MillerCoors delivers 8.0% underlying net income growth in second quarter
Posted: 8 August 2014 | Molson Coors Brewing Company | No comments yet
SABMiller plc and Molson Coors Brewing Company reported that MillerCoors second quarter underlying net income grew 8.0 percent to $445.7 million versus the same period in the prior year, driven by positive pricing, sales mix and cost savings…
SABMiller plc (LN:SAB; OTC:SABMRY) and Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) reported that MillerCoors second quarter underlying net income grew 8.0 percent to $445.7 million versus the same period in the prior year, driven by positive pricing, sales mix and cost savings. Total net sales increased 2.2 percent in the second quarter to $2.207 billion.
“In the second quarter, we continued to gain share with our Above Premium portfolio, driving profitable growth with brands like Redd’s, Leinenkugel’s Summer Shandy, Smith & Forge Hard Cider and Miller Fortune,” said MillerCoors Chief Executive Officer Tom Long. “We also continued to engage consumers around our flagship beers with big ideas like Miller Lite’s Original Can and Coors Light Summer Brew.”
Second Quarter Highlights
Unless otherwise indicated, all amounts are in U.S. dollars and calculated in accordance with generally accepted accounting principles in the U.S. (U.S. GAAP). All 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, increased 8.0 percent to $445.7 million for the second quarter.
- Total net sales increased 2.2 percent to $2.207 billion.
- Domestic net revenue per barrel, excluding contract brewing and company-owned distributor sales, increased 3.6 percent.
- Total cost of goods sold (COGS) per barrel increased 1.9 percent.
- Domestic sales-to-retailers (STRs) decreased 1.2 percent.
- Domestic sales-to-wholesalers (STWs) decreased 1.7 percent.
Brand Highlights for the Second Quarter
Premium Light portfolio STRs declined low-single digits, with both Coors Light and Miller Lite down lowsingle digits for the quarter.
On May 1, Coors Light introduced its first U.S. line extension, Coors Light Summer Brew. Since its debut, Summer Brew has captured 0.5 share points of the Premium Light segment. Summer Brew will continue national advertising through the summer, and Coors Light will debut new television advertising this September.
Miller Lite can STR’s were up mid-single digits in the second quarter. Based on the success of the Original Lite Can, which debuted earlier this year, the brand released its Heritage bottles on August 1, featuring a similar Original Lite design that speaks to the brand’s authenticity. An updated design inspired by Miller Lite’s original look will be released across all packaging in October.
Total Above Premium portfolio STRs grew double digits in the second quarter. Innovations delivered strong volume and value growth in Above Premium, driven primarily by the Redd’s franchise and Leinenkugel’s franchise, with support from Miller Fortune and Smith & Forge Hard Cider. The Redd’s franchise continues to post strong results with volume more than doubling in the second quarter versus the prior year comparable period. To capitalize on that momentum, Redd’s launched a higher-ABV apple ale, Redd’s Wicked Apple, earlier this week. Miller Fortune captured 0.2 share points of the total industry in the second quarter and is the fourth largest growth brand in the category, according to Nielsen. Smith & Forge Hard Cider, launched in March, gained the most value and volume share within the cider segment in the quarter, according to Nielsen.
Within the Above Premium portfolio, Tenth and Blake Beer Company’s performance improved over the first quarter, yet still declined low-single digits in the second quarter. High-single digit growth of the Leinenkugel’s franchise and low-single digit growth of Blue Moon Belgian White partially offset double digit declines in Henry Weinhard’s, which was strategically de-prioritized and has returned to being a regional brand. Leinenkugel’s Summer Shandy continues its success in 2014, growing double digits in the quarter. In addition to Orange Shandy, this September, Leinenkugel’s will introduce its Fall Shandy Variety Pack, featuring three new shandies: Harvest Patch Shandy, Old Fashioned Shandy and Cranberry Ginger Shandy.
The Premium Regular portfolio was down low-single digits in the second quarter, driven by double digit declines in Miller Genuine Draft. This was partially offset by high-single digit growth of Coors Banquet, which has now grown for more than seven consecutive years. This year, the brand launched one of the biggest media plans in its history, and Coors Banquet television advertising will air nationally throughout the year.
Miller High Life declined mid-single digits in the second quarter, and Keystone Light declined high-single digits.
In April 2014, Miller High Life and Keystone Light returned to television with national advertising campaigns for the first time since 2012. Miller High Life mitigated its decline by achieving a mid-single digit trend improvement versus the first quarter, attributed to its national advertising campaign.
Financial Highlights for the Second Quarter
Domestic net revenue per barrel grew 3.6 percent for the quarter as a result of favorable net pricing and positive brand mix.
Total company net revenue per barrel, including contract brewing and company-owned distributor sales, increased 3.1 percent. Contract brewing volumes were up 6.4 percent.
Total COGS per barrel increased 1.9 percent, driven primarily by brand mix, as cost savings offset inflation.
Marketing, general and administrative costs increased by 0.6 percent. The increase was driven by higher media investment and higher employee related expenses.
MillerCoors achieved $40 million of cost savings in the second quarter, primarily related to procurement savings, brewery efficiencies and lower overhead costs.
Depreciation and amortization expenses for MillerCoors in the second quarter were $77.4 million, and additions to tangible and intangible assets totaled $70.0 million.
Special items in the quarter included restructuring costs of $0.5 million.