A month after Molson Coors’ sunny Q2 earnings call with investors, CEO Gavin Hattersley gave an update on continued positive trends at the Barclays Global Consumer Staples Conference.
Molson Coors’ Coors Light and Miller Lite continue to benefit from the Bud Light declines that started in April and trends likely won’t go away soon, according to Hattersley.
“It’s been five months now and whichever way you look at it, you look around the rolling 13 weeks, every single week, the numbers are the same,” Hattersley said. “The trend has stuck, it’s sticky, it’s not changing. You might see a little either way, in a one-week number – and there’s always historical reasons for that – but when you look at the rolling 13 week, the trend has stuck.”
In the last 13 weeks (ending August 12), Bud Light dollar sales declined -26.3% year-over-year (YoY) and volume declined -29.7% in NIQ-tracked off-premise channels, according to data shared by 3 Tier Beverages. In the same period, Coors Light (dollar sales +22.6%, volume +17.1%) and Miller Lite (dollar sales +18.7%, volume +13%) both recorded double-digit YoY gains.
During last month’s earnings call, Hattersley noted that about 20 major retailers were enacting fall resets, mainly as a result of the market shift. That number has since increased to 40 retailers, Hattersley said Wednesday.
Hattersley named three “clear winners” in the resets: themselves (Molson Coors), Pabst and Yuengling.
Hattersley also commented on supply chain, pricing and Molson Coors’ non-alcoholic (NA) plans.
Molson Coors’ production and supply chain has done an “amazing job,” over-delivering on shipments in the past quarter, Hattersley said. The company had also built up inventory in Q4 and kept it high in Q1, allowing for the company to keep up with the summer demand.
In regards to price, Molson Coors plans to continue with its usual fall price increases across certain SKUs and markets, and maintains its projection of a +1% to +2% increase next year.
In terms of innovation, Hattersley shared excitement for the previously announced NA version of Blue Moon, which will have a “halo effect to the overall portfolio.”
Hattersley admitted that Blue Moon has struggled in scans, impacted by overall negative craft trends and “disproportionately” impacted by weather challenges on the West Coast. However, the company believes the reputation of the brand will still support the NA extension.
“It’s a very well-known brand – it’s got great quality credentials and it’s got a huge consumer following – and coming up with a non-alcohol version of that, that is meet[ing] the expectation that you would have from Blue Moon from a craft and a taste point of view, rose to the top of a pile of a number of different ideas,” Hattersley said.
Constellation Brands: Pricing Strategy Remains Unchanged
In his latest monthly industry update, Bump Williams Consulting founder Bump Williams noted that there might be a new price leader in beer. While he didn’t name anyone, many have inferred that to be Constellation Brands, as Modelo Especial has surpassed Bud Light in off-premise dollar sales.
Constellation CFO Garth Hankinson acknowledged the unofficial title during his own sitdown at the Barclays event Wednesday, but said the company will continue to make pricing decisions on a “brand-by-brand, market-by-market, SKU-by-SKU basis.”
“From our perspective, our outlook on pricing or our methodology doesn’t change,” Hankinson said.
Historically, the company has raised revenue growth 1-2 percentage points each year from pricing and plans to continue to do so, Hankinson said.
“We don’t want to take pricing to such an extent that it starts to impact our consumer, then impact the growth profile of our business,” he continued. “And so, again, we will continue to be very methodical and disciplined and intentional around our pricing actions.”
Unlike Hattersley’s claims, Hankinson said he expects fall resets to be “not dissimilar to what happens every year,” but will be “more meaningful” in the spring.
He noted that Constellation has “benefited from incremental features and displays” as well as continued growth in premiumization and high-end brands. The company has also increased its “influence” on shelf resets, growing from influencing 1,500 resets in 2019, to 17,000 in fiscal year 2023 and 13,000 in the first half of this fiscal year.
“We think that a retailer shelf is their most precious asset, and they ought to be allocating back to the brands that are showing the most growth, have the highest turns and have the highest profitability,” Hankinson said. “And that is what our brands provide retailers.”
Hankinson said Constellation is “in the best position we’ve been in from a supply chain standpoint since we’ve owned these beer brands.” The company has continued to increase its capacity in Mexico and is aiming to run at 78% utilization.
Hankinson was rosy about Constellation’s supply capabilities despite reports that the company has faced disruptions in keg production. Just this week, Constellation informed distribution partners that “additional disruptions to keg production, which were necessary to ensure optimal quality levels,” resulted in “weekly production volumes have not been at the levels we expected,” Beer Marketer’s Insights reported.
For innovation, Hankinson shared the initial success of Modelo Oro, its low-carb, low-calorie extension, that is “already a top 10 dollar share gainer in the U.S.” The brand has a different consumer base than Constellation’s core brands Modelo Especial, Corona Light and Corona Premier, resonating more with Hispanic males, younger consumers and women, Hankinson said.
The company plans to expand Modelo Oro in 2024 with additional pack offerings, Hankinson said.
Hankinson was also asked about Constellation’s decision to focus its NA innovation on expanding an existing bev-alc brand with the introduction of Corona Non-Alcoholic.
“If you think about the occasions for why someone might have a non-alcoholic variant of a beer, certainly having that off of an existing beer brand makes sense,” Hankinson said.
However, the company has dipped its toes in NA-dedicted brands, including a minority investment in Hop Wtr. Constellation is expanding its involvement with the NA brand this fall with a co-branded marketing campaign between Hop Wtr and Pacifico.