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Is Revitalization Plan Key to Molson Coors' (TAP) Growth?

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Molson Coors Beverage Company (TAP - Free Report) has not only made a mark in the alcoholic beverage space but is also gaining footing in the non-alcoholic beverage space through its Revitalization Plan. Under the plan, the company intends to invest in iconic brands and growth opportunities in the above-premium beer space, expand in adjacencies and beyond beer, and create digital competencies for commercial functions, supply-chain-related system capabilities and employees.

It has made notable progress on the above-mentioned attributes, particularly the expansion of its above-premium and beyond beer portfolios, which have been boosting its performance of late. Per IRR, Molson Coors’ U.S. above premium portfolio grew brand volumes year over year in first-quarter 2021, while also gained industry share. Moreover, the company has taken several steps toward its hard seltzer ambition, which is a key part of its “beyond beer” approach.

Coming to hard seltzer, the company’s share in the U.S. hard seltzer segment increased to more than 50%, which is higher than what it was at the beginning of 2021. Progress on expanding the hard seltzer portfolio was marked by the launch of Topo Chico Hard Seltzer in the United States in the first quarter of 2021. Moreover, it launched the Three Fold hard seltzer brand in the U.K. It is poised to roll out the Wai brand in Central and Eastern Europe.

Also, the company’s Vizzy and Coors Seltzer have become the top-five hard seltzers amid Canada’s leading retailers. Additionally, the Topo Chico Hard Seltzer and Vizzy are gaining share in the United States, with Vizzy ranked in the top 10 U.S. industry growth brand in the first quarter, per IRR.

Other beverage companies, which are keen on gaining a lucrative share in the fast-growing hard seltzer space, are The Boston Beer Company Inc. (SAM - Free Report) , Anheuser-Busch InBev (BUD - Free Report) and The Coca-Cola Company (KO - Free Report) .

Coming back to Molson Coors, the company is on track with expansion into various other lines apart from the seltzer portfolio. Truss — its Canada cannabis joint venture — is holding strong as a market leader in the entire Canada cannabis beverage market. It is also positioned to benefit from its planned line-up of CBD beverages in the United States through the Truss USA. Also, the Blue Moon LightSky has attained the top-volume share gainer rank in the U.S. craft segment.

The company expects to see improving brand volume trends for Coors Light and Miller Lite in North America beyond the fiscal first-quarter levels. Moreover, Molson Coors has entered the fast-growing RTD cocktails space with an exclusive equity and distribution agreement with Superbird and above premium tequila-based Paloma. The company expects to deliver significant growth through the entire lineup of hemp-derived CBD beverages and the fast-growing RTD cocktails. This is expected to drive its emerging drug division to become a $1-billion business in revenue terms by 2023.

First-Quarter 2021 Headwinds

While the aforementioned factors position Molson Coors for long-term growth, its first-quarter 2021 results were significantly hurt by the impacts of the system outage, owing to the cybersecurity incident that occurred on Mar 11; an 11-day long closure of the Fort Worth, TX-based brewery due to winter storms in February; and government restrictions, resulting in the closure of the entire on-trade channel in the U.K. The factors led to significant declines in sales and earnings in the first quarter of 2021.

Net sales declined 9.7% to $1,898.4 million, driven by a fall in financial volume, including declines of 9.4% in North America and 22% in Europe. Additionally, sales were hurt by adverse channel and geographic mix, owing to the impacts of restrictions in the on-premise channel, particularly in the U.K. and Canada. On a constant-currency basis, net sales declined 11.1%. The company’s adjusted earnings of 1 cent per share declined 34 cents year over year on lower sales and financial volume coupled with higher cost of goods sold per hectoliter in constant currency.

Despite the current uncertainties, Molson Coors retained its view for 2021 as it continues to make progress on its revitalization plan. The company expects 2021 to be a year of top-line growth and business investments.

Molson Coors expects net sales growth in mid-single digits at constant currency in 2021. The company is working to build inventory levels and expects domestic shipments in the United States to exceed brand volume in the second half of 2020. Underlying EBITDA is likely to remain almost flat year over year at constant currency.

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