|Molson Coors is connecting with consumers because it is in tune with evolving tastes and preferences…especially those of the youngest generation of drinkers. |
A key tenant of the company’s revitalization plan is to recruit “new legal age drinking consumers” by gearing marketing and innovation to new 20-somethings. A plan to enhance digital capabilities like social media outlets will come in handy here.
It is also winning by being quicker to market with new products. A “test and learn” approach followed by rapid scaling is dramatically reducing time to market, from 18 months to as little as 4 months.
5. Molson Coors is Inflation-Proof
Like the rest of corporate America, Molson Coors has its share of inflation challenges. Packaging and transportation costs are up significantly as are wages.
But the company has stayed relatively inflation proof by raising prices and shifting to a more favorable sales mix. It can continue to hold up well to inflation because it has:
- Pricing Power
- Premium Products
- Cost Savings Initiatives
- A Hedging Program
Inflation sure didn’t faze management from maintaining an upbeat outlook for the remainder of the year. It is expecting a mid-single-digit increase in 2022 sales. This speaks to an ability to pass along higher costs to consumers backed by the strength of an expanding beer and beyond beer lineup.
Should the economy dip into a recession, Molson Coors should also fare relatively well. Alcoholic beverage companies are among the “sin stocks” that tend to perform well during economic downturns. To many consumers, their favorite bevies become security blankets that them get through the tough times.
Meanwhile, at-home consumption has proven resilient as pandemic conditions improve. Management recently noted continued momentum in the off-premise channel. If we go back into recession-induced ‘lockdown’ mode, at-home consumption is bound to stay strong.
Granted, the restaurant, bar, and events channels could pare back orders in a recessionary environment.
But based on the strength of Molson Coors’ underlying consumer trends, we don’t expect a detrimental effect on purchase behavior. It could even get a boost from a recession.
6. Growth Outlook is Bright
This summer Molson Coors is teaming up with Coca-Cola to roll out Simply Spiked Lemonade. The canned cocktail is based on the nation’s leading juice brand and will come in slim-can 12-packs and 24-ounce standalone cans.
Delicious juice with a splash of fun…sounds refreshing to us!
We’ll be tracking the consumer response to this launch. It could be a big sales contributor.
Simply Spiked exemplifies a push into non-beer markets that is a big part of why management is feeling good about the rest of the year and beyond.
By 2023, the emerging growth portion of the Molson Coors portfolio is expected to be a $1 billion business. Products like Five Trail American Whiskey and La Colombe RTD coffee are leading the way.
The international growth prospects are also promising. Molson Coors sells beer in about 100 countries, sales outside North America account for less than 20% of total sales.
With inflationary pressures expected to subside and higher-margin premium brands leading the charge, the Street is projecting 8% EPS growth in 2023. This would mark the company’s best profit growth in the last 5 years.
It also means that Molson Coors is trading at 13x FY23 earnings. The S&P 500 currently goes for 15x next year’s earnings estimate.
On top of the growth outlook, it’s hard not to like the stock’s 3% forward dividend yield. And the recently approved $200 million buyback program through March 2026.
After advancing 7 straight months, TAP is taking a breather in June. It's looking like a good time to crack open a position.