Molson Coors (TAP) Buys Blue Run to Focus on Drinks Beyond Beer
Molson Coors Beverage Company TAP inked a deal to acquire a finely crafted bourbon and rye whiskey brand namely, Blue Run Spirits. Blue Run is an award-winning whiskey brand launched in October 2020.
This marks Molson Coors’ first spirits acquisition. With the addition of Blue Run, the company is likely to expand its portfolio beyond beer and aid its premiumization strategy.
As part of this buyout, TAP has expanded its existing spirits business to form Coors Spirits Co., which will house Blue Run, Five Trail Blended American Whiskey, Barmen 1873 Bourbon and other future products.
Prior to this, Molson Coors launched Five Trail Blended American Whiskey in 2021 and Barmen 1873 Bourbon in 2022.
Blue Run is currently available in 31 states at retail and on-premise accounts, as well as online. Blue Run announced plans to build a distillery in Kentucky in March 2023, which will now be implemented by Molson Coors. The brand also has three upcoming whisky launches in late summer/fall.
Blue Run’s founders — Mike Montgomery, Tim Sparapani, Jesse McKnight and Andy Brown — will continue to be associated with the brand.
We believe that this acquisition is in sync with TAP’s efforts to grow market share through innovation and premiumization. In a bid to accelerate portfolio premiumization, the company has been aggressively growing its above-premium portfolio for the past few years.
The company has highlighted that it has been making efforts to change the shape of its product portfolio and expand in growth areas. Its U.S. above-premium portfolio witnessed sales that outpaced its U.S. economy portfolio, driven by rapid growth of its hard seltzers, the successful launch of Simply Spiked Lemonade, and the continued strength in Blue Moon and Peroni’s.
What Else Should You Know?
Molson Coors is on track with its revitalization plan focused on achieving sustainable top-line growth by streamlining the organization and reinvesting resources into its brands and capabilities. It intends to invest in iconic brands and growth opportunities in the above-premium beer space, and expand in adjacencies and beyond beer, without hampering the support for its existing large brands. Some other notable efforts include creating digital competencies for commercial functions, supply-chain-related system capabilities and employees.
Strength in its core brands, particularly Coors Light and Miller Lite, acts as a key growth driver. The company intends to increase investment in convenience store shopper marketing in the second half of this year. Also, favorable volume leverage is expected to partly offset cost increases. This, along with premiumization and lower contract brewing volumes, is anticipated to drive gross margin expansion for the year.
Driven by these factors, 2023 sales are projected to grow year over year in the high-single digits on a constant-currency basis, up from the prior mentioned low-single-digit growth. This will be backed by sturdy demand in the United States, with growth in rates and volumes. Underlying EBT is likely to grow 23-26% year over year compared with the earlier stated low-single-digit growth on a constant-currency basis.
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We note that shares of this Zacks Rank #2 (Buy) have gained 16.4% in the past year against the industry’s decline of 4.1%.
However, Molson Coors has been witnessing weakened consumer demand across the beer industry due to pricing actions stemming from inflationary pressures. Also, cost inflation, with respect to materials and manufacturing expenses and unfavorable mix, remains concerning. Management anticipates the inflation impacts on cost of goods sold for 2023. Nevertheless, it is likely to moderate in the second half.
Other Stocks to Consider
We highlighted some other top-ranked stocks from the broader Consumer Staples space, namely TreeHouse Foods THS, Associated British Foods ASBFY and Celsius Holdings CELH.
TreeHouse Foods, a manufacturer of packaged foods and beverages, currently sports a Zacks Rank #1 (Strong Buy). THS has a trailing four-quarter earnings surprise of 49.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TreeHouse Foods’ current financial year’s sales suggests a decline of 12.4% from the year-ago reported number.
Associated British Foods is a diversified international food, ingredients and retail group, which currently flaunts a Zacks Rank #1. ASBFY’s expected EPS growth rate for three to five years is 7%.
The Zacks Consensus Estimate for Associated British Foods’ current financial-year sales and earnings suggests growth of 30.4% and 4.2%, respectively, from the year-ago reported figures.
Celsius Holdings currently carries a Zacks Rank #2 (Buy). CELH specializes in commercializing healthier, nutritional functional foods, beverages and dietary supplements.
The Zacks Consensus Estimate for CELH’s current financial-year sales indicates 67.9% growth from the year-ago reported figure, and the same for EPS implies a 154% rise. The company had an earnings surprise of 81.8% in the last reported quarter.
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Molson Coors Beverage Company (TAP) : Free Stock Analysis Report
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