Market Overview

Big Changes Ahead For Molson Coors In Fast-Changing Beer Industry

Big Changes Ahead For Molson Coors In Fast-Changing Beer Industry

Will this be a silver bullet?

Molson Coors Brewing Co (NYSE: TAP) is making major changes in a revitalization plan that will move its headquarters from Denver to Chicago, cut hundreds of jobs and work to speed up how quickly it brings new products to market.

What It Means

New products are the big story in the beer industry in recent years: it's morphing into a beer-plus-other-beverages industry, and Coors is making a big change there too.

The company said Wednesday it will change its name to reflect its effort to move beyond beer, replacing "Brewing" with "Beverage" to become Molson Coors Beverage Co. in January.

It's a transition for a company that unexpectedly got a new CEO three months ago, and the new chief said more big change is needed.

“Our business is at an inflection point," new CEO Gavin Hattersley said Wednesday as the company reported lower-than-expected earnings and sales in its third-quarter print.

"We can continue down the path we’ve been on for several years now, or we can make the significant and difficult changes necessary to get back on the right track. Our revitalization plan is designed to streamline the company, move faster and free up resources to invest in our brands and our capabilities.”

MKM: Urgency Is Needed

MKM Partners analyst Bill Kirk said in a Friday note that faster reactions to market changes are exactly what the company needs — and suggested even more urgency is called for. 

"We believe many of the strategies Molson Coors is pursuing are prudent, but the pace of change should be quicker," said Kirk, who nonetheless reiterated a Buy rating on the stock with a $63 price target.

"MillerCoors has not meaningfully participated in a share-leading fashion in many of the largest beer-adjacent trends in the U.S. over the last decade."

In contrast, the analyst pointed to a more nimble Boston Beer Company Inc (NYSE: SAM) and its quickness to take advantage of beverage trends like hard teas, lemonades, ciders and seltzers.

During the rise of those new drink trends, "Molson Coors was largely absent," Kirk said. 

Still, Molson Coors generates strong free cash flow and is undervalued, and in the traditional beer market, it has two strong brands in Miller Lite and an improving Coors Light, the analyst said. 

"However, the investment community is not appreciating what Molson Coors has/is doing, making it time for more aggressive action."

Another Overhaul

Boston Beer is showing off some of that nimbleness with changes to its Truly hard seltzer brand.

The company has reformulated the product's taste in response to critics, added manufacturing capacity and landed a sponsorship with the National Hockey League, among other moves, said Guggenheim Securities analyst Lauren Grandet, according to Yahoo Finance. It also has added a new lemonade hard seltzer.

"We expect Truly to begin taking ground on White Claw" because of those changes, Grandet said, adding that Truly could double sales in 2020 with the help of the lemonade product.

White Claw, made by privately held Mark Anthony Brands, is the market leader.

Hard seltzer sales were up nearly 200% last year at $1.2 billion, according to Nielsen.

Stock Prices

Molson Coors shares dropped after its earnings report before the open on Wednesday and have yet to recover the loss. The shares were volatile Friday and were up 1.04% at $53.27 at the time of publication. 

Boston Beer Company stock was up 2.34% Thursday, trading at $383.21.

Related Links:

New Brew: MillerCoors, Colombe Have Beer And Coffee Mashup To Help You 'Rally Like A GrownUp'

The Street's Wide-Ranging Take On Molson Coors Earnings, CEO Change

Latest Ratings for TAP

Oct 2020Morgan StanleyMaintainsEqual-Weight
Jul 2020Morgan StanleyMaintainsEqual-Weight
Jun 2020Morgan StanleyMaintainsEqual-Weight

View More Analyst Ratings for TAP
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