MONTREAL – Molson Coors is rooting for Canada’s NHL hockey teams to come from behind and go deep in the playoffs in order to spur beer consumption.
“The longer the Canadian teams stay in the playoffs the happier we’ll be,” CEO Peter Swinburn said in an interview Tuesday after releasing disappointing first-quarter results.
The NHL sponsor has already endured the ill effect on sales from the 113-day lockout that ended in January. An early end to the season for the Canadian teams could cap the challenging year.
Although four Canadian teams made this year’s playoffs, only one is guaranteed to make it to the next round.
The Vancouver Canucks and Toronto Maple Leafs are trailing in their series. So are the Montreal Canadiens, but they face the Ottawa Senators, guaranteeing at least one Canadian team a little more ice time.
When Canadian teams miss the run for the Stanley Cup or bow out early, it hurts sales at arenas, bars and premises where fans gather to watch the games. Molson Coors also misses out on a chance to promote its ties with the sport.
“You add a lot of those individual things up and you get a dampening effect on your overall market,” Swinburn said.
The brewer, which reports in U.S. dollars, reported weaker than expected results Tuesday as its net profit plummeted in the first quarter due to weakness in core North American markets and additional costs in Europe.
The company said it earned $36.5 million or 20 cents per share in the period ended March 30, down from $79.4 million or 44 cents per share in the prior year.
Underlining profits were $54.6 million or 30 cents per share, down from $85.3 million or 47 cents per share in the 2012 quarter.
The company had been expected to earn 34 cents per share in adjusted profits on $854 million of revenues, according to analysts polled by Thomson Reuters.
Molson Coors (NYSE:TAP) said the drop was largely attributable to its Central European acquisition, which also helped to boost overall net sales by nearly 20 per cent to US$828.5 million.
However, it was also hit by weaker results in Canada and the United States, its two largest markets.
“We’re not happy with Canada at the moment,” Swinburn said during a conference call with analysts.
Analyst Mark Swartzberg of Stifel Nicolaus attributed the lower than expected earnings to the Canadian and U.S. segments, which together represent 84 per cent of earnings.
In Canada, the Molson Coors decrease in sales to retailers was better than the 2.9 per cent decline by Labatt’s.
“But both majors lost share, especially in economy brands,” he wrote in a report.
However, Swartzberg said share trends are improving in the U.S. and Europe and all regions feel lower costs pressures. Meanwhile, he expects the company to issue new cost savings targets next months.
Although its two leading brands Coors Light and Molson Canadian perform well, it has a weaker offerings at the low and high ends of the market where small brewers have made inroads.
Molson Coors said it was expanding the Keystone brand at the low end and adding to its premium portfolio.
In addition to Granville Island Lager, Creemore Springs and Rickard’s, it has introduced Molson Canadian Wheat and is adding Molson Canadian Cider and Rickard’s Shandy.
“There’s some news now coming into the market which I think is going to be helpful for us as we look at the back part of the year,” Molson Coors Canada president Stewart Glendinning told analysts.
The brewer recently introduced Molson Canadian to Ireland, its first launch of the brand outside of North America.
Available in draft and for home consumption, the beer is designed to appeal to the Irish consumer’s interest in North American products.
Sales could be extended to other countries, depending on how well it performs, Swinburn said.
“With any new product development there’s always the curiosity factor and it’s going to take at least 18 months to two years to know whether you’ve got a solid brand proposition that resonates.”