On Jun 23, we issued an updated research report on Molson Coors Brewing Company TAP. This global brewer delivered better-than-expected earnings and revenues in the first quarter of 2015 on May 7, despite a continuous decline in beer volumes.
Factors at Play
Molson Coors has been struggling with weak volumes for more than a year. The company has been posting declining sales volume in its major markets such as Canada, the U.S. and Europe since the past many quarters. Weak consumer demand in the face of macro-economic headwinds is hampering growth.
In Europe, beer volumes have been falling due to declines in the overall alcohol market while in the U.S., the company is witnessing volume declines, partially due to relatively weak economic conditions.
The premium beer segment in Canada has been gradually losing volume to the above premium and value segments, mainly due to an aging population and a sluggish economy. The substantial excise tax increase in Québec in Aug 2014 has also hurt volumes of retail beers as the company holds a significant share of the Québec market. The loss of the Modelo brands in Canada in Feb 2014 also led to volume declines.
Nevertheless, it is encouraging that the company has been launching new products, enhancing the above-premium category of beers, and spending on marketing and advertising to increase brand awareness.
Molson Coors has a strong foothold internationally and has made international acquisitions in the past to expand its portfolio in new and emerging markets. The acquisition of India-based Mount Shivalik Breweries in Apr 2015 will create new opportunities for Molson Coors and help it to introduce its brands in India.
Though the company continues to focus on building brand strength and achieve positive pricing, unfavorable foreign currency movements and lower volumes might hinder its results in the near term.
Molson Coors holds a Zacks Rank #3 (Hold). However, a better-ranked player in the beverage industry is Constellation Brands Inc. STZ, which holds a Zacks Rank #2 (Buy). Other stocks in the wider consumer staples sector worth considering include General Mills, Inc. GIS and McCormick & Co., Inc. MKC both holding a Zacks Rank #2.
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