The last couple of months have proven rough for Molson Coors Beverage Company.
A February winter storm in Texas stopped production at the company’s facility in Fort Worth, Texas, for 11 days. That was followed by a March 11 cybersecurity breach, which caused a systems outage for the company.
Molson Coors addressed concerns caused by those incidents in a post-trading Friday press release that reaffirmed its full year 2021 financial guidance and provided an update on its post-disruption business.
The company cautioned that those business interruptions — as well as continuing on-premise shutdowns in the U.K — “will negatively impact first quarter 2021 financial results,” which the company will report on Thursday, April 29.
Nevertheless, Molson Coors said it still expects a mid-single digit increase in net sales revenue and flat EBITDA in 2021, compared to 2020. The company also expects its board of directors to reinstate a dividend in the second half of 2021.
The company expects to shift between 1.8 and 2 million hectoliters (or 1.53 million to 1.7 million barrels) of production and shipments from Q1 to the balance of the year. It also plans to shift between $120 million to $140 million of underlying EBITDA from Q1 to the rest of the year.
Molson Coors also said it would incur one-time costs in the first half of 2021 related to the cybersecurity breach, including consultants, experts and data recovery efforts.
Although “substantial progress” has been made in restoring systems since the cybersecurity incident, including production and shipments “ramping up to near normal operating levels,” the company said it “continues to experience some delays and disruptions in its business, including brewery operations, production and shipments in the U.K., Canada and the U.S.”
Friday’s press release was followed by an email to wholesalers from Kevin Doyle, president of sales and distributor operations, and Brian Erhardt, chief supply chain officer, admitting that the situation “has been frustrating” for its partners.
“We know many of you are dealing with low inventories on key SKUs as a result of this situation,” they wrote. “We know you and your teams have had to have challenging conversations with retailers and customers. We know that you want more information about our plans to build supply of our core SKUs.
“We know, at the end of the day, you just want your beer. And we have a plan to get it to you.”
The plan includes:
- Prioritizing core brands — Miller Lite, Coors Light, Coors Banquet, Blue Moon Belgian White, Miller High Life, Keystone Light, and Leinenkugel’s Summer Shandy – for 12 oz. industry standard, 12 oz. tall and 16 oz. can SKUs;
- Producing 12 oz. bottles, aluminum pints, kegs, and most other singles packages at full capacity;
- Targeting fewer days of inventory or pausing other brands to focus on the biggest brands.
Molson Coors reported “minimal” impact to its innovation pipeline, noting its second Vizzy Hard Seltzer variety pack and Vizzy Lemonade Hard Seltzer line extension are already in the market, while Topo Chico Hard Seltzer and Proof Point Spirited Seltzers are expected to launch this week as planned. Coors Seltzer and Topo Chico Ranch Water are expected to follow in the coming weeks.
Doyle and Erhardt also reported “minimal” impact to Blue Moon LightSky, Coors Pure and Hop Valley brands.
“To be clear, we are taking these actions to ensure we recover inventory of our core SKUs by Memorial Day,” they wrote. “But doing so requires us to make the tough decision to deprioritize other slower-moving SKUs.
“Our goal as we head into the summer is to provide you with the strongest possible supply on the brands and packs that consumers will be seeking out,” they added.
Wall Street analysts responded with skepticism to Molson Coors’ response.
Goldman Sachs analyst Bonnie Herzog “once again” lowered estimates on Molson Coors’ stock (TAP).
“Broadly speaking, we’re somewhat skeptical and believe it may be difficult for TAP to fully offset such a significant shortfall in Q1 volume/EBITDA through the balance of FY21,” she wrote, adding that she is “increasingly cautious that TAP can reinstate its dividend in 2H21.”
Credit Suisse analyst Kaumil Gajrawala also expressed doubt that Molson Coors “can offset all its losses.”
Q1 “is a key period for distributors/retailers to manage inventory and shelf space amidst a firehose of innovation – it is difficult to recover after falling behind,” he wrote.
Gajrawala added that Molson Coors’ plan to save $600 million from 2020 to 2022 may have led the “efficiency pendulum” to swing “too far.”
Although analysts may be discouraged, investors haven’t been so far. As of press time, Molson Coors stock (TAP) was trading up 2.74%.