Molson Coors shares plummet as company cites division in consumer spending on beer

A bottle of Molson Coors Brewing Co. Blue Moon brand beer

Tiffany Hagler-Geard | Bloomberg | Getty Images

Molson Coors Beverage is seeing a split among its customers as inflation hits their wallets: some beer drinkers are trading down, while others are still looking for pricier six-packs.

Shares of the beverage company fell more than 10% in Tuesday’s morning trading as concerns about the uncertain macroeconomic environment weighed on the stock. The company reported second-quarter earnings and revenue roughly in line with Wall Street estimates.

CEO Gavin Hattersley told CNBC that the beer industry saw sales decline in the second quarter, blaming the company for a 1.7% drop in its US sales volume.

But Molson Coors said it outperformed the broader industry in the United States, Canada and the United Kingdom during the period. Hattersley attributed strong sales growth to higher end beverages such as Blue Moon and Peroni beer, as well as a boost in demand for lower-priced beers such as Miller High Life and Keystone Light.

A year ago, Molson Coors began scaling down its portfolio of cheaper beers to focus on more popular options. Some investors wanted the company to scrap the segment altogether and instead focus entirely on higher-end beers, which have outperformed in recent years.

“What some would consider an Achilles’ heel in the past has positioned us perfectly at the moment,” Hattersley said. “Some of our competitors only operate in the premium space, which is obviously not a place I would like to be as we are heading into what are clearly going to be tough times.”

As Molson Coors’ six-packs get more expensive, more consumers could trade for the cheaper options. The company increased its prices in the spring by nearly double the usual rate and is considering another round of increases by the end of 2022, according to Hattersley.

Beer isn’t the only industry seeing a split in consumer behavior. Ferrari reported a record second quarter on Tuesday, fueled by surging growth for its luxury cars. Delta Air Lines said its ticket recovery for premium-class tickets has surpassed that of major cabin tickets. Chipotle Mexican Grill said high-income patrons are more likely to visit, while those making less than $75,000 a year don’t order their burritos as often.

Leave a Comment