Profits slip at Molson Coors

Weak sales and rising costs contributed to Molson Coors recording a 6% drop in profits in the second quarter of the year.

The brewer had hoped that raising prices would help offset losses.

Officials at the company, which brews Coors Light and Carling among other lagers, nevertheless maintained their view that it has performed well against a backdrop of economic struggle in the US.

The company said it has still managed to gain market share both in the US and abroad.

“The external world is what it is,” said Molson Coors CEO Peter Swinburne. “But there are a lot of things we are working on internally that we are doing to reach consumers.”

The tough economic situation has been compounded by escalating fuel, packaging and ingredient costs, which are affecting nearly all consumer product makers.

Molson Coors has been particularly hard hit by the US economic downturn as its core customer – men under the age of 28 – are struggling with high unemployment, while gas prices have also been steadily on the rise.

In order to remain profitable in challenging circumstances, Molson Coors has been implementing a cost-cutting strategy over the past few quarters.

The company has also increased its push into emerging markets during the recent quarter.

In India, it purchased a controlling stake in a joint venture during the period, while it also introduced Coors Light into China.

However, Molson Coors’ heavy investment in its overseas business also hurt its bottom line during the period.

Molson Coors reported that it earned US$222.8 million for the period ended 25 June – down from US$237.2m a year ago. Revenue rose 6% to US$933.6m.

Meanwhile the company has announced a £5m capital investment programme at Sharp’s Brewery in the UK between 2011 and 2013 to ensure that the brewery can manage demand and sustain its growth.

The major investment from parent company, Molson Coors, will see an upgrade to the water treatment plant, additional fermentation vessels installed and a new packaging area.

Molson Coors acquired Sharp’s Brewery in February this year and the investment is evidence of its planned growth for the Rock-based brewer of Doom Bar.

Sharp’s head brewer, Stuart Howe, said: “This is great news for Sharp’s Brewery. Production capacity represents the biggest constraint to exceptional growth and this investment will serve two purposes: to meet immediate demand and support the growth of great beers that continue to capture the attention of drinkers up and down the land.”