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08/12/2012

MillerCoors Oper Income Up Double Digits in Half; "Very Good" Cost Mgt and Rev Per Bbl

MC earnings grew faster than AB's in 1st half 2012, even while its depletions trend was 2 points softer (difference is basically Bud Light Platinum). MillerCoors oper income jumped $78 mil, 12% in 1st half to $723 mil, while ABI North American EBIT (including Canada) up 4% to $2.9 bil. MC's oper margin up to 18.1 in half. That's big jump from 11 in 2009, 13.5 last yr tho still only about half of ABI's North American EBIT margin at 36.5. What's more, MC's earnings likely to be less robust in 2d half, judging by its own guidance for more modest margin increase of 25-50 basis points for the yr.

MC's earnings growth bolstered by rev per bbl up between 3.5-4% for 2d qtr in a row. MC got 0.6 points of benefit from mix shift in 2d qtr, while net pricing improved by 3%. But MC also had "very good cost management," said ceo Tom Long on conference call. It realized $32 mil in savings, mostly because of "integrated supply chain." MillerCoors deep into "business transformation" project, working with consultant BCG, expected to result in reorg of systems, processes and people.

MillerCoors cost of goods sold and mktg, gen and admin expenses up just moderately in 1st half, 2% and 3% respectively. But MC will get a "significant acceleration of our marketing investment" in 2d half, new cfo Tracey Joubert said on call. Also making a difference in 1st half and a headwind in 2d half: MC shipped at almost 2% better rate than it depleted in 2d qtr. But shipments and depletions will be in-line by yrend, execs acknowledged, suggesting that shipments trend will be lower than depletions in 2d half.

New Miller Lite campaign "landed very well with millenials,"
said cmo Andy England on conference call, including gains in 12 and 16 oz cans. "We're playing in exactly the right space." Without a lot of fanfare, Lite's trend has improved in scan data. Flat for last 12 weeks thru Jul 28 in Nielsen food/drug/convenience. And Coors Light is popping, up 4.5% for 12 weeks in Nielsen. But MC still getting hurt in subpremiums.

Meanwhile, MillerCoors hired innovations veep David Kroll to replace Pat Edson and he will "hit the ground running" at end of Aug, said Tom. MC testing several new brands like Coco Breve, Third Shift and Redd's, investing more in others (like Crispin), rolling Batch 19, dialing up Weinhard as value play in craft and more. Volume potential of most of these brands is modest, and they will add complexity for distribs, but collectively they should be (at least) a short-term shot in the arm. Who knows from there?

MC frequently touts its category mgt capabilities as it is now category captain in 44% of its volume up from 24% at inception of JV. Yet MC still losing share in some of biggest chains, and losing almost a full share point of $$ yr-to-date in Nielsen overall (0.9). So winning "control of mouse" not yet leading to winning share back in total beer mkt. How much is total beer biz improving? "I don't think we're seeing any tailwinds," said Tom on call, meaning major improvement in macroeconomic conditions. But decline in gas prices in effect a "tax cut," he added. Then too, beer trend improved because "marketing of beer is significantly better than a couple of years ago," according to Tom.

Publishing Info

  • Year: 2012
  • Volume: 43
  • Issue #: 15
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