How AB InBev and Molson Coors are adapting to a rapidly changing alcoholic beverage market
After announcing a 2% drop in sales in its last earnings call, Molson coors (NYSE: TAP) makes a surprise announcement: it’s change his name from Molson Coors Brewing Co. to Molson Coors Beverage Co. It may seem like a minor change at first glance, but the underlying reason may say a lot about the future of the alcoholic beverage industry, especially for the US segments. struggling Molson Coors and his beer giant peer Anheuser Busch InBev NV (NYSE: BUD).
State of the beer market
Earlier this year, the beer institute reported the share of this beer in total alcohol servings fell to 49%, down around 1% in 2018, which is perfectly in line with AB InBev’s US turnover, which fell by 0, 7% the same year. Craft breweries, which the Brewers Association now account for more than 24% of the overall US beer market, increased their volume by 4% and helped keep beer sales from falling further. However, both AB InBev and Molson Coors are facing significant pressure on their traditional domestic beer revenues, with third quarter results highlighting the trend.
A wave of spiked seltzer comes crashing down
According to the Nielsen market research, seltzer sales crossed the billion dollar mark in the past 52 weeks in August, signaling changing consumer preferences. Currently, the spiked seltzer water market is dominated by two main players: White Claw by Marc Anthony Brands and Boston beer‘s (NYSE: SAM) Really hard seltzer. Together, the two spiked seltzers accounted for 84% of the market in mid-August, according to market research firm IRI.
Unlike its two big domestic brewing rivals, Boston Beer, the country’s second-largest craft brewery and maker of Samuel Adams and Angry Orchard, saw third-quarter revenue increase 23.3% (even with sales from Sam Adams falling). The difference? Boston Beer Truly was the second best-selling spiked seltzer on the market. The brand just announced a new partnership with the National Hockey League, and even with new entrants to the space, Boston Beer expects to capitalize on its “triple-digit volume growth,” as has mentioned CEO Dave Burwick in the earnings release, trying to maintain his position in the market.
White Claw was just ranked the second fastest growing brand in 2019 by global research firm Morning Consult and “accelerated faster than anyone could have predicted,” said White’s senior vice president of marketing. Claw to CNN Business in September. According to another one-year Nielsen study completed in April, hard seltzer sales had already seen their sales increase 193% from the previous year, and that was even before “White Claw Summer.”
How are the beverage companies reacting?
In its third quarter earnings release, Molson Coors discussed plans to expand its model to “bring new beverages to market faster and more accurately.” Investors are getting a glimpse of this process with new products such as La Colombe hard coffee, released in September in the United States, and Vizzy hard seltzer, which will be released in 2020 in the United States. However, Molson Coors already has a struggling hard seltzer lineup. , With Henry’s Hard Soda only holding a 2% market share in mid-August, far behind White Claw and Truly.
AB InBev already has a portfolio of spiked seltzer brands, including its premium brand, Bon & Viv, and the less expensive Natty Light Seltzer. As mentioned in his Third Quarter Results Report, both were “among the top 15 winners in terms of innovations in the malt beverage category in 2019, according to IRI”. AB InBev also announced the upcoming launch of Bud Light Seltzer in order to continue its efforts to gain market share from its spiked seltzer competitors. In addition, AB InBev continues to launch non-alcoholic beers such as Budweiser Prohibition in international markets, signaling a move away from its traditional beer brand to become a beverage conglomerate.
With the significant investments that Molson Coors and AB InBev are making in the flavored malt beverage (FMB) market, it remains to be seen how effective their new product lines will be and what growth they can derive from them. With declining corporate sales and a shift in consumer preferences, investors will need to demonstrate a significant level of trust in the executives of the two mega-breweries in order to put their stock prices back into the market. good direction.
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