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Post date: 05/11/2015 - 17:23

MillerCoors Sales Fall as Demand Drops for Coors Light Beer

SABMiller and Molson Coors Brewing Company reported that MillerCoors first quarter underlying net income grew 4.4 percent versus the same period in the prior year to $304.6 million. This income growth was driven by higher net pricing, positive sales mix and strong cost control.

SABMiller and Molson Coors Brewing Company reported that MillerCoors first quarter underlying net income grew 4.4 percent versus the same period in the prior year to $304.6 million. This income growth was driven by higher net pricing, positive sales mix and strong cost control.

“In the first quarter, we continued to grow our largest Above Premium brands while also making strides toward restoring growth to our Premium Lights,” said Tom Long, MillerCoors Chief Executive Officer. “In the coming months, we’ll continue to bolster Miller Lite’s success with a new national advertising campaign, and we’ll execute a holistic refresh of Coors Light that will extend across all consumer touch points, starting with new packaging that emphasizes its ‘Born in the Rockies’ heritage. We’ll continue to win in Above Premium by amplifying and expanding our higher-margin offerings like Redd’s, Blue Moon and Leinenkugel’s Shandy portfolio as we head into the summer selling season.”

First Quarter Highlights

Unless otherwise indicated, all amounts are in U.S. dollars and calculated in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). All share references are per A.C. Nielsen. Percentages are versus the prior year comparable period and include MillerCoors operations in the U.S. and Puerto Rico.

Underlying net income, a non-GAAP measure, increased 4.4 percent to $304.6 million.
Total net sales decreased 0.9 percent to $1.775 billion.
Domestic net revenue per barrel, excluding contract brewing and company-owned distributor sales, increased 1.6 percent.
Total cost of goods sold (COGS) per barrel increased 0.7 percent.
Domestic sales-to-retail volume (STRs) decreased 2.7 percent.
Domestic sales-to-wholesalers volume (STWs) decreased 2.5 percent.

Brand Highlights for the First Quarter

The MillerCoors Premium Light portfolio STRs declined low-single digits, in part due to industry softness in the first two months of the quarter.

Miller Lite declined low-single digits but gained share of the Premium Light segment in the first quarter. The brand continues to benefit from its graphic design overhaul, executed last year and inspired by the Original Lite Can. In January, the brand launched its “Liquid Pride” television campaign to reinforce the quality story behind its pilsner roots, which will continue to air through the summer. The brand will release new television advertising in May designed to further leverage Miller Lite’s authenticity and sessionability. In addition, Miller Lite has begun releasing cans with unique designs linked to local events, like the South by Southwest festival in Austin, Texas, and NASCAR races in local markets.

Coors Light declined low-single digits for the first quarter, but achieved a 90 basis point trend improvement versus the fourth quarter 2014. In the first quarter, Coors Light began to execute a brand overhaul that will emphasize its Rocky Mountain Refreshment. The overhaul began with the rollout of a new can design in late March and will continue through July. The brand debuted new national television advertising in March designed to emphasize Coors Light’s unique refreshment and will launch additional television advertising in June. The brand re-introduced its summer line extension, Coors Light Citrus Radler, in April.

The MillerCoors Above Premium portfolio STRs declined low-single digits in the first quarter, driven by launch volumes of Miller Fortune in the prior year. Excluding Miller Fortune, STRs in the segment grew low-single digits. The Redd’s Franchise is the fastest-growing flavored malt beverage (FMB) in the category in 2015, accelerating to double digits in the first quarter. In March the brand introduced its newest flavor, Redd’s Green Apple, which is off to a promising start; and Redd’s Wicked Apple, introduced just last year, captured the most share of any FMB in the Above Premium segment. The brand will continue to draw new consumers to the segment with unique flavors like Redd’s Wicked Mango, which also was introduced in March. Smith & Forge gained share of segment in the first quarter, and though it was only introduced last year, it is the number three cider brand in the segment by volume, according to Nielsen.

The Blue Moon franchise accelerated to mid-single digits in the first quarter. The Blue Moon Brewing Company is celebrating its 20th anniversary in 2015 and announced that it will open a new brewery in Denver’s River North district next year. Blue Moon seasonal volumes grew double digits in the first quarter, driven by the success of the spring seasonal, First Peach Ale. The brand launched its summer seasonal, Summer Honey Wheat, on April 1. Jacob Leinenkugel Brewing Company achieved high-single digit growth in the first quarter, aided by double digit growth of Leinenkugel’s Summer Shandy. Also in March, the brand released its newest offering, Grapefruit Shandy, to capitalize on a grapefruit beer market that grew triple digits in 2014, and it is off to a strong start. Leinenkugel’s will support its shandy portfolio with national television advertising that will air in May.

Coors Banquet grew mid-single digits for the first quarter. In the first quarter, the brand’s “stubby” heritage bottle was expanded into 12-packs, 18-packs and 20-packs nationwide. This year, Banquet will introduce four new classic can designs that will emphasize the brand’s heritage and authenticity. The brand released national advertising to further leverage those concepts in March.

The MillerCoors Below Premium portfolio declined mid-single digits, driven by high-single digit declines of Keystone Light and Milwaukee’s Best. This is attributable primarily to a reduction in national marketing investment on Keystone Light and the underperformance of Milwaukee’s Best Light.

Miller High Life declined low-single digits in the first quarter, sustaining a trend improvement versus recent years. The brand will continue its “I Am Rich,” advertising campaign, and will introduce its American Artist Series in May, featuring limited edition packaging with original artist illustrations. Steel Reserve grew high-single digits in the first quarter, due in large part to the success of the Steel Reserve Alloy Series, the brand’s line of flavored malt beverages. To satisfy the economy drinkers’ desire for more flavorful choices, the Alloy Series added Margarita and Hard Pineapple flavors in the first quarter.

Financial Highlights for the First Quarter

Domestic net revenue per barrel grew 1.6 percent as a result of favorable net pricing and positive sales mix.

Total company net revenue per barrel, including contract brewing and company-owned distributor sales, increased 1.5 percent. Third-party contract brewing volumes were down 1.0 percent.

Total COGS per barrel increased 0.7 percent, driven by brewery inflation, higher costs associated with brand innovation and lower fixed cost absorption due to lower volumes. Unfavorability was partially offset by lower costs on malt and fuel, as well as by supply chain cost savings.

Marketing, general and administrative costs decreased by 2.3 percent, driven by lower general and administrative costs, partially offset by higher marketing investment than the prior year comparable quarter.

MillerCoors achieved cost savings of $15 million in the first quarter, primarily related to procurement savings, logistics and brewery efficiencies.

Depreciation and amortization expenses for MillerCoors in the first quarter were $76.7 million, and additions to tangible and intangible assets totaled $76.3 million.

There were no special items in the quarter.