Molson Coors Analyst Meeting Review

By Eric Fox | April 07, 2011 AAA

Molson Coors Brewing (NYSE:TAP) used a recent analyst meeting to set out its corporate goals of achieving top and bottom line growth over the next few years. The company hopes to accomplish this mostly through brand building, cost efficiencies and selective investments in higher growth emerging markets.

TUTORIAL: Stock Basics

Growth Strategy
Molson Coors Brewing plans to generate growth from current markets through building and extending its portfolio of brands as well as continued tough cost management. The company has a successful history of cost reductions and brand expansion in the United States.

Molson Coors Brewing is also targeting growth from emerging markets, with a focus on China, Russia, Vietnam, Japan, Spain and Mexico. Molson Coors Brewing is always looking for selected acquisition or joint-venture opportunities that might fill a gap in a current market, or one that provides an entry or expansion into an emerging market.

An example of this type of expansion was the September 2010 purchase of a 51% interest in a joint venture with a Chinese beer company. The joint venture markets both companies' brands throughout the country.

Craft Beers
Another area that Molson Coors Brewery and some beer companies are focusing on is the craft beer segment. These smaller breweries typically make higher-end brands and are the only part of the beer industry that is showing growth. In 2010, craft beers saw an 11% increase in volume compared to 2009.

One of the largest craft brewers is the Boston Beer Company (NYSE:SAM), which makes the Samuel Adams brand. The company reported sales growth of 12% in the most recent fiscal year.

Molson Coors Brewing just purchased Sharp's Brewery Ltd, a craft brewer in the United Kingdom, and Anheuser-Busch InBev (NYSE:BUD) recently bought Goose Island brewery for $38.8 million.

Miller Coors
Molson Coors Brewing conducts its business in the United States through Miller Coors, a joint venture between the company and SAB Miller (LSE:SAB). This joint venture was started up in 2008 and Molson Coors Brewing owns a 42% economic interest in the venture.

This business faced some headwinds in 2010 as overall industry beer shipments for the year fell slightly and unemployment remained high. Molson Coors Brewing reported flat sales and a 2.3% increase in domestic net revenue per barrel in 2010, along with continued cost savings from the joint venture.

One negative was that sales of many of the company's Premium Light products fell in 2010. The company is attempting to stem this decline through the continued expansion of its marketing efforts into Hispanic markets.

Cost Savings
Molson Coors Brewing reported $31 million in costs savings in the fourth quarter of 2010, bringing its total savings since entering the joint venture to $150 million. The company also claims to have generated $505 million in "synergies savings" as well, including $60 million in the most recent quarter.

Canada
Molson Coors Brewing also faced challenges in its Canadian business segment, with declines in beer consumption over the last few years, and continued market share loss to wine and spirits.

Financial
Molson Coors Brewing has sought to improve its balance sheet over the last few years and has succeeded in reducing its leverage. The company has brought its net debt to EBITDA down from 1.8 times in 2006 to 0.6 in 2010.

Molson Coors Brewing has also grown its dividend substantially over that same time frame, from 64 cents in 2006 to $1.08 in 2010.

Molson Coors Brewing is looking to get sales and income growing again as the economy recovers in the United States and elsewhere. The company plans to build its existing brands and expand into faster-growing emerging markets. (This measure has a bad rap, but it's still a valuable tool when used appropriately. Check out EBITDA: Challenging The Calculation.)

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