MillerCoors Weathers Tough First Quarter
New Above Premium Innovations Help Drive 4.0% Increase in Domestic Net Revenue Per Barrel
Profit Held Back by Weaker Volume, Commodity Inflation and Marketing of New Brand Launches
LONDON & DENVER--(BUSINESS WIRE)-- SABMiller plc (LN:SAB; OTC:SABMRY) and Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) reported that pricing and growth in sales of above premium brands at MillerCoors drove a 4.0 percent increase in domestic net revenue per barrel versus the same quarter in the prior year. MillerCoors underlying net income declined 1.2 percent in the first quarter to $271.9 million versus the same quarter in the prior year.
"Across the country, beer volumes were challenged in the first quarter due to a combination of tough comparatives led by last year's unseasonably warm weather and the payroll tax increase that impacted our core beer drinkers' disposable income," said MillerCoors Chief Executive Officer Tom Long. "However, our portfolio transformation strategy is working as evidenced by our growth in domestic net revenue per barrel, so there is reason for optimism as our strategy unfolds. Our new brand launches, Redd's Apple Ale and Third Shift, gained early traction with consumers and retailers ahead of our initial projections, and Tenth and Blake continues to deliver strong results led by Blue Moon."
First Quarter Highlights
Unless otherwise indicated, all amounts are in U.S. dollars and calculated in accordance with U.S. GAAP. All percentages are versus the prior year comparable period and include MillerCoors operations in the U.S. and Puerto Rico. Quarterly sales-to-retailers (STRs) results are presented on a trading-day-adjusted basis, as the first quarter of 2013 had one less trading day compared with the same quarter in the prior year.
Total net sales increased 1.6 percent to $1.788 billion for the quarter.
Total cost of goods sold (COGS) per barrel increased 3.7 percent for the quarter.
Underlying net income (a non-GAAP measure) decreased 1.2 percent to $271.9 million for the quarter.
Domestic net revenue per barrel, excluding contract brewing and company-owned distributor sales, increased 4.0 percent for the quarter, representing the highest increase since Q1 2009.
Domestic STRs decreased 3.3 percent for the quarter.
Domestic sales-to-wholesalers (STWs) decreased 2.5 percent for the quarter.
Brand Highlights for the First Quarter
MillerCoors Premium Light STRs decreased mid-single digits in the quarter. Coors Light declined low-single-digits in the quarter. The brand continues to lead the premium light segment in share growth through continued reinforcement of its "refreshment as cold as the Rockies" positioning in advertising, including several new "Explorers" TV spots, as well as through packaging innovation with the launch of the "World's Most Refreshing Can" this month with several functional features that will drive consumer engagement. The brand will continue to grow its appeal to multicultural consumers with the strength of its Liga MX Hispanic soccer alliance and the "Search for the Coldest" program with rapper/actor Ice Cube.
Miller Lite declined high-single digits for the quarter. The "It's Miller Time" campaign is well-positioned around camaraderie and is resonating emotionally with our consumers, particularly within social media where Facebook followers have doubled since the launch of the program. We launched new executions of the "It's Miller Time" campaign in March featuring celebrities Ken Jeong, Chuck Liddell and Questlove. We will follow up the successful punch top can launch of last year with the launch of the new Miller Lite iconic bottle in the on-premise channel nationally this month.
Tenth and Blake Beer Company grew the MillerCoors Craft and Import portfolio by high-single digits in the quarter, driven by Blue Moon Brewing Company and the continued national expansion of Batch 19. Blue Moon continued its strong growth, up high-single digits in the quarter. Peroni Nastro Azzurro continued its growth, up low-single digits for the quarter. Jacob Leinenkugel Brewing Company's growth slowed to low-single digits for the quarter as the Summer Shandy brand was adversely affected by unseasonably warm weather in the prior year.
MillerCoors launched Redd's Apple Ale and Third Shift nationally in the first quarter as it focused on creating innovative new products in the fast-growing, higher-margin segments of the beer industry. Redd's Apple Ale was launched with a Super Bowl TV ad in local markets across the country and we continue to market the brand aggressively to increase awareness. Third Shift debuted in March and was prominently advertised across the country during the March Madness men's college basketball tournament. Distribution and volume on both brands are incremental to our business as many consumers are new to the MillerCoors portfolio of brands.
The MillerCoors Economy portfolio declined mid-single digits in the quarter. Miller High Life continued its veterans program and will kick off a partnership this month to celebrate the 110th anniversaries of two iconic American brands: Miller High Life and Harley-Davidson. Keystone Light continued to drive its "Always Smooth" positioning primarily through digital engagement and localized marketing efforts and introduced new packaging in late February.
The Premium Regular portfolio declined mid-single digits. The continued growth of Coors Banquet, which grew mid-single digits for the quarter, was offset by Miller Genuine Draft's double digit decline. Coors Banquet remains the only national Premium Regular brand in the industry to gain market share in the quarter.
Financial Highlights for the First Quarter
Domestic net revenue per barrel grew 4.0 percent for the quarter as a result of strong net pricing and favorable mix, the largest increase since Q1 2009.
Total company net revenue per barrel, including contract brewing and company-owned distributor sales, increased 3.6 percent for the quarter. Third-party contract brewing volumes were up 3.2 percent for the quarter.
Total COGS per barrel increased 3.7 percent for the quarter, driven by commodity inflation, brand and packaging innovation and volume softness.
Marketing, general and administrative costs increased 3.5 percent for the quarter, driven primarily by increased marketing investments in support of the national launches of Redd's Apple Ale and Third Shift.
In the first quarter, $16 million of cost savings were achieved, primarily related to procurement savings, logistics savings and brewery efficiencies.
Depreciation and amortization expenses for MillerCoors in the first quarter were $69.7 million, and additions to tangible and intangible assets totaled $55.7 million.
There were no special charges during the first quarter.
Overview of MillerCoors
Built on a foundation of great beer brands and nearly 300 years of brewing heritage, MillerCoors continues the commitment of its founders to brew the highest quality beers. MillerCoors is the second-largest beer company in the United States, capturing nearly 30 percent of beer sales in the U.S. and Puerto Rico. Led by two of the best-selling beers in the industry, MillerCoors has a broad portfolio of brands across every major industry segment. The portfolio is led by the company's premium light brands: Coors Light, Miller Lite and Miller64. Coors Light, the World's Most Refreshing Beer, offers consumers refreshment as cold as the Rockies. Miller Lite established the American light beer category in 1975, offering beer drinkers a light beer that tastes like beer should. Miller64 is 64 calories of crisp, light taste that complements a balanced lifestyle. MillerCoors brews premium beers Coors Banquet and Miller Genuine Draft, and economy brands Miller High Life and Keystone Light. Crisp like an apple. Brewed like an ale. Redd's Apple Ale is an apple flavored golden ale with low malt and bitterness cues. Third Shift Amber Lager is an award-winning beer brewed by the Band of Brewers - a group of talented brewers across the MillerCoors network. Tenth and Blake Beer Company, MillerCoors craft and import division, imports Peroni Nastro Azzurro, Pilsner Urquell and Grolsch and features craft brews from the Jacob Leinenkugel Brewing Company, Blue Moon Brewing Company and the Blitz-Weinhard Brewing Company. MillerCoors operates eight major breweries in the U.S., as well as the Leinenkugel's craft brewery in Chippewa Falls, Wisc., and two microbreweries, the Tenth Street Brewery in Milwaukee and the Blue Moon Brewing Company at Coors Field in Denver. MillerCoors vision is to create the best beer company in America through great people changing the way America enjoys beer. MillerCoors builds its brands the right way through brewing quality, responsible marketing and sustainable environmental and community impact. MillerCoors is a joint venture of SABMiller plc and Molson Coors Brewing Company. Learn more at www.MillerCoors.com, at facebook.com/MillerCoors or on Twitter through @MillerCoors.
Overview of SABMiller
SABMiller plc is one of the world's leading brewers with more than 200 beer brands and some 70,000 employees in over 75 countries. The group's portfolio includes global brands such as Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine Draft and Grolsch; as well as leading local brands such as Aguila (Colombia), Castle (South Africa), Miller Lite (USA), Snow (China), Victoria Bitter (Australia) and Tyskie (Poland). SABMiller also has growing soft drinks businesses and is one of the world's largest bottlers of Coca-Cola products.
In the year ended 31 March 2012, the group reported EBITA of US$5,634 million and group revenue of US$31,388 million. SABMiller plc is listed on the London and Johannesburg stock exchanges. For more information on SABMiller plc, visit the company's website: www.sabmiller.com.
Overview of Molson Coors
Molson Coors Brewing Company is one of the world's largest brewers. It brews, markets and sells a portfolio of leading premium quality brands such as Coors Light, Molson Canadian, Molson Dry, Staropramen, Carling, Coors Banquet and Keystone Light in North America, Europe and Asia. For more information on Molson Coors Brewing Company, visit the company's web site: www.molsoncoors.com.
This press release includes "forward-looking statements" within the meaning of the U.S. federal securities laws, and language indicating trends, such as "anticipated" and "expected."It also includes financial information, of which, as of the date of this press release, the Companies' independent auditors have not completed their audit.Although the Companies believe that the assumptions upon which their respective financial information and their respective forward-looking statements are based are reasonable, they can give no assurance that these assumptions will prove to be correct.Important factors that could cause actual results to differ materially from the Companies' projections and expectations are disclosed in Molson Coors' filings with the Securities and Exchange Commission or in SABMiller's annual report and accounts for the year ended March 31, 2012, and in other documents which are available on SABMiller's website atwww.sabmiller.com.These factors include, among others, changes in consumer preferences and product trends; price discounting by major competitors; failure to realize anticipated results from synergy initiatives; and increases in costs generally.All forward-looking statements in this press release are expressly qualified by such cautionary statements and by reference to the underlying assumptions.Neither SABMiller nor Molson Coors undertakes to update forward-looking statements relating to their respective businesses, whether as a result of new information, future events or otherwise.You should not place undue reliance on any forward-looking statement. Neither SABMiller nor Molson Coors accepts any responsibility for any financial information contained in this press release relating to the business or operations or results or financial condition of the other or their respective groups.
MillerCoors Results and Related Reconciliations
The table below reconciles net income attributable to MillerCoors, reported in accordance with U.S. GAAP as used for inclusion within Molson Coors reported results, to MillerCoors EBITA as used for inclusion within SABMiller's reported results in accordance with IFRS. Underlying net income and EBITA are non-GAAP measures. Management of both companies believes that underlying net income and EBITA provide shareholders with a useful basis for assessing the profit performance of MillerCoors. There are limitations to using non-GAAP financial measures, including the difficulty associated with comparing companies that use similarly named non-GAAP measures whose calculations may differ from the company's calculations.
Three Months Ended
(In millions of $US)
U.S. GAAP : Net Income Attributable to MillerCoors
Plus: Special/Exceptional Items1
Non-GAAP Underlying Net Income
Plus: Adjustments to IFRS Underlying EBITA2
IFRS : MillerCoors underlying earnings before interest, taxes and amortization before exceptional items (EBITA3)
Percent change versus prior year MillerCoors underlying EBITA3
1There were no Special/Exceptional Items in the current or prior year.
2U.S. GAAP Underlying net income to IFRS EBITA adjustments relate to differing treatment of step-up depreciation, pension, post-retirement benefits, consolidation of container joint ventures, asset disposals, share-based compensation and severance expenses between U.S. GAAP and IFRS. Amortization of intangible assets, interest, taxes and non-controlling interest have been removed to arrive at underlying EBITA.
3EBITA - Earnings Before Interest, Taxes, and Amortization, excluding exceptional items.
RESULTS OF OPERATIONS
(VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS $US)
Three Months Ended
Volume in Barrels
Cost of Goods Sold
Marketing, General and Administrative Expenses
Special Items, net
Other Income (Expense), net
Income Before Income Taxes and Non-controlling Interests
Net Income Attributable to Non-controlling Interests
Net Income Attributable to MillerCoors LLC
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