Investor Day Highlights (TAP)
Molson Coors outlined its annual growth targets of LSD% revenue growth, MSD% EBIT growth, and HSD% EPS growth.
- The biggest change in strategy was making Beyond Beer a new strategic pillar. Management is targeting half of their above premium revenue growth to come from Beyond Beer.
- Miller Lite and Coors Light have won thousands of tap handles in the U.S. Both brands are each nearly the same size as the former market leader, Bud Light. In the summer the company gained 12,000 tap handles.
- In off-premise, the brands “are gaining significant amounts of shelf space at dozens of major U.S. retailers as they reset their shelf space to meet current trends.”
- The company is spending 15% more on media in the U.S. and 25% more in Canada.
- The large brewing contract that represents 2-3% of volumes in the Americas will be a margin enhancer in 2024.
- Capex needs do not require a future step up.
- Acquisitions would be in the “bolt-on” size of ~$100M. There are no large international pieces.
- The debt level being the lowest in years will lead to accelerating share repurchases. The company announced a $2B repurchase plan to be executed over the next five years.
We’re not in love with Beyond Beer as a strategic pillar. The differences in manufacturing and distribution are hurdles to a competitive advantage. With Miller Lite and Coors Light receiving a boost from their competitors, the growth in the above premium won’t be offset by the core brands. It has been our contention that Bud Light share losses are not easy comparisons, and Molson Coors will solidify its gains in 2024. Molson Coors is on our long list.
Return to the office new normal (KR)
Post-Labor Day office occupancy rates have reached a nationwide high since the outbreak of the pandemic. According to Placer.ai, office visits were down 35.2% in August compared to the same month in 2019, the smallest monthly decline compared to the same month four years ago, as seen in the chart below. Several companies took new measures to increase office occupancy after Labor Day. Meta even went so far as to threaten workers who did not return with being fired. 28% of employers surveyed by ResumeBuilder in August said they would fire employees not complying with the return to work orders.
However, Kastle Systems’ Back To Work Barometer ticked down for the week ended September 27 to 49.7% from 50.4% in the previous week. The work week varies widely, with Monday and Friday lagging behind Tuesday, Wednesday, and Thursday. Last week, Tuesday reached 59.4% occupancy, while Friday was 32.9%.
At this point, the “return to the office” is not a headwind for the grocers or a tailwind for restaurants in the cities. The mid-week in-office work schedule is looking like the new normal, and the job market does not look like companies can fire employees for not being in the office.
Appeals win (KVUE)
A New Jersey appeals court threw out a $223.8M verdict against Johnson & Johnson in a talc lawsuit. The Superior Court of New Jersey Appellate Division found that a lower court judge should not have allowed some of the scientific expert testimony the plaintiffs presented.
Johnson & Johnson has a wave of additional talc lawsuits that are expected to go to court next year. It sought relief through a bankruptcy filing for its LTL subsidiary to resolve 40,000 cases for ~$9B, but it was rejected by a judge. After the bankruptcy stay was lifted two months ago, Johnson & Johnson received 11,000 new claims in the first month. The claims have slowed recently to a 2,000 talc claims per month pace. J&J will likely have to raise its settlement, which will not be enough for the plaintiffs, with so many cases continuing to be filed. J&J needs some bigger wins in court, where it is winning about ¾ of the cases, with most of the losses either on appeal or have been resolved. Kenvue is indemnified by Johnson & Johnson in the U.S. cases, but the lawsuits are still an overhang for the shares.
