Beer Demand Resurgence in Europe and Asia: Implications for the Beverage Industry

Current Beer Demand Trends

Beer demand in Europe and Asia is on the rise, driven by the growth of brands like Madri in the U.K. and increased net sales in the EMEA and APAC regions. Classic beer is gaining market share against spirits, indicating a robust resurgence in beer consumption.

"When it is fully operational in a few weeks' time, we will have a more efficient brewery that produces less waste. We also commenced a new multiyear project in the U.K. to increase our brewing and packaging capacity, which is necessary in part due to the continued growth of Madri and it is these investments, along with our extensive hedging program, that have helped us to offset inflation, particularly during the significant inflationary period we have experienced in recent years. And while inflation has moderated, as expected, it remains a" --- (TAP, earning call, 2024/Q2)

"Madri is currently the number three world beer in the U.K. total trade, and we have been consistently closing the gap to number two." --- (TAP, earning call, 2024/Q1)

"Factored volume in our EMEA&APAC segment is the distribution of beer, wine, spirits and other products owned and produced by other companies to the on-premise channel, which is a common arrangement in the U.K. Net Sales The following table highlights the drivers of the change in net sales for the three months ended March 31, 2024 compared to March 31, 2023 (in percentages): Financial Volume Price and Sales Mix Currency Total Consolidated net sales 5.7 % 4.4 % 0.6 % 10.7 % Net sales increased 10.7% for the three months ended March 31, 2024, compared to prior year, driven by higher financial volumes, favorable price and sales mix and favorable foreign currency impacts." --- (TAP, sec filing, 2024/Q1)

"So definitely seeing an improvement in classic beer. If you add the RTD spirits into that, which beer supply is put in, and then just total overall beer is gaining share against spirits." --- (TAP, earning call, 2024/Q2)

"Okay, great. We'll drill into a lot of those points as we go. But I guess maybe just stepping back, a lot of discussion on both the health of the consumer generally, especially in the U. S. And the health of the broader beer industry. We came into the year with good momentum. Very" --- (TAP, conference, 2024/06/05)

Supply Chain Impacts on Availability and Pricing

Molson Coors' supply chain has consistently exceeded expectations despite challenges, ensuring reliable supply to retailers. However, inflationary pressures and higher costs are expected to increase the cost of goods sold, impacting beer pricing. Efforts to upgrade capacity and improve procurement processes are ongoing to mitigate these impacts.

"The part we weren't expecting is that our supply chain team on a consistent week-over-week basis, I think we're in week nine or 10 of the strike have over delivered our expectations from a supply point of view." --- (TAP, earning call, 2024/Q1)

"And having a consistent supply chain now where we can guarantee supply to our retailers and distributors who've really wanted to support the brand, but have been concerned about the lack of consistency sometimes in supply chain." --- (TAP, conference, 2024/06/05)

"On the cost side, we expect underlying cost of goods sold per hectoliter to increase due to continued, albeit moderating inflationary pressure, including material conversion costs, higher costs related to premiumization, and lower volume leverage impact as compared to 2023 and the first quarter of 2024." --- (TAP, earning call, 2024/Q1)

"Maybe we can just, I mean this includes upgrading capacity, more sophisticated manufacturing, you know, it's kind of step changing both your procurement and your supply chain, marketing efficiencies, there's a lot you're working on all at once." --- (TAP, conference, 2024/06/05)

"Cost of goods sold per hectoliter improved 1.9% for the three months ended March 31, 2024 compared to prior year, including unfavorable foreign currency impacts of 0.6%, primarily due to the favorable changes in our unrealized mark-to-market derivative positions of $52.6 million, the benefits of cost savings and volume leverage, partially offset by cost inflation related to materials and manufacturing expenses and unfavorable mix driven by lower contract brewing volumes in the Americas segment." --- (TAP, sec filing, 2024/Q1)

Competitive Landscape and Market Share

Molson Coors has seen significant market share gains in Europe and Asia, driven by favorable net pricing, premiumization, and brand volume growth. The company has retained most of its market share gains from the previous year, with core brands performing strongly and contributing to overall profitability.

"We also accelerated the pace of share repurchases for the quarter given compelling valuation as we see it, amid the strong performance of the business and our confidence in our long-term algorithm.Contributing meaningfully to our results was our EMEA & APAC business due to favorable net pricing, premiumization and brand volume growth." --- (TAP, earning call, 2024/Q2)

"The core strength of our portfolio, the core brands are much healthier, gaining share, momentum strong, and they're a large part of our profitability and they're in a much better place than they were before." --- (TAP, conference, 2024/06/05)

"S, have increased their market share substantially. Akko's Banquet, in particular, is accelerating on the back of substantially increased distribution and really, really good campaign around legacy and tying in Yellowstone." --- (TAP, conference, 2024/06/05)

"And if you compare our current share performance of those core brands with the exit share performance in the back end of last year, you'll see that we've retained almost all of the share that we picked up." --- (TAP, conference, 2024/06/05)

"It was our highest share gain that we had that we experienced in the last year, and we've retained 80% of that.And so compared to the second quarter of 2022, our total portfolio is up over 1.7 points of volume share and obviously, we're very pleased with that." --- (TAP, earning call, 2024/Q2)

Consumer Behavior Shifts

Recent shifts in consumer packaging preferences and cautious behavior indicate subtle changes in beer demand. However, no significant changes in consumption patterns have been observed. Molson Coors uses its Foresight System to track long-term consumer shifts, ensuring their marketing and innovation strategies align with evolving consumer behavior.

"I know some of the consumer pack shifts that we've seen as a little bit more recent and perhaps difficult to have been planning for." --- (TAP, earning call, 2024/Q2)

"I don't have any data that would suggest that consumers' consumption and purchasing behavior has changed more meaningfully than that brand. We're not seeing that. Thanks." --- (TAP, earning call, 2024/Q1)

"So I do see cautious behavior from consumers. And when you lump all of these things together, that does, as Tracey said in her remarks lead to us being a little bit more cautious and prudent as to how we see the industry going forward." --- (TAP, earning call, 2024/Q1)

"So I wouldn't pin it on that. It's more around consumer behavior and our belief that around consumer confidence, as I alluded to a little earlier." --- (TAP, earning call, 2024/Q1)

"Our Foresight System allows us to detect and track long-term consumer shifts and approach our marketing and innovation with that mindset, and we're thrilled to be sharing some of these insights." --- (TAP, press release, 2024/04/25)