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MarketScreener Homepage  >  Equities  >  Nyse  >  Molson Coors Beverage Company    TAP

MOLSON COORS BEVERAGE COMPANY

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Coronavirus Brings Beer Drinkers Back to Bud Light

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05/18/2020 | 07:12am EDT

By Jennifer Maloney

When the apocalypse came, Americans bought Bud Light.

Big beer brands had been losing ground for years before the coronavirus struck. Now drinkers are turning back to mainstream beers as the crisis shifts sales from tap rooms to grocery store aisles, giving a boost to giant beer companies while putting small craft breweries in peril.

The crisis has reversed the trajectory of long-declining beers such as Bud Light, Miller Lite and Coors Light, but it isn't clear how long the effect will last. The biggest U.S. brewers are hoping some of the people who have returned to these American lagers will stick with them after the lockdowns lift.

The more permanent impact may be on small craft brewers, some of whom already have gone out of business because of the pandemic.

The coronavirus crisis has shut restaurants, bars, tap rooms and other out-of-home venues that together make up about 18% of U.S. beer sales. A jump in retail-store beer sales hasn't entirely made up for those losses, but it has given new life to flagging mainstream beer brands.

Beer drinkers have turned to box stores and grocery stores, and they are buying beer in 24- and 30-packs so they can make fewer trips. Shoppers are experimenting less, gravitating to brands they trust and looking for healthier, lower-calorie beers. Some people, out of work or watching their budgets, are trading down to cheaper options. And distributors and retailers, looking to simplify their supply chain, are trimming the number of products they carry.

All of those factors are hurting small craft brewers, which make most of their sales in their own tap rooms. Many craft beer brands aren't distributed in retail stores. For most craft breweries, on-site sales were down by more than 70% in early April, and sales of craft beer to bars and restaurants had evaporated, according to a survey by the Brewers Association, an industry group

The shift in buying behavior has been a boon for megabrewers such as Budweiser maker Anheuser-Busch InBev SA, which said its net sales grew in the U.S. by 1.9% in the first quarter despite the global crisis.

Sales of mainstream beers like Bud Light and Coors Light in U.S. retail stores fell 3.1% in 2019. Since coronavirus pantry-loading began in early March, sales in that category have jumped 10.7% from the same period a year ago, according to an analysis of Nielsen data by beer-industry consultant Bump Williams.

Coronavirus shopping patterns are benefiting big beer brands across the price spectrum, from budget beers like Keystone Light and Natural Light to pricier brews like Michelob Ultra and the biggest craft beer brands like Sierra Nevada and Blue Moon, a craft-style beer owned by Molson Coors Brewing Co. The trend has also fueled the continuing craze for hard seltzer, pushing sales of White Claw to new heights.

Joel Jackson was a Bud Light fan in college and a few years ago got interested in craft beers. Since the coronavirus lockdown began, the 28-year-old lead-paint inspector in Buffalo, N.Y., has driven around each Friday night to buy a four- or six-pack from tap rooms offering curbside pickup. But he also has found himself drinking more Bud Light. He and his girlfriend bought a 30-pack recently to play a virtual round of beer Olympics with friends.

"It was definitely nostalgic," Mr. Jackson said.

And he drank Bud Light to celebrate his brother's 21st birthday on Saturday in their father's garage, where the family had set up a bar. His brother had to buy drinks with monopoly money.

"Consumers are behaving very differently to how they were even four months ago," said Nigel Tordoff, chief customer officer at Molson Coors, which swung to a loss in the first quarter but reported relatively strong sales of its mainstream and budget brands including Miller Lite, Coors Light, Keystone Light and Miller High Life.

Even as state lockdowns lift, some people might not return to their previous habits for a while, Mr. Tordoff said. Over time, he said, people will shift from drinking at home with family or sharing a beer with a friend to gathering in small groups and eventually larger celebrations.

Brendan Whitworth, chief sales officer for AB InBev's U.S. business, said he expects consumers to go back to bars -- and to craft beer. But some coronavirus-era habits may stick, he said, such as ordering booze online or doing curbside pickup. And many consumers might be looking for more affordable options.

"When people needed to make meaningful decisions, they chose Bud Light," he said.

Industry leaders agreed that the craft-beer market was oversaturated before the pandemic hit. There were more than 8,000 craft breweries in the U.S. as of April, the Brewers Association said, and the churn rate was high. Because of the steep competition and the challenges of operating a small business, the Brewers Association before the pandemic projected that 400 breweries would close this year.

But now more are considering going out of business. In early April, a Brewers Association survey found 60% of craft brewers said they wouldn't be able to stay in business if social-distancing measures continued for three months. Smaller craft brewers often have high overhead costs, heavy debt loads, minimal cash reserves and little or no distribution in retail stores, said Bart Watson, economist for the Brewers Association.

Davis Tucker, who more than two decades ago founded North By Northwest Brewing Co. in Austin, Texas, made the decision in April to close his brewery for good.

Last year, he produced roughly 1,300 barrels. About 90% was sold at his brew pub. He had a staff of 65, rent to pay and debt service on capital improvements including a renovated pavilion and a new air-conditioning system.

"We just didn't have the cash backup," he said. "We decided to make the call earlier rather than hang on a couple of months."

Write to Jennifer Maloney at jennifer.maloney@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
ANHEUSER-BUSCH INBEV 4.23% 47.18 Delayed Quote.-35.11%
AT HOME GROUP INC. 2.76% 5.96 Delayed Quote.8.36%
BOX, INC. -1.95% 20.57 Delayed Quote.22.59%
BUFFALO CO.,LTD. 1.50% 1148 End-of-day quote.-7.49%
BYD COMPANY LIMITED 3.62% 77.3 End-of-day quote.98.97%
JUST GROUP PLC 2.25% 49.06 Delayed Quote.-37.90%
MOLSON COORS BEVERAGE COMPANY 4.24% 34.66 Delayed Quote.-35.70%
SHIFT, INC. 13.90% 12780 End-of-day quote.60.15%
THE GLOBAL LTD. -3.30% 205 End-of-day quote.-56.48%
THE LEAD CO., INC. -1.71% 345 End-of-day quote.-11.54%
WILL GROUP, INC. -2.52% 618 End-of-day quote.-50.64%
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Financials (USD)
Sales 2020 9 455 M - -
Net income 2020 537 M - -
Net Debt 2020 8 060 M - -
P/E ratio 2020 12,9x
Yield 2020 3,88%
Capitalization 7 560 M 7 560 M -
EV / Sales 2019
EV / Sales 2020 1,65x
Nbr of Employees 17 700
Free-Float 77,9%
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Technical analysis trends MOLSON COORS BEVERAGE COMP
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Mean consensus HOLD
Number of Analysts 19
Average target price 44,43 $
Last Close Price 34,66 $
Spread / Highest target 70,2%
Spread / Average Target 28,2%
Spread / Lowest Target -1,90%
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Managers
NameTitle
Gavin D. K. Hattersley President, Chief Executive Officer & Director
Andrew Thomas Molson Chairman
Tracey I. Joubert Chief Financial Officer
H. Sanford Riley Independent Director
Peter H. Coors Vice Chairman
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