Closure of on-premise hits Molson Coors with 15.1% sales drop for Q2

Molson Coors has reported a 15.1% decrease in net sales for Q2, following the impact of coronavirus-related shutdowns.

The brewer says that it experienced a ‘significant adverse’ volume impact from the closure of the on-premise channel in nearly all of its markets for most of the quarter.

The impact of uncertainty, and the risk of a return to shutdowns in some markets, is expected to continue to impact both net sales and profits for Q3 and FY20, and ‘possibly beyond’.

The brewer has previously estimated that approximately 23% of its 2019 net sales were from on-premise consumption.

In contrast, for Q2 2020 ‘nearly all’ of Molson Coors’ consolidated net sales are estimated to be from off-premise consumption, as even after some locations re-opened in June, business in the channel has been ‘slow’.

Largely as a result of on-premise closures, Molson Coors reported a financial volume decline of 12.5% in the three months ended 30 June 2020.

This was further impacted in North America by strains on the brewer’s supply chain and package availability, particularly of aluminium cans, as demand shifted to the off-premise.

The brewer’s under-shipment position in this segment, as well as lower brand volume and lower contract brewing volume, were reflected in a net sales decrease of 8.3%.

Meanwhile, Molson Coors’ Europe segment witnessed its net sales drop 44.6%. Here, the brewer was hit by a 12.7% decline in net sales per hectolitre on a brand volume basis, driven by unfavourable channel and geographic mix.

This was particularly apparent in the brewer’s ‘higher margin’ UK business, which has more exposure to the on-premise channel, which in turn remained closed later than in other European markets.

Gavin Hattersley, Molson Coors president and CEO, said: “Last quarter we told you that our overarching focus as the whole world deals with the coronavirus pandemic was centred on two objectives: navigating the short term to protect our employees and to mitigate short-term business challenges of the coronavirus, and positioning our business for long-term success. That’s just what we’ve done.

“Through sound management and incredible work by our teams, we had a strong second quarter executing well against these two objectives and beating expectations for both top and bottom-line performance in the second quarter.

“We did it while delivering an improved cash position and preserving the biggest firepower in our marketing budgets so they can be ramped up in the back half of the year when we expect they will be most effective.”