From Miller Coors:
November 5, 2015 (London and Denver) – SAB Miller plc (LN:SAB; OTC:SABMRY) and Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) reported that third quarter MillerCoors underlying net income declined 8.6 percent to $344.4 million versus the same period in the prior year, driven by lower volume and increased marketing investment, partially offset by lower cost of sales, positive sales mix and net pricing growth. For the second consecutive quarter, Coors Light and Miller Lite both gained market share of the Premium Light segment, with Miller Lite delivering volume growth. Combined, Coors Light and Miller Lite delivered their best quarterly performance in three years.
“As we relentlessly pursue total portfolio growth, job number one is taking share and growing our American Light Lagers. This past quarter, we took a step in this direction by taking segment share with both Coors Light and Miller Lite,” said Gavin Hattersley, MillerCoors Chief Executive Officer. “We have a lot of work ahead of us to address our economy segment performance, but all other segments across our portfolio are in good shape as we close out the year. Net income was down this quarter due to lower volume, partially due to bringing distributor inventories down as anticipated coming out of peak-selling season, and increased media investments across our brands.”
Third Quarter Highlights
Unless otherwise indicated, all amounts are in U.S. dollars and calculated in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). All market share references are per A.C. Nielsen. Percentages are versus the prior year comparable period and include MillerCoors operations in the U.S. and Puerto Rico.
- Underlying net income, a non-GAAP measure, decreased 8.6 percent to $344.4 million.
- Total net sales decreased 3.4 percent to $2.000 billion.
- Domestic net revenue per barrel, excluding contract brewing and company-owned distributor sales, increased 1.2 percent.
- Total cost of goods sold (COGS) per barrel decreased 0.8 percent.
- Domestic sales-to-retail volume (STRs) decreased 2.5 percent.
- Domestic sales-to-wholesalers volume (STWs) decreased 4.6 percent.
Brand Highlights for the Third Quarter
Miller Lite STRs increased low-single digits and, according to Nielsen, gained share of the Premium Light segment in the third quarter. Earlier this year, the brand launched a new advertising campaign titled “Bodega,” designed to further leverage Miller Lite’s perspective that people stay connected to who they really are, just as the brand has reconnected with its true self. The brand has gained momentum since returning to its original white packaging and is further celebrating its history and heritage by releasing the original Steinie bottle from 1975. The shorter neck bottle is available now for a limited time, with production set to end at the close of the year.
Coors Light declined low-single digits but gained share of the Premium Light segment in the third quarter. Coors Light continued to execute its brand overhaul with the continued rollout of a contemporary and new visual identity across all packages, while 72andSunny was announced as the new advertising and digital agency of record for the Coors family of brands. The Los Angeles-based company, which was named “Agency of the Year” by AdAge in both 2013 and 2014, will drive forward the unique, engaging stories behind the Coors Light brand.
Our Above Premium portfolio was down low-single digits this quarter with the strategic de-prioritization of Miller Fortune, while the portfolio was up low-single digits excluding Fortune. The Redd’s franchise achieved mid-single digit growth, driven by Redd’s Wicked brands, including the 2015 introduction of Redd’s Wicked Mango.
The MillerCoors Tenth & Blake portfolio grew low-single digits. The Blue Moon Brewing Company grew low-single digits, driven by Blue Moon Belgian White’s 80th consecutive quarter of growth and the release of Blue Moon White IPA, which is the No. 4 new craft offering in 2015, according to Nielsen. The Jacob Leinenkugel Brewing Company grew low-single digits, driven by the continued growth of its Shandy portfolio, and its newest varietals, Harvest Patch Shandy and Grapefruit Shandy. According to Nielsen, Grapefruit Shandy is the No. 1 new craft offering in 2015. MillerCoors also announced the acquisition of San Diego’s Saint Archer Brewing Company, a fast-growing craft brewer with a portfolio currently available only in California.
In the Premium Regular segment, Coors Banquet grew low-single digits in the third quarter and is in the midst of its ninth consecutive year of growth. According to Nielsen, Coors Banquet remains the only national Premium Regular brand that is growing due to its continued success with the “stubby” heritage bottle, led by 12-packs and 18-packs nationwide. The growth from Banquet partially offset a double-digit decline for Miller Genuine Draft.
Consistent with the overall industry trend that has seen declines in economy brands, the MillerCoors Below Premium portfolio decreased mid-single digits, driven by a double-digit decline of Milwaukee’s Best and a high-single digit decline of Keystone Light, while Miller High Life declined mid-single digits. Steel Reserve grew low-single digits, due to the continuing success of the Steel Reserve Alloy Series, the brand’s line of flavored malt beverages.
Financial Highlights for the Third Quarter
Domest
ic net revenue per barrel grew 1.2 percent as a result of favorable net pricing and positive sales mix.
Total company net revenue per barrel, including contract brewing and company-owned distributor sales, increased 1.1 percent. Third-party contract brewing volumes were down 3.5 percent.
Total COGS per barrel decreased 0.8 percent, driven by lower aluminum pricing, malt and corn costs, and fuel expense, along with supply chain cost savings. These factors were partially offset by brewery and freight inflation, and lower fixed-cost absorption due to lower volumes.
Marketing, general and administrative costs increased by 5.6 percent, driven by higher brand investments, employee related benefits and technology investments.
MillerCoors achieved cost savings of $26 million in the third quarter, primarily related to procurement savings and brewery efficiencies.
Depreciation and amortization expenses for MillerCoors in the third quarter were $99.9 million, including accelerated depreciation related to the planned closure of our Eden, North Carolina, brewery of $21.8 million included in special items. Additions to tangible and intangible assets totaled $77.3 million.
Special items of $28 million were recognized in the third quarter related to the announced closure of the Eden Brewery, with additional special items expected to be recognized through the third quarter of 2016, when the closure is planned.
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