MillerCoors Delivers 2.9% Underlying Net Income Growth for 2014

11 Feb 2015 --- SABMiller and Molson Coors Brewing Company reported that MillerCoors underlying net income grew 2.9 percent for the full year 2014 to $1.328 billion, while fourth quarter underlying net income decreased 11.8 percent to $213.3 million versus the same period in the prior year due to lower shipment volume, unrealized losses on commodity hedges and higher marketing investment.

Fourth quarter sales to retailer volume continued to improve, with Miller Lite returning to growth. Increased profitability for the year was driven by positive pricing, sales mix and cost savings.

“In 2014, we made progress in growing our net revenue per barrel and transforming our portfolio to higher revenue brands while also restoring growth to Miller Lite,” said Tom Long, MillerCoors Chief Executive Officer. “Last year we also continued to grow the Above Premium segment with higher-margin offerings, notably Redd’s, Blue Moon and Leinenkugel’s Summer Shandy.”

Full Year and Fourth Quarter Highlights

Unless otherwise indicated, all amounts are in U.S. dollars and calculated in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). All percentages are versus the prior year comparable period and include MillerCoors operations in the U.S. and Puerto Rico.
- Underlying net income, a non-GAAP measure, grew 2.9 percent to $1.328 billion for the year and decreased 11.8 percent to $213.3 million for the fourth quarter.
- Total net sales increased 0.6 percent to $7.848 billion for the year and declined 1.1 percent to $1.782 billion for the quarter.
- Domestic net revenue per barrel, excluding contract brewing and company-owned distributor sales, increased 2.9 percent for the year and 2.0 percent for the quarter.
- Total cost of goods sold (COGS) per barrel increased 2.6 percent for the year and 3.0 percent for the fourth quarter.
- Domestic sales-to-retail volume (STRs) decreased 2.5 percent for the year and 1.7 percent for the quarter.
- Domestic sales-to-wholesalers volume (STWs) decreased 2.5 percent for the year and 3.7 percent for the quarter.

Brand Highlights for the Full Year and Fourth Quarter

The MillerCoors Premium Light portfolio STRs declined low-single digits for the full year and the fourth quarter.

Miller Lite declined low-single digits for the full year but grew low-single digits in the fourth quarter. The brand’s growth is attributed to its graphic design overhaul, which began a year ago and was inspired by the Original Lite Can; this re-design has now been extended to all of the brand’s consumer touch points. In March, the brand will once again sponsor the South by Southwest Conference, and this spring, Miller Lite will release new television advertising continuing to emphasize the brand’s quality and authenticity.

In 2014, Coors Light declined low-single digits for the full year and in the fourth quarter. In 2015, Coors Light will benefit from a significant brand restage that will provide beer drinkers with a deeper understanding of why “Rocky Mountain cold refreshment” matters and how it sets Coors Light apart from competitors. The restage will include a new visual identity, new packaging design and new television advertising that will air in the spring.

Total Above Premium portfolio STRs grew high-single digits in 2014 and low-single digits in the fourth quarter, led by Redd’s, Smith & Forge, Miller Fortune and craft brands like Blue Moon Belgian White and Leinenkugel’s Seasonal Shandy variants. The Redd’s Franchise was the fastest growing flavored malt beverage (FMB) in the category in 2014, growing double-digits in the year and high-single digits in the fourth quarter. The brand franchise was aided by the introduction of Redd’s Wicked Apple in the third quarter, which was already the number one FMB growth brand in the grocery channel and the number two FMB growth brand in the convenience store channel in the fourth quarter. Both Smith & Forge and Miller Fortune captured modest share of the Above Premium segment in both the year and the quarter. Though it was introduced less than a year ago, Smith & Forge is already number three in the cider segment by volume for the full year.

Blue Moon Belgian White grew low-single digits for the year and in the fourth quarter. Blue Moon will celebrate its twentieth anniversary in 2015. Though sales of Blue Moon’s winter seasonal, Mountain Abbey Ale, did not meet expectations, the spring seasonal, First Peach Ale, debuted on January 1 and has already outpaced last year’s spring release. Leinenkugel’s decreased low-single digits in the quarter, but grew mid-single digits for the year. Seasonal Shandy performance grew year over year in the fourth quarter with the successful introduction of Cranberry Ginger Shandy; this was partially offset by the soft performance of Leinenkugel’s Heritage portfolio.

The MillerCoors Premium Regular portfolio STRs decreased mid-single digits for both the year and the fourth quarter.

Coors Banquet grew low-single digits for the full year and the fourth quarter. 2014 marks the eighth consecutive year the brand has grown in a declining segment, and it was the only national Premium Regular beer that grew in 2014. This year, the brand’s “stubby” heritage bottle will be expanded into 12-packs, 18-packs and 20-packs nationwide.

Below Premium portfolio STRs decreased mid-single digits for both the year and the quarter.

Miller High Life declined mid-single digits for the year and low-single digits in the fourth quarter. The brand saw sequential trend improvement in each quarter of 2014 and realized a mid-single digit trend swing in 2014 over the prior year; this is attributed, in large part, to the brand’s “I Am Rich,” advertising campaign. Steel Reserve grew mid-single digits for the year and in the fourth quarter due to the success of the Steel Reserve Alloy Series, the brand’s line of FMBs.

Financial Highlights for the Full Year and Fourth Quarter

Domestic net revenue per barrel grew 2.9 percent for the year and 2.0 percent for the quarter as a result of favorable net pricing and positive brand mix.

Total company net revenue per barrel, including contract brewing and company-owned distributor sales, increased 2.8 percent for the full year and 2.0 percent for the quarter. Third-party contract brewing volumes were up 0.8 percent for the year and up 1.9 percent for the quarter.

Total COGS per barrel increased 2.6 percent for the full year and 3.0 percent for the quarter, driven by commodity and brewery inflation, lower fixed-cost absorption, higher costs associated with brand innovation and, in the fourth quarter, unrealized losses on commodity hedges.

Marketing, general and administrative costs decreased by 0.8 percent for the full year and were up 1.8 percent for the quarter. The fourth quarter increase was driven by higher media investment, partially offset by lower employee benefit related expenses. Lower employee benefit related expenses drove the full year reduction.

MillerCoors achieved $143 million of cost savings for the year and $30 million in the fourth quarter, primarily related to procurement savings, lower employee-related expenses and logistics and brewery efficiencies.

Depreciation and amortization expenses for MillerCoors were $311.1 million for the year and $78.0 million in the fourth quarter. Additions to tangible and intangible assets totaled $401.1 million in the year and $138.9 million in the quarter.

Full year special items of $1.4 million related to restructuring costs. There were no special items in the quarter.