The chief executive of Molson Coors said cost inflation is now his biggest concern as the US brewer experienced a further rise in prices for inputs such as barley, aluminum and commodities.
That upward trend was taking some of the shine off consumer demand, which otherwise looked resilient despite broader concerns about rising interest rates, inflation and a possible economic recession.
“The consumer has proven himself over many, many recessions. . . to be resilient in terms of beer purchases, so I would pick input costs as the biggest concerns” around inflation, chief executive Gavin Hattersley told the Financial Times.
Behind Hattersley’s concern was a $434 million year-over-year increase in cost of goods sold to $2.1 billion in the second quarter. Revenue was little changed at $2.92 billion, the maker of Miller Lite and Blue Moon beer reported Tuesday.
About half of the cost increase was due to inflation, and mainly to higher prices for commodities, natural gas and inputs such as barley and aluminum, Hattersley said. The rest was due to the investment in the “premiumization” of the company’s brands.
Hattersley said the brewer had “cushions” in the form of hedges for some of its costs and was deliberately keeping its inventories of both unfinished goods and inputs, including a year’s supply of barley, high in case supply chains deteriorate.
Molson Coors has experienced growth in its premium and economy segments. If consumers are drawn away from more expensive drinks, Hattersley said the company was “ready to focus” its diverse drinks portfolio towards more value-oriented options.
Due to rising costs, net income at Molson Coors fell 88 percent from a year earlier to $47.3 million. After accounting for certain market-to-market fluctuations and other costs, adjusted earnings of $260.1 million slightly beat Wall Street forecasts.
Shares closed 10.5 percent lower in regular trading on Tuesday.
