Beer taps slow amid soft economy

Molson Coors Brewing Co. and SABMiller PLC said the recession has dampened consumer appetite for beer and their thirst is unlikely to return in the first half of this year as economies remain weak.

Molson Coors reported Tuesday that worldwide volumes fell 4% in the latest quarter.

As a whole, Canada’s beer industry fizzled out by an estimated 1.9% in recent months, according to the Montreal and Denver-based company.

And over at MillerCoors, the company’s joint venture with London-listed SabMiller in the U.S., the picture was similar as quarterly sales dipped compared to last year.

Slowing sales run contrary to the notion that beer is recession-proof.

"It's tough out there, and we saw the effect of ongoing economic pressure and unemployment on beer sales, especially in the fourth quarter," MillerCoors Chief Executive Leo Kiely said in a statement released Monday.

Even the traditionally robust U.K. beer market saw fewer pours amid a weak economy, Molson Coors said.

In Britain, volumes fell more than double the company’s global average by 9.3% during the quarter ended Dec. 26.

Molson Coors said it’s decision not to drop prices contributed to the steep declines in the pint-loving U.K. as the cost of making beer there increased 12% in local currency.

The company fared slightly better in Canada where overall sales remained relatively flat at 2.1 million hectoliters of beer sold in the quarter, unchanged from a year ago. It was cheaper to make and sell beer in this country thanks to a 3% drop in production costs.

But sales to retailers fell 1.2% as the demand for Molson Canadian, Dry and Export brands all declined.

Despite fewer beer drinkers tapping into the liquid gold, Molson Coors managed to more than double its profits thanks to favourable tax benefits. Higher prices also helped to boost net sales by 11% to $820.8 million.

The brewer said it earned $218.2 million, or $1.17 per share in the quarter. That's up from $87.6 million, or 48 cents per share, compared to the same quarter one-prior. Without one-time items, the company earned $190.3 million, or $1.02 a share.

South of the border at MillerCoors, net revenue decreased by 1.6% to $1.71 billion, although pricing was strong.

Molson Coors Chief Executive Peter Swinburn said he expects the weak sales volumes to continue, especially in the coming months.

“Looking to 2010, we expect volume to remain challenging, especially in the first half, but we are focused on continuing to establish a strong brand base to our business that ensures we not only manage the current market but that we take full advantage of revenue upsides when momentum improves.”

But Swinburn is hopeful that things will pick up in step with the economic recovery.

“We are focused on investing in innovation and our brands and ensuring we maintain a strong balance sheet, so that when market conditions improve we are better positioned to accelerate our growth and capitalize on opportunities.”

According to researcher firm Plato Logic, Swinburn could be right. Plato estimates the world beer market grew less than 0.1% in 2009, but projections show it could pick up again in 2010 with growth pegged at about 3%.

“While this may appear quite optimistic, we would expect growth to resume in some emerging markets,” Plato director Ian Pressnell said.

Molson Coors is the world’s sixth largest brewer. The world’s top four brewers (Belgium-based Anheuser-Busch InBev, London-listed SABMiller, Heineken, and Denmark’s Carlsberg) now account for over half the global market for beer after recent deals such as Dutch brewer Heineken’s takeover of Mexico’s FEMSA. China’s Tsingtao Brewery is the world’s fifth largest beer maker.

Shares of Molson Coors closed 2.47% lower on the Toronto Stock Exchange Tuesday at $43.62.