This is progress? Molson Coors Brewing Co. President Mark Hunter thinks so. Judge for yourself:
- U.S. sales to wholesalers fell 6.7%.”Distributor inventory levels were lower than planned, compounded by a new ordering system at our Golden brewery, which has taken longer to ramp up than expected. Compared to last year, we under-shipped by approximately 450,000 hectoliters, which represents about $30 million of gross profit.”
- U.S. brand volumes were down 3.8%, reflecting, Hunter said, “overall industry softness as poor weather dampened overall industry demand.
- Worldwide brand volume of 19.1 million hectoliters decreased 3.1 percent driven by U.S., Canada and International declines. Global priority brand volume decreased 5.6 percent. Financial volume of 20.8 million hectoliters decreased 4.9 percent, and was adversely impacted by reductions in brand volumes, wholesale inventories and contract brewing.
- Sales in the U.S. were down 5.8%, in Canada, down 2.5%; in Europe, down 1.9% and everywhere else down 7%.
- Net income was down 39.5% to $104.3 million, or 48 cents a share.
Hunter insisted things will look up on a full-year basis, “with the negative first quarter profit impact reversing primarily in the second half of this year.”
You might think boosting sales would be the company’s No. 1 priority, but you’d be wrong.
“Across Molson Coors, our teams are focused on our first priority, which is to drive margin expansion, bottom-line growth and strong free cash flow to enable deleverage,” Hunter said.
Increasing sales is priority No. 2, and Hunter said the company’s “First Choice commercial excellence approach, which provides the most sustainable source of profit growth over the medium to long term.”
Comment: In reporting earnings this morning, Molson Coors didn’t break out what it spent on adverting and promotion, but it appears to us that Molson Coors has cut that pretty drastically in order to reduce its debt burden. We’re always in favor of cutting debt, but we think the No. 1 priority at a minimum should be to consistently maintain sales and shipments at the same level as a year earlier, at a minimum.