Sunday 13 February 2011

Fancy A Drink?

Having looked at the Budapest Business Journal to discover that in Hungary the ongoing shambles much resembles ours, the next logical course was to check out The Royal Gazette of Bermuda business section.

For a small clump of land in the middle of The Atlantic there seems to a great deal of high level business activity but that is the way the world goes.

At one time beer was a basic home made drink. Then specialist brewers emerged and in the UK we developed a pub culture largely based at one time on local breweries. Now much of it is just another global big money machine.


Q: I have seen stories lately about Molson Coors Brewing Co. How about that as a stock investment? B.G., via the internet

A: You might not have expected Russians to be drinking Coors Light this winter, but that beer was a recent product rollout of this giant global brewer.

The company also bought a 51 percent interest in a new joint venture with China’s Si’hai Beer Co. which will produce Coors Light under a Chinese name that translates as “silver bullet”.

This Denver-based company that resulted from the merger of Adolph Coors Brewing Co. with Canada’s Molson Inc. in 2005 has cut its costs since that deal and improved efficiency through synergy. It has had a joint venture called MillerCoors with SAB Miller’s US business since 2008 as well.

Through famous name brands such as Molson, Coors, Carling, Keystone and Blue Moon, it holds about 40 percent of the beer market in Canada, about 30 percent of the US market and nearly 20 percent of the UK market.

Shares of Molson Coors (TAP) recently were down about eight percent this year, partially due to a drop in fourth-quarter earnings. Class A shares have voting rights and are 84 percent controlled by the Molson and Coors families, while class B shares have little influence on how the firm is run.

Hopes for alcohol stocks have direct ties to the restaurant industry, which is expected to show improvement as economies rise. Brewers have been able to increase the prices of products and move consumers upscale to more premium beers. Yet they always must wage a balancing act between retaining market share and increasing profits.

Consensus analyst rating of Molson Coors shares is between “buy” and “hold”, according to Thomson Reuters, consisting of two “strong buys”, five “buys” and seven “holds”.

Competition among beers is brutal. Despite its impressive size, Molson Coors must go up against giants such as AB InBev (BUD), the company that resulted from the acquisition of Anheuser-Busch by Belgium-based InBev.

Because beer remains a mature, slow-growth market, some discussion about the investment potential of Molson Coors always involves whether it might be an acquisition target for another brewer, such as SAB Miller. That speculation is likely to continue for as long as the company remains independent.

Molson Coors earnings are expected to rise eight percent in 2011 compared to 19 percent for the beverage and brewer industry. The expected five-year annualised growth rate of nine percent compares to a projected 14 percent industry-wide.


And you wonder why so many pubs are closing?

No comments:

Post a Comment