Investor Alert

New York Markets Open in:

Nov. 2, 2020, 4:13 p.m. EST

Molson Coors CEO says revitalization is about ‘more than just seltzer,’ though that’s a big part of the ‘beyond beer’ approach

Molson Coors has Vizzy, Coors Seltzer, a Coca-Cola partnership for Topo Chico Hard Seltzer and another, Proof Point, coming

By Tonya Garcia, MarketWatch

Molson Coors
Vizzy is one of a number of hard seltzers in the Molson Coors product lineup

Molson Coors Beverage Co. highlighted the success of Vizzy and Coors hard seltzers in its third-quarter earnings report, but Chief Executive Gavin Hattersley also emphasized other areas of growth as the company’s turnaround plays out.

“The ‘Revitalization Plan’ has five core legs to it,” Hattersley told MarketWatch. “Seltzer is obviously a big part of the ‘beyond beer’ approach, but there are lots of other items that we’ve achieved over the last year. It’s more than just seltzer.”

Molson Coors (NYS:TAP)  reported Thursday adjusted earnings per share of $1.62, exceeding the FactSet consensus for $1.02. Sales of $2.75 billion were down year-over-year due to the coronavirus, but also beat the FactSet consensus of $2.66 billion.

Sales suffered due to the lack of events when people would buy beer and other beverages.

“Consumption is up but not enough to offset all of the sporting occasions, concerts,” and more, Hattersley said.

See: Boston Beer’s third quarter got a boost from Truly hard seltzer but analysts warn of slow growth

Molson Coors’ “Revitalization Plan” includes efforts to support the company’s core brands, aims to grow the premium merchandise lineup and has a focus on areas “outside of the beer aisle.”

Hard seltzer off-premise sales year-to-date to Oct. 17 totaled $3.4 billion, up 183% year-over-year, according to Nielsen data. Off-premise includes grocery and convenience stores, as well as other places where alcohol can be purchased in order to be consumed elsewhere.

Vizzy seltzer, made with acerola cherry, which is high in antioxidants, is #8 on Nielsen’s list of top 10 growth brands in 2020, Molson Coors pointed out in its earnings release. And Coors Seltzer sold 500,000 cases in its first month after the August launch.

Vizzy and Coors Seltzer is facing competition from an increasingly crowded hard seltzer category that is expected to get more crowded.

Molson Coors has partnered with Coca-Cola Co. (NYS:KO)  for the launch of Topo Chico Hard Seltzer. And Molson Coors will launch Proof Point next year, a spirit-based seltzer.

Also: Michelob Ultra Organic Seltzer adds to swiftly growing hard seltzer category

“There’s a lot of runway in the hard seltzer category,” Hattersley said. “Differentiation is important.”

In addition to hard seltzer, Molson Coors launched Blue Moon LightSky, a light version of its popular craft beer, in February. That has become the top-selling new beer of 2020, according to Nielsen data the company quotes.

Coors Light and Miller Lite also continue to grow.

JPMorgan analysts note that Molson Coors is expanding the production capacity for Blue Moon LightSky and seltzers by 400% each, but they’re still concerned it’s not enough.

“As we believe hard seltzers will continue to grow at a fast pace and other players are also adding production capacity, we believe this target puts Molson Coors under tremendous pressure to deliver against this goal even when considering the three brands,” JPMorgan said.

“Management’s effort to launch on-trend hard seltzer brands is helpful, but still relatively small to really move the needle, and therefore we think it is prudent to remain on the sidelines at present.”

JPMorgan rates Molson Coors stock neutral with a $40 price target.

Don’t miss: California’s fabled wine region is having ‘the most horrible, devastating and catastrophic year’

MKM Partners is more upbeat.

“Where most staples companies have received a pass for COVID-19 related disruption, Molson Coors valuation has been unduly punished,” analysts said. “Results aren’t far off peers, yet Molson Coors is near its 52-week low.”

Molson Coors stock has slumped 28.8% over the past year while the SPDR Consumer Staples Select Sector exchange-traded fund (PSE:XLP)  has gained 3.3% and the S&P 500 index (S&P:SPX) is up 8% for the period.

MKM points out a number of factors in Molson Coors’ favor, including Miller Lite and Coors Light outperforming Anheuser-Busch’s (NYS:BUD) Bud Light and the company’s innovative lineup, including hard seltzers.

“COVID-19 disruption has concealed the improvements Molson Coors has made, but over time should become more obvious,” MKM said.

MKM rates Molson Coors stock buy with a $55 price target.

Link to MarketWatch's Slice.