MillerCoors delivers 5.5% underlying net income growth for 2013

SABMiller plc (LN:SAB; OTC:SABMRY) and Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) reported that MillerCoors underlying net income grew 5.5 percent for the full year 2013 to $1.290 billion, while fourth quarter underlying net income increased 30.2 percent to $241.9 million versus the same period in the prior year. 

“With our strong fourth quarter profit growth, we have momentum going into the new year as we continue to execute our strategy to grow share in the high-margin and fast-growing above premium space,” said MillerCoors Chief Executive Officer Tom Long.  “We are encouraged by our innovation pipeline and the excellent results in the above premium space.  Last year, we led the industry in above premium share growth with Blue Moon, Leinenkugel’s, Batch 19 and our successful launch of Redd’s Apple Ale. Coors Banquet continues on its exceptional path.  We are holding share in the premium light segment and have strong plans in place for both Coors Light and Miller Lite in the year ahead.”

Full Year and Fourth Quarter Highlights

Unless otherwise indicated, all amounts are in U.S. dollars and calculated in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP).  All percentages are versus the prior year comparable period and include MillerCoors operations in the U.S. and Puerto Rico.

• Underlying net income, a non-GAAP measure, increased 5.5 percent to $1.290 billion for the year and 30.2 percent to $241.9 million for the fourth quarter.
• Total net sales increased 0.5 percent to $7.801 billion for the year and 1.0 percent to $1.803 billion for the quarter.
• Domestic net revenue per barrel, excluding contract brewing and company-owned distributor sales, increased 3.4 percent for the year and 3.1 percent for the quarter.
• Total cost of goods sold (COGS) per barrel increased 3.5 percent for the year and 4.1 percent for the fourth quarter.
• Domestic sales-to-retail (STRs) decreased 2.8 percent for the year and 1.9 percent for the quarter. 
• Domestic sales-to-wholesalers (STWs) decreased 3.0 percent for the year and 2.2 percent for the quarter.

Brand Highlights for the Full Year and Fourth Quarter

The MillerCoors premium light portfolio STRs declined mid-single digits for the full year and the fourth quarter. 

In 2013, Coors Light declined low-single digits for the full year and fourth quarter. In 2014, the brand is putting a special emphasis on connecting with legal drinking age millennials with cutting-edge design across packaging, advertising and digital marketing for both the bottle and aluminum pint. The brand also is engaging sports fans early in 2014 through activation of its alliances with the National Hockey League Stadium Series and Mexico’s LigaMx soccer league. 

Miller Lite declined high-single digits for the full year but mid-single digits in the fourth quarter. The brand brought back the original Miller Lite can design in December of 2013 to drive new interest and trial. Based on strong consumer results, the original can pack will be extended nationally through September 30. The brand will sponsor the South by Southwest Conference in March and this summer will partner with celebrity chef Guy Fieri on an off-premise promotion program.   

Tenth and Blake Beer Company grew the MillerCoors craft and import portfolio by high-single digits for the full year and low-single digits for the fourth quarter led by the national expansion of the Leinenkugel’s Shandy line which propelled the franchise up double digits for the year and the quarter.  Fourth quarter growth was partially offset by lower volumes of Henry Weinhard’s.  The Blue Moon Brewing Company grew mid-single digits for the full year and low-single digits in the fourth quarter.  Blue Moon Belgian White, continued its run of 73 consecutive quarters of growth and Batch 19 volumes grew over 300% versus the prior full year as it continued to expand nationally.  Additionally, the Crispin Cider Company grew STRs at a strong double-digit rate in 2013.

MillerCoors new brands delivered excellent volume and value growth in above premium.  In 2013, the Redd’s franchise was one of the top performing growth brands in the entire U.S. beer industry.  It captured 0.4 share points of total industry volume for the full year and 0.6 share points of total industry volume in the fourth quarter.  Third Shift Amber Lager continues to perform well and is now a top 15 craft brand by dollar sales according to Nielsen.  

Coors Banquet grew high-single digits for the full year and mid-single digits in the fourth quarter, marking seven consecutive years of growth. In 2014, Banquet will continue to tell its story of heritage and authenticity through packaging, with continued expansion of the popular heritage bottle and a series of special heritage bottle labels, cans and aluminum pints.    

In the economy segment, Miller High Life and Keystone Light will return with national television advertising campaigns this spring.  Keystone Light recently renewed an agreement to partner with the FLW Walmart Bass Fishing Tour Series beginning next month. 

Financial Highlights for the Full Year and Fourth Quarter

Domestic net revenue per barrel grew 3.4 percent for the year and 3.1 percent for the quarter as a result of favorable net pricing and positive brand mix.

Total company net revenue per barrel, including contract brewing and company-owned distributor sales, increased 3.3 percent for the full year and 2.9 percent for the quarter. Third-party contract brewing volumes were down 0.1 percent for the year and up 1.1 percent for the quarter.

Total COGS per barrel increased 3.5 percent for the full year and 4.1 percent for the quarter, driven by commodity and brewery inflation, lower volume, and higher costs associated with brand innovation. 

Marketing, general and administrative costs decreased by 3.2 percent for the full year and 12.0 percent for the quarter.  The fourth quarter decrease was driven primarily by media investment phasing and lower pension and employee benefit related expenses.  Lower pension expenses and lower promotional spending drove the full year reduction.

MillerCoors achieved $102 million of cost savings for the year and $28 million in the fourth quarter, primarily related to procurement savings, logistics and brewery efficiencies.  

Depreciation and amortization expenses for MillerCoors in the fourth quarter were $80.5 million, and additions to tangible and intangible assets totaled $165.9 million. 

Special items in the quarter included a $2.6 million write off of information system assets related to the Business Transformation project and restructuring related severance and other benefit costs of $2.2 million.