The numbers:
- Worldwide brand volume: 19.706 million hectoliters, up 2.1%
- Global priority brand volume up 6.6%
- Net sales: $2.4 billion, down 0.5%, but up 1% in constant currency
- Net sales per HL: $111.93, increased 2.4%, and increased 3.9% in constant currency
- U.S. GAAP net income from continuing operations attributable to MCBC: $201.9 million ($0.93 per diluted share), compared to pro forma net income of $257.4 million a year ago
- Underlying after-tax income: $165.6 million ($0.76 per diluted share), decreased 12.1%
The company’s U.S. unit, MillerCoors Brewing Co.’s reported a 21.5% plunge in U.S. GAAP net income from continuing operations. That drop “was driven by lower net special and other non-core items this year, along with lower U.S. volume, mix shift to higher-cost products, higher brand amortization expense and higher corporate costs,” the company said.
U.S. domestic sales-to-retailers volume (STRs) declined 2% percent for the quarter, driven by lower volume in the Premium Light and Below Premium segments. Domestic sales-to-wholesalers volume (STWs) decreased 4% percent for the quarter. Domestic net revenue per hectoliter, which excludes contract brewing and company-owned-distributor sales, grew 0.2% for the quarter as a result of favorable net pricing, partially offset by negative sales mix.
Cost of goods sold (COGS) per hectoliter increased 1.7 percent for the quarter, driven by higher input costs and volume deleverage, partially offset by supply chain cost savings. Marketing, general and administrative (MG&A) expense decreased 3.7 percent due to lower brand investments and lower employee-related expenses.
On a U.S. GAAP basis, MillerCoors income from continuing operations before income tax rose 3.4% to $315.6 million for the first quarter, a result of lower special charges related to the Eden, North Carolina, brewery closure; lower MG&A expenses; and net pricing growth, partially offset by lower volume and higher COGS per hectoliter.
MillerCoors underlying EBITDA for the first quarter decreased 3.7 percent to $441.9 million, versus the same period in the prior year, driven by lower volume and higher COGS per hectoliter, partially offset by lower MG&A expenses and net pricing growth.
But it wasn’t just MillerCoors. MolsonCoors’ Canadian operations also had lower volume, contributing to a 12.1% drop in Molson Coors’ underlying after-tax income for the first quarter of 2017. Also hurting: higher brand amortization expense and corporate costs.
The problem, at least in terms of volume, appears to be contract brewing. Molson Coors worldwide brand volume of 19.7 million hectoliters in the first quarter 2.1% versus the prior year. But factor in contract brewing, and what MolsonCoors calls “financial volume” fell to 2.8% from a year earlier to 21.9 million hectoliters in the first quarter.