Molson Coors says weak economy affecting beer sales in oil-producing provinces

MONTREAL – Molson Coors Brewing Co. says a sluggish economy and higher food prices are affecting beer drinking in Canada’s oil-rich provinces.

Some beer drinkers, particularly in Alberta, are shifting from higher-priced premium brews to economy brands, the company said Thursday.

Molson also said overall industry sales volumes have also been slipping in Alberta, as well as in the oil-producing provinces of Newfoundland and Labrador and Saskatchewan.

The Alberta Gaming and Liquor Commission said preliminary indications suggest sales volumes in the province were “remaining fairly steady,” although the association representing liquor stores in the province said the industry has felt an across-the-board slowdown, not just in beer sales.

The brewer said its sales volume decreased 5.4 per cent across Canada in the fourth quarter. In January, sales to retailers for at-home consumption fell by more than 10 per cent.

Part of that decrease can be attributed to higher food prices and household debt, said Stewart Glendinning, chief executive of Molson Coors Canada.

“The consumer is under pressure,” he said during a conference call on the company’s fourth-quarter and 2015 results. “And if you add to that the fact that consumer debt in Canada is at an all-time high, it’s made for quite a difficult recipe in some of those provinces.”

Molson Coors (TSX:TPX.B, NYSE:TAP) said its Canadian market share dropped by one percentage point in the fourth quarter, primarily due to the performance of its flagship Coors Light brand.

Sales volumes were reduced in Quebec by the brewer’s decision to raise prices to match competitor Budweiser. Coors Light was also hurt from consumer purchases of Coors Banquet.

Glendinning said the company has made strategic changes over the past three years, including overhauling its supply chain, reducing costs and transforming its portfolio, that will pave the way to improved results.

The brewer is modernizing its manufacturing capacity by building a new plant in Vancouver and is close to completing an assessment of its 230-year-old Montreal facility. Glendinning wouldn’t say when a decision will be announced on whether to upgrade or move.

And even though hockey goes hand-in-hand with beer drinking, the executive said he’s not overly fazed by the prospect that no Canadian hockey team will make the NHL playoffs if current standings hold.

“Whilst we would love to have the Canadian teams going all the way to the Stanley Cup finals … our business is not dependent solely on that,” he said.

Molson Coors said its net income plummeted 65 per cent to US$32.8 million in the fourth quarter because of lower sales, currency fluctuations and reduced income from operations in Canada and the United States.

The company, which reports in U.S. dollars, said its profit excluding one-time items fell 11.3 per cent to $90.6 million as net sales decreased to $844.4 million.

In Canada, adjusted pre-tax profits from continuing operations fell 32 per cent to $51.8 million on $341.9 million in net sales.

For the full year, net profits decreased 30 per cent to US$359.5 million on a 14 per cent dip in revenues to $3.57 billion.