Not only has MillerCoors failed to conquer the Millennial market, but the Millennial market has conquered this 150-year old tradition. It turns out, Millennials really don’t like that mass-produced beer that tastes like too much tainted water.
The Millennial generation’s victory over the traditional beer producer is even forcing it to change its name and cut its workforce after third-quarter losses of over $400 million. In the process, the brewing giant will close down its Denver office and turn Chicago into its North American headquarters.
Sales fell 3 percent to $8.1 billion in the first nine months of this year. And its stock is dragging as a result.
First, came the demise of the brewer’s fruit-flavored ‘Two Hats’ lager, which it was forced to axe back in August when it failed to metamorphose into the Millennials’ favorite beer.
The entire brewing group is about to be rebranded. In fact, “brewing” will no longer be part of its name.
The group includes U.S. unit MillerCoors, Canadian unit Molson Coors Canada, European unit Molson Coors Europe and Molson Coors International.
The company’s new name will be Molson Coors Beverage Co.
The consolidation and rebranding will see a reduction into two business units--North American and European. The plan is to simplify corporate structure and cut cuts, which also means getting rid of 500 employees.
The restructuring and labor force reduction is meant to save the company $150 million, which it will reinvest in a rebranding that, so far, lacks any real details.
Miller, Molson, Coors, Blue Moon, Pilsner Urquell and Foster’s will still be around, but the brewing giant is under pressure to come up with a new game plan amid slowing growth and a major threat from the increasing numbers of craft beers.
How, exactly, will this help with the fact that MIllennials don’t seem keen on Coors and Miller beer? According to Molson Coors new president and CEO Gavin Hattersley, the company has realized that future growth will not only rely on “above-premium beers”, but will also have to go “beyond beer”.
And beyond beer means non-alcoholic beverages.
Earlier this year, Molson Coors introduced a couple of new products, including “canned wine” and “hard coffee”.
Part of the money it saves in the restructuring will go to improving digital marketing capabilities and being able to introduce new products to the market faster. The new target is four months, compared to the 18 months it now takes the company to introduce something new.
MillerCoors’ Q3 earnings report was dismal, indeed. But it’s not alone.
Anheuser-Busch Inbev also released disappointing sales in its Q3 report earlier this year. Analysts had been expecting growth of 0.8 percent. Instead, they saw a 0.5-percent year-on-year decline in sales volumes.
If the traditional beer market is floundering, the global craft beer market is still doing well, but not necessarily for the big brewers.
The younger generations want better beer, not more beer. And they’re very fickle.
And it’s not just craft beer and a Millennial distaste for regular old American beer that are diminishing the big brewers, it’s also cannabis.
Data shows that legalized cannabis reduces beer demand. Since Canada legalized recreational cannabis, Canadians have been drinking less beer, according to survey data published by Barrons.
For Molson Coors, it’s not going to be an easy climb out of this hole.
In “absolute dollar terms, competitors such as Anheuser-Busch InBev (BUD), Heineken (HEINY), Mike's, Constellation Brands (STZ) and Boston Beer (SAM) have increased marketing/brand support behind new products, packaging and marketing,” Bank of America analyst Bryan Spillane said, downgrading Molson Coors to Underperform from Buy, and lowered his price target by $20, to $50.
The question on every investor’s mind right now is whether the brewer can reinvent itself fast enough and without going into massive debt.
By Michael Scott for Safehaven.com
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