MONTREAL — Molson Coors successfully exploited the national celebration of the Vancouver Olympics to help ignite the first volume sales growth in four years for the company’s flagship Molson Canadian brand.
The Winter Games boosted Canadian beer industry sales by 3.8 per cent as fans celebrated a record gold medal haul by Canadian athletes, concluding in the Olympic men’s hockey championship on the final day of The Games.
But the Canadian-American brewer said Tuesday that its top Molson brand got a five per cent volume lift from its repackaging and new advertising that coincided with the company being the official beer sponsor of the global sporting event.
“We’ve been pleasantly surprised in the first quarter at the buoyancy of the Canadian business,” president and chief executive Peter Swinburn said in an interview.
Molson Coors’ (TSX:TPX.B) market share increased about half a percentage point from a year ago. Gains by Coors Light, Molson Canadian, Molson Dry and Richard’s were partially offset by a decline of Molson Export and non-strategic brands.
“We believe that half of the market growth was attributable to both the Olympics and the timing of Easter, but nevertheless we’ve gotten back at least to a growth rate in Canada which is about one per cent.”
Swinburn said it’s early to say if Molson Canadian’s turnaround is sustainable without the added Olympic push. Despite catchy TV spots and aggressive marketing, the brand has been in the doldrums for four years and at times suffered double-digit volume declines last year.
The company increased its marketing spending by 14 per cent in the fourth quarter to support the numerous new brands that were added, primarily in Canada.
Swinburn said Molson Coors has been successful, at least in the short term, in persuading consumers to re-evaluate a mature brand through the messages it conveyed.
Earlier Tuesday, the Denver and Montreal-headquartered company said its first-quarter profit climbed 38 per cent on a tax-related gain, but higher costs and fewer beer purchases by consumers caused adjusted results to miss Wall Street’s expectations.
The brewer said that it sold 3.8 per cent less beer worldwide. It blamed the decline on high unemployment and a slow recovery in consumer confidence, particularly in the United States and Britain.
In another development Tuesday, Anheuser-Busch was selected by the NFL Tuesday to replace MillerCoors — a Molson Coors joint venture — as the official beer of the professional football league starting in the 2011-2012 season.
MillerCoors CEO Leo Kiely said the decision will allow the brewer to reallocate a “significant amount of money” more effectively to support its brands.
“In fact I think it’s an opportunity that’s different for us as a new company than it was as Coors,” he said during a conference call.
“NFL is a great property. We’re not running away from the NFL.”
MillerCoors’ NFL deal continues for another year and the joint venture brewer will keep contracts with specific teams.
Molson Coors (NYSE:TAP), which reports in U.S. dollars, earned $104.6 million, or 56 cents per share, for the three months ended March 27. That’s up from $75.7 million, or 41 cents per share, during the same period a year earlier.
But the brewer’s profit was 37 cents per share when removing $42.6 million of costs related to the settlement of Brazilian indemnity liabilities. That missed the 45 cents-per-share estimate of analysts polled by Thomson Reuters. These estimates normally exclude one-time items.
Revenue climbed 15 per cent to $947 million from $824.2 million. Taking out excise taxes, revenue rose to $661 million from $559 million.
Kaumil Gajrawala of UBS said the earnings miss was attributable to a substantial increase in marketing expenses, which were $20 million higher than forecasts in Canada alone.
Looking ahead, Swinburn said things are starting to improve in the company’s markets as a result of its investment in promoting its brands and aggressively reducing costs.
“As a result we believe our company is stronger and better positioned to take advantage of growth opportunities as the economy recovers,” he told analysts.
“We are confident that the strength of our Canada portfolio will drive improving results over the balance of the year.”
In Canada, underlying earnings decreased 3.3 per cent to $56.2 million, reflecting a $9 million benefit from a 21 per cent appreciation of the loonie and prior-year benefits.
In the U.K., brands Molson Coors owns saw volume fell 10.9 per cent.
Earlier in the day MillerCoors, a joint venture made up of the U.S. businesses of Molson Coors Brewing Co. and SABMiller PLC, reported its first-quarter profit rose slightly on cost-cutting and higher prices even as sales of some brands slipped. Molson Coors also announced it will spend about $40 million to buy a 51 per cent controlling interest in a new joint venture with the Hebei Si’hai Beer Company of China.
On the Toronto Stock Exchange, the company’s B shares closed at C$44.50, down cents, or 1.26 per cent.