Event Details:
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We see 30% upside from the combination of higher than expected revenue and EPS estimates and a modest valuation.
The Setup:
AB InBev and Molson Coors combined have more than 60% of the domestic market share of beer. The two brewers have lost the higher end of the beer segment to craft beer. They have also failed to make inroads with the growing Latino population. Since the pandemic began, younger consumers have adopted hard seltzers and RTDs potentially switching consumption habits for decades to come. Demographics and premiumization are secular headwinds for the domestic big brewers.
With annual volume declines Molson Coors has sought out new partners for distribution to keep the network from entering a decremental margin cycle. Memorable marketing campaigns have often centered on market share wars, rather than growing the market. In this challenging backdrop, Bud Light committed a historic marketing fiasco of its own doing. Molson Coors is the key beneficiary for the new customers up for grabs as seen in the off-premise scanner data.
Earnings upside:
Our EPS estimates for the year are considerably ahead of consensus expectations. Driving our estimates are higher U.S. volumes and the fixed cost leverage of a manufacturer budgeting for volume declines. The current valuation implies the company will not be able to hold onto the market share gains. We see a path for Molson Coors to build on the gains rather than give them back.
Black Book Sections:
We will have an evaluation of industry trends including:
- demographics
- competitive analysis of beverage alcohol, beer, and RTDs
- a breakdown of the challenges facing its key competitor as it seeks to restore its largest brand
- valuation analysis
- earnings upside scenarios
- and more.
