Molson Coors Beverage Co. reports net sales for the third quarter rose 2.5% to $2.82 billion and profit jumped 32.1% to $453 million, or $2.08 a share.
The company attributed the 2.5% sales gain to strong net pricing in both North America and Europe, favorable brand mix from premiumization of the portfolio as well as positive channel mix as the on-premise continues to reopen, particularly in Europe and Canada, partially offset by the impact of lower financial volumes driven by economy brand declines and U.S. domestic shipment timing.
Brand volumes decreased 3.6%, primarily due to a decline in the U.S. driven by economy brands including the de-prioritization of non-core SKUs, as well as lower Central Europe volumes and the cycling of prior year volumes of our India business which was disposed of in the first quarter of 2021, partially offset by brand volume growth in Canada and Latin America as the on-premise continues to reopen.
Net sales per hectoliter on a brand volume basis increased 3.6% in constant currency, reflecting the strong net pricing growth as well as favorable impact to brand mix of premiumization of the portfolio, as well as favorable channel mix.
Higher transportation and “inputs” costs pushed the cost of goods sold up 9.3%.
In North America. reported net sales decreased 1.2% and 2.1% in constant currency primarily due to a 4.8% decrease in financial volumes which was driven by lower brand volumes and unfavorable shipment timing in the U.S., the company said. North America brand volumes decreased 3.8% primarily due to a 5.2% decline in the U.S. driven by economy brands including the de-prioritization of non-core SKUs, partially offset by growth in above premium. Brand volumes in Canada and Latin America grew 0.5% and 9.0%, respectively, reflecting the benefit of fewer on-premise restrictions in the third quarter of 2021.
Net sales per hectoliter on a brand volume basis increased 2.4% in constant currency due to net pricing increases and positive brand mix, partially offset by unfavorable geographic mix attributed to growing license volume in Latin America.
In the U.S., net sales per hectoliter on a brand volume basis increased 3.2% which Molson Coors said “reflects strong brand mix performance as we continue to premiumize our portfolio. The rate favorability was offset by financial volume decreases, resulting in a 3.7% decrease in net sales revenue in the U.S.
“Net sales per hectoliter on a brand volume basis grew in Canada due to positive brand and channel mix, as well as net pricing increases, while Latin America also increased due to favorable sales mix.”
“Twenty-four months ago, we announced a revitalization plan to put Molson Coors on track to deliver sustainable top- and bottom-line growth, and we continue to make meaningful progress towards that goal,” said Molson Coors CEO Gavin Hattersley. “I remain confident that we are on track to deliver our full-year key financial guidance for 2021.”
The gains came despite a raft of global supply chain issues and significant inflation, which resulted in soaring prices for transportation and key raw materials. Those pressures are expected to persist in the months ahead.
“Fuel prices are up. Truckers are in short supply around the world, and freight costs are up too,” Hattersley told analysts and investors on the company’s earnings conference call.
That resulted in lower shipments during the quarter than the company projected, but the tide is beginning to turn, Hattersley said. So far in the fourth quarter, shipments are up to nearly 1 million barrels a week in the U.S., Molson Coors’ largest market, helping boost distributor inventories by more than 10% heading into the key holiday season.
Molson Coors’ largest brand, Coors Light, is growing share of total beer in the United States for the first time in more than five years. Its strong performance in the third quarter, aided by the continued success of its “Made to Chill” campaign, was fueled by increased marketing investment, Hattersley said.
The company plans to continue robust marketing support for the brand into and beyond the fourth quarter.
The brand also is showing momentum in Latin America. In Puerto Rico, for instance, Coors Light is growing for the first time in 15 years.
During the quarter, Molson Coors said its global portfolio of above-premium beverages, including brands such as Vizzy, Topo Chico Hard Seltzer, Blue Moon, Madrí Excepcional and Praha, eclipsed 25% of total brand volume net sales revenue.
This so-called premiumization of the company’s portfolio, a key goal of its revitalization plan, is helping drive profitability.
In the U.S., the company has grown share of the above-premium segment for two consecutive quarters for the first time in more than five years.
That growth is largely tied to its continued success in hard seltzers. While the segment is showing signs of flattening and leading brands are mired in declines, Molson Coors continues to gain share with the fastest-growing hard seltzer portfolio in the U.S.
Vizzy brand volumes surged 50% in the third quarter to become the No. 4-selling hard seltzer in the country, per IRI data. Topo Chico Hard Seltzer, meanwhile, holds the No. 3 slot among new items released in 2021 in the general malt beverages category and holds a 2.4 share of the market despite being sold in just 16 markets, per IRI.
In the U.S., Peroni also is up double-digits, outpacing all other European imports. Blue Moon Belgian White is up high single digits. And Blue Moon LightSky continues to post double-digit growth.
Molson Coors said it sold nearly 2 million cases of non-alcohol beverages during the first nine months of 2021, marking progress toward its ambition of reaching $1 billion in revenue by 2023.
Leading the way is ZOA, the No. 1 new energy franchise in 2021 that’s elbowed its way into the Top 20 brands in the space, IRI data show. Molson Coors now has secured more than 115,000 points of distribution for the brand, with “more coming online every day,” Hattersley said.
Molson Coors’ partnership with La Colombe on its ready-to-drink line of coffees also is picking up steam. Early success with distribution in large, national retailers has allowed the company to unlock national distribution of La Colombe products in grocery and other chain stores for early 2022.
“Growing beyond the beer aisle is no longer an aspiration,” Hattersley said. “We’re doing it.”