Molson Coors Brewing Company
) boasts a strong portfolio of well-established brands, including
Coors Light, Molson Canadian, Carling and Staropramen, as well as
craft and specialty beers like Blue Moon, Creemore Springs and
Cobra. The company focuses on growing its market share through
innovation and by shifting its focus on the above-premium category
Recently, Molson Coors and Heineken N.V. (
) expanded their marketing partnership in Canada, whereby Molson
Coors Canada will distribute five additional above-premium brands
of Heineken including Dos Equis, Sol, Tecate, Birra Moretti and
Desperados in Canada starting from Jan 2015.
Over the last two decades, Molson Coors in association with
Heineken has been marketing and selling its brands such as
Heineken, Murphy's, Newcastle and Strongbow. In addition, Molson
Coors has also agreed to distribute the Coors Light brand in
However, we note that Molson Coors has been posting negative
beer volumes in Canada for quite some time. Since 2001, the premium
beer segment in Canada has been gradually losing volume to the
above premium and value segments, mainly due to an aging population
and a sluggish economy.
In Canada, the substantial excise tax increase in Québec, which
was enforced in Nov 2012, has been hurting volumes as the company
holds a significant share of the Québec market. Despite the
reduction in tax rate in Canada in the second quarter of 2013, the
region is still struggling with volume declines.
In the recently-reported second quarter 2014 too, a 2% decline
in sales volume and currency headwinds led to sales decline in
Molson Coors Canada. However, overall the company's net sales,
including excise tax, increased marginally by 0.9% to $1.19 billion
in the second quarter driven by positive pricing and mix, which
made up for the beer volume decline in the quarter.
Adjusted earnings of $1.57 per share exceeded the Zacks
Consensus Estimate by 9% and grew 6.8% from the prior-year earnings
driven by growth in underlying pre-tax income and expanded margins
owing to lower interest expense (Read:
Molson Coors Beats on Q2 Earnings on Lower Interest
We believe the new expanded agreement will not only strengthen
the market share of the above-premium category of beers, but will
also complement the existing portfolio of leading Canadian beer
brands. The addition of the Heineken portfolio is a positive as
Canadian drinkers have a strong appetite for imported beers.
Molson Coors currently holds a Zacks Rank #2 (Buy). Other
players worth considering in the beer industry include
Anheuser-Busch InBev SA (
) and Constellation Brands Inc. (
) with a Zacks Rank #2.
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