Molson Coors Beverage Company (TAP-A)

Molson Coors Beverage Company: A Comprehensive Overview

Company Profile:

History and Background:

• Founded in 1873 through the amalgamation of the Molson and Coors families' breweries, Molson Coors Beverage Company has over 145 years of brewing expertise.
• In 2005, Molson Inc. and Adolph Coors Company merged, forming Molson Coors Brewing Company. The entity renamed itself Molson Coors Beverage Company in 2016 to reflect its expanded portfolio beyond beer.
• Currently, Molson Coors operates in 63 countries globally, employing approximately 10,000 people.

Core Business Areas:

• Beer: Molson Coors boasts a diverse portfolio of iconic beer brands, including Coors Light, Miller Lite, Carling, Blue Moon, and Peroni.
• Pre-made Cocktails: Recognizing shifting consumer preferences, Molson Coors entered the growing pre-made cocktail market in 2022 with their Vizzy Hard Seltzer line and Topo Chico Hard Seltzer.
• Other Beverages: The company also produces various non-alcoholic and non-beer beverages, including energy drinks and malt beverages.

Leadership and Corporate Structure:

• Gavin Hattersley serves as the President and CEO of Molson Coors Beverage Company.
• The company operates with a Board of Directors and an executive leadership team responsible for strategic direction and operational efficiency.

Top Products and Market Share:

• Top Products:
  • Coors Light: America's No. 2 selling beer, holding 8.2% of the US market share as of June 2023.
  • Miller Lite: The original American Light Lager boasts a 4.6% market share in the US.
  • Carling: This iconic British beer enjoys considerable popularity, particularly in the UK with over 50% of the market share.
• Market Share:
  • Global market share for Molson Coors: approximately 3%.
  • US market share for Molson Coors: 9.8%.
• Product Performance Comparison:
  • Coors Light and Miller Lite face strong competition from leading domestic brewers, Budweiser and Bud Light, with a combined market share exceeding 44% in the US.
  • Molson Coors continues to innovate and adapt product lines to stay competitive, focusing on expanding market share in the growing hard seltzer market.

Total Addressable Market:

• The global beer market is estimated at around 1.97 trillion USD in 2023.
• Within this, the US beer market accounts for approximately 115 billion USD.
• The pre-made cocktail market, particularly seltzers, witnessed rapid growth in recent years and is expected to reach 11 billion USD in 2023.

Financial Performance:

• Revenue:
  • For the fiscal year 2022, Molson Coors generated net sales of 10.35 billion USD.
  • Revenue increased 7.8% year-over-year, driven by the strong performance of the company's above-premium brands in North America and the growing hard seltzer market.
• Net Income:
  • Net income attributable to Molson Coors for the fiscal year 2022 was 508 million USD, marking a decline of 42.6% compared to 2021.
  • This decline was primarily caused by impairments and restructuring charges due to the company's streamlining initiatives, partially offset by higher operating income.
• Profit Margins:
  • The company’s gross profit margin for 2022 stood at 52.4%, experiencing a slight drop compared to the previous year.
  • This decrease reflects ongoing cost pressures from inflation and increased commodity costs.
  • Operating margin slightly decreased to 13.5% for 2022, impacted by restructuring charges.
• Earnings per Share (EPS):
  • Diluted EPS for the fiscal year 2022 was reported at 2.03 USD, reflecting a notable decrease of 43.7% compared to 2021.
  • This decrease aligns with the net income performance as mentioned above.

Dividends and Shareholder Returns:

• Dividend History:
  • Molson Coors maintains a history of consistently paying dividends since 2005.
  • The current annual dividend payout is 1.20 USD per share, translating to a forward yield of 4.5% as of November 17, 2023.
  • The current payout ratio is approximately 54%, indicating a moderate level of dividend stability, with possibilities for further increases in the future.
• Shareholder Returns:
  • Over the last year (as of November 17, 2023), Molson Coors stock has generated a negative total return of 4.1%.
  • Over the past five years, the total return was 43.6%, and for the last ten years, the total return stands at 77.4%.
  • These returns generally track below market indices like the S&P 500 during these periods.

Growth Trajectory:

• Historical Growth:
  • Over the past five years, Molson Coors experienced moderate revenue growth.
  • However, net income and EPS have fluctuated due to the impact of restructuring initiatives, acquisitions, and market conditions.
• Future Growth Projections:
  • The company anticipates moderate organic growth in the future, fueled by initiatives like:
    • Premiumizing their core beer portfolio.
    • Expanding their footprint in the high-growth hard seltzer market.
    • Targeting international growth opportunities, especially in developing markets.
  • Analysts' consensus growth forecast for EPS stands at around 2% for the next five years.
• Recent Product Launches and Strategic Initiatives:
  • In 2022, Molson Coors made significant investments in new product development with a strong focus on seltzers and innovation within their existing brands.
  • They acquired Topo Chico Hard Seltzer and relaunched the iconic Leinenkugel brand with new offerings.
  • These initiatives indicate the company's continued commitment to adapting and expanding its portfolio to capture emerging market trends.

Market Dynamics:

• Industry Trends:
  • The beer market faces maturity in developed regions like North America, with slowing overall demand and shifting consumer preferences towards craft beers and alternative alcoholic beverages.
  • However, the global market exhibits growth potential, particularly in developing regions.
  • The hard seltzer market continues to experience substantial growth, attracting both existing brewers and new entrants to the beverage space.
• Positioning of Molson Coors:
  • The company holds a considerable market share within the North American beer industry with strong brand recognition.
  • However, competition remains intense, necessitating a focus on innovation and strategic expansion into other segments like hard seltzers.
  • Molson Coors' global footprint offers opportunities for growth in international markets.
  • The company actively seeks to adapt its portfolio and marketing strategies to stay relevant with evolving consumer tastes.

Competitors:

• Key Competitive Advantages:
  • Strong brand portfolio with Coors Light and Miller Lite having substantial brand equity
  • Well-established distribution network across North America and in select international markets
  • Continued investment in innovation with new product launches in growing segments
• Competitive Disadvantages:
  • The majority of the company's sales come from mature North American beer market limiting overall growth potential