, including a sparkling water, an iced tea and a juice. One of these, Veryvell, became the company’s first CBD drink launch in the US, moving into Colorado at the start of 2021.
Molson Coors Beverage Co faces a number of challenges and priorities in 2021, including:
The big guys – Molson Coors’ overall sales are hugely dependent on the US and its US activities are hugely dependent on Coors Light and Miller Lite – so getting this formidable tag-team to perform is a major priority for the business. The numbers from last year look positive, but 2020 was an unprecedented year, from which few firm conclusions can be drawn. The pressure’s on for 2021.
Satisfied with seltzers? – The group has made some good moves on hard seltzers, hedging its bets between Vizzy and Coors and supplementing this with an opportunistic deal to do the hard work on Topo Chico in the US for The Coca-Cola Co. There’s still Proof Point to come, but Henry’s Hard is looking tired. Is that enough? It surely isn’t. Expect more activity to come.
Getting serious beyond beer – Having a $1bn sales target looming in a couple of years’ time should be enough to make a brewer serious about its ‘beyond beer’ activities – but, while Molson Coors has been admittedly busy in this area recently, there’s a heck of a lot of work still to do. It feels like a couple of big deals are needed to get things moving, which could be funded by…
…selling off the company’s European operations? – On one level, this doesn’t make strategic sense. Why would you cast off your only significant presence outside North America? But selling off your unit in India doesn’t suggest you’re that bothered about expanding your global footprint anyway, so why not go the whole hog and just focus entirely on the Americas? Then again…
…how about that Heineken deal? – It’s a bit of a stuck record, but – like the suggested divestment of Molson Coors’ European operations – it’s another rumour that refuses to die. Everyone’s had more pressing matters on their minds over the past year or so, but the rationale behind the deal still exists. If it’s ever going to happen, it could happen soon.