Marketing shift leads to a low expectations beat (TAP)
Molson Coors reported Q1 EPS of $.01, above consensus expectations of -$.10. Expectations were low into the event due to the hacking and Texas winter storm disruption on production during the quarter. Marketing spend was lower in Q1 but will step up in Q2.
North American revenue decreased 6.3%, with pricing up 2.4% (US pricing up 4.1%) and EBITDA down 13%. European revenue decreased 39.5%, with volumes down 22% and pricing down 10.4%. EBITDA was a loss of $38M, $34M wider than the prior year. Consolidated revenue decreased 11.1% in constant currencies, with volumes down 12%. Sales per hectoliter grew 1.8% as the company continues to take price despite volume declines. COGS per hectoliter grew 5.6%, with inflation driving 470bps of the higher costs. Higher transportation costs and can sourcing costs were a headwind. MG&A decreased 15.9% due to lower marketing spend. EBITDA declined 20%.
Molson Coors depends on hard seltzer growth to drive the top line this year. Management aims to reach a double-digit share in the U.S. market by year-end, equaling Bud Light’s Seltzer in share (currently 3rd in share). That would require Topo Chico most of its launch share of 7%. Management maintained guidance for the year for sales to be up MSD% and EBITDA to be flat. Management expects the on-premise trends to continue to improve in the US. At the same time, increasing restrictions pressure Canada, and in Europe, a gradual improvement led by the UK is expected to lead to YOY improvement.
The secular trends remain in place against Molson Coors, but it has easy comparisons to the pandemic in the near term. Despite those easy comparisons, higher inflationary and marketing costs will offset the revenue growth.
Amazon grocery comments (KR)
(Brian McGough covers amazon, but it poses a large competitive threat to the grocery competitors.)
“Grocery has been a great revelation during the post-pandemic period here. I think people really value the ability to get home delivery. And we’ve seen that as numbers go up considerably pre and post-pandemic…. Amazon Fresh became a free Prime benefit, as you know, in the late part of 2019. And customers really adopted it and continue to see strong growth. So, I think on the fresh stores, it’s a little too early. The stores themselves, we’re confident that the ‘Just Walk Out’ technology that will be a boon, a benefit to customers. And we’re very excited about what’s in the works, but that’s still really early in day 1.” -Brian Olsavsky, CFO.
Amazon’s grocery delivery offering has several advantages compared to the traditional grocers. As the tide goes out for food at home consumption Amazon’s competitive impact will be more readily seen.
“We’ve got about 12 Fresh stores right now that are open, and we’ve confirmed. We’ve got some additional ones coming in Southern California and Illinois, New Jersey, and the here with us in the Seattle area.” -Dave Fildes, Director of IR.
Amazon continues to test and learn from its Fresh concept. A larger, accelerated rollout still feels years away. Amazon’s presence in grocery is more likely to be felt through delivery than in small stores.
Online grocery trends (ACI)
The biggest growth for the grocers during the pandemic was their online sales. The pandemic drove people to shop online for groceries, including groups that probably would never have considered it previously. The strong triple-digit growth rates for many grocers led them to project that online would continue to grow in 2021 despite the difficult comparisons.
Instacart, the grocery delivery site, is seeing significant declines anniversarying the pandemic down ~50%, according to Similarweb, as seen in the chart below. Albertsons reported 282% growth in its online business for the quarter ended February 2021. Albertsons still sees strong growth rates while Kroger has decelerated significantly. Albertsons does not expect to complete its rollout of curbside pickup to all of its stores until year-end, which gives its online sales a growth driver this year. The weaker growth rates recently have been seen at the stand-alone e-commerce and delivery sites. The conventional grocers, for the most part, have outperformed their digital-only competition.
