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The soaring inflationary environment has left beer drinkers in some European countries unable to “withstand” higher prices for beverages, Molson Coor’s chief executive warned, as the brewer behind brands like Carling and Miller Lite reported a halving in third-quarter profit.
Hampered by elevated costs, consumer pullback in central and eastern Europe, and the strong dollar, the Chicago-based company’s net profit dropped 52.2 per cent to $216.4mn in the latest quarter from $453mn a year ago.
“In some markets, it’s been difficult to keep up with the ramp and pace of inflation,” chief executive Gavin Hattersley told analysts during an earnings call on Tuesday. “Historic” price rises of almost 10 per cent for its beverages this year have not been enough to offset the brewer’s higher costs.
Overall costs were up 20 per cent, as prices for materials, transportation, and energy increased alongside $192.6mn in changes to unrealised mark-to-market commodity positions. Costs were up more in Europe, the Middle East, and the Asia-Pacific regions than in the Americas.
In Central and eastern Europe, demand has softened because “some consumers simply cannot withstand higher levels of pricing” as they contend with soaring inflation, particularly on energy costs, Hattersley said.
Given its worldwide presence, the company took a $109mn revenue hit from the strong dollar, chief financial officer Tracey Joubert said on the same call. Total revenue for the quarter was $2.94bn, up from $2.82bn a year ago.
Molson Coors still reaffirmed its 2022 sales guidance, optimistic of a boost from the upcoming football World Cup. However, pre-tax income growth is expected to come in at the lower end of the range.
Hattersley pointed to consumer strength in western Europe and the US, with demand in the former “holding up strongly”.
“The US consumer remains resilient to date,” he said, with some continuing to trade up to premium beers and no “significant” trading down.
Molson Coors shares were down 3.5 per cent in afternoon trading in New York on Tuesday.