A funny thing happened on the way down the drain
Beer sales fell worldwide during the early days of the pandemic, replaced by wine, spirits and trendy coolers, seltzers and cannabidiol (CBD) concoctions. Photo by Molson It’s said that people turn to chocolate and wine in uncertain times. A guilty, often inexpensive pleasure to take the edge off. Of course, it doesn’t have to be wine. It could be beer and chips, though Molson Coors Beverage Co. didn’t seem to enjoy any benefit when the COVID-19 lockdowns hit worldwide in March 2020.
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Its stock plummeted more than 30 per cent on the Toronto Stock Exchange between Feb. 7 and March 20, 2020, and then bottomed out at $43.67 that September, well off its all-time high of $143.74 four years earlier. The pandemic clearly just added to the discontent investors were already feeling with the beer maker.
That’s understandable. Beer sales are falling worldwide, replaced by wine, spirits and trendy coolers, seltzers and cannabidiol (CBD) concoctions. Even within the beer category, drinkers are shunning the big guys in favour of craft brewers often just steps away from their homes.
But a funny thing happened on the way down the drain. For the first time in more than a decade, Molson Coors reported annual revenue growth in fiscal 2021, with net sales rising 6.5 per cent to US$10.28 billion in 2021, compared to a decline of 8.7 per cent a year earlier as pandemic restrictions weighed on demand. It also reported a US$80-million profit in its fourth quarter, compared to a US$1.37-billion loss a year earlier.
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Drinkers around the world even started drinking more Miller Lite and Coors Light, Molson Coors’ primary brands, though neither is exactly an indulgence. “We came really close to actually growing those brands in 2021, mostly (hurt) — in my view — because of the surge of Omicron in the last six weeks of the year,” chief executive Gavin Hattersley told investors in late February.
The Canadian operations were singled out for the improved results, no surprise given it’s the company’s second-largest market, as well as a corporate turnaround plan, a key part of which is that the brewer no longer sees itself solely as a brewer.
The Molson Coors brewery in Montreal. Photo by THE CANADIAN PRESS/Ryan Remiorz files Indeed, the company replaced Brewing with Beverage in its corporate name in January 2020, reflecting the growing importance of non-beer products such as seltzers and CBD-infused drinks. Call it diversification within a single category, which is very different from Molson’s previous attempts at diluting its reliance on beer. For a while last century, the company was more of a conglomerate — with fingers in retail, sports and chemicals — than a brewer, before it started refocusing on its core products in the late 1990s.
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Obviously, the name change isn’t as significant as the one Molson Inc. made in 2004 when it merged with Adolph Coors Co., thereby creating a Canadian-American company called Molson Coors Brewing Co. That put a symbolic end to a Canadian brewing empire founded in 1786, one that was an early national champion that formed a bank (which later merged with the Bank of Montreal) and launched this country’s first steamboat.
The company may no longer be investing in lumber retailers or steam lines, but it has been busy making changes nonetheless.
“In the last five, six years we’ve invested approximately $1 billion in Canada alone in our supply chain networks,” Molson Coors Canada chief executive Frederic Landtmeters said, adding that two of the primary objectives were sustainability and innovation. “If we’re now talking about growing in categories beyond beer, that’s only really possible because we invested in our supply chain five, six years ago, and that’s now allowing us to be much more flexible, much more nimble to produce different types of products in-house.”
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Bottles of George Killian’s Irish Red beer make their way down a conveyor belt before being boxed at the Molson Coors brewery in Golden, Colorado. Photo by Matthew Staver/Bloomberg files Admittedly, the company is a latecomer to the seltzer category and it’s competing against seemingly hundreds of very similar beverages introduced every year. Coors Seltzer and Vizzy Hard Seltzer launched in Canada in 2021, followed by Topo Chico, through a partnership with Coca-Cola Co., this past January. Landtmeters said the company had close to a 10-per-cent share of the seltzer market coming out of 2021, which is pretty good for an upstart, even if it’s a multi-billion-dollar one.
Molson Coors has also been busy on the CBD beverage front, which is still in its infancy given the law allowing such beverages was only recently introduced in Canada. The company has a joint venture called Truss Beverage Co. with Quebec-based cannabis producer Hexo Corp. to produce CBD drinks, eight of which were introduced in August 2020, and another six in April 2021.
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“From our perspective, from my perspective, I’m looking forward to seeing the full potential of our strategy coming through, which is going to happen when we get our on-premise partners back on board,” said Landtmeters, who was installed in his current position in 2016 after previous roles at Molson Coors UK and Ireland, and Molson Coors Europe.
On-premise sales make up approximately 20 per cent of Molson Canada’s business, so he’s right to be somewhat optimistic. One in three Canadian consumers have visited bars and restaurants in March for drink-led occasions — four in five for food-led occasions — and beer remains the No. 1 beverage in bars and restaurants, according to data from research firm CGA for March 10-14.
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More On This Topic Tom Bradley: The more things change, the more the keys to successful investing stay the same Don’t fight to keep your old investor habits going when they aren’t working anymore Money managers prep for bad news as stagflation risk has investors sinking billions into hedges However, two-thirds of consumers have noticed an increase in alcoholic drink prices in the past three months, and 32 per cent of these consumers have been purchasing fewer drinks, while 29 per cent have been going out less often. There isn’t much Molson Canada, or any other brewer can do about that.
“We need the pricing to reflect our increasing cost of goods,” Landtmeters said. But that’s where diversification comes in. “We need the volume from our big brands. We need the pricing to reflect our increasing cost of goods. And we need the mix improvement through more above-premium and more beyond-beer beverages.”
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Article content Of course, it’s not all good news. One of the jewels in Molson Coors Canada’s revitalized infrastructure plan is undergoing a bit of labour strife, as workers at the production facility in Longueuil, Que., went on strike in late March and remain on the sidelines.
The suburban Montreal facility replaced the historic brewery on Notre-Dame Street near the old port. If you never had a chance to visit, too bad. Canadian history, along with the smell of spent grains, oozed from those walls. The company’s future may not be as nationalistic, but Landtmeters for one seems to think it will be no less heady.
• Email: aholloway@postmedia.com
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