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Facing a weaker-than-expected industry and the departure of Pabst contract volume, Molson Coors shipped 6.1% less beer in the US in Q2 than it did last yr. And that includes a 1.5-pt benefit from shipments timing, execs explained during earnings call last wk. MC again ended the half shipping well ahead of depletions, which declined 5.3% in Q2. Net sales across the larger Americas region declined 2.8% to $2.5 bil, driving a 1.6% drop for the total co. Volume puts and takes ease somewhat in 2nd half, but consumer sentiment remains weak and co's "not seeing any signs of that changing in the balance of the year," ceo Gavin Hattersley said. Loss of Pabst Volume Hit Margins, But "Very, Very Helpful" A softer US beer biz may have caught co off guard, but MC knew about another major impact on its biz in Q2: loss of contract volume for Pabst as well as Labatt. Co already "cycled" almost 940K bbls of lost contract volume in the 1st half (1.1 mil hectoliters, hLs), slicing 3 pts off co's total shipments trend in the Americas region, cfo Tracey Joubert explained. Recall, contract volume headwind totals 1.6 mil bbls (1.9 mil hLs) for full yr. MC will see "mix benefits from lower contract brewing," she commented, but they'll be "more than offset by higher volume deleverage."With loss of so much volume overall, multiple analysts wondered if co would revisit its capacity (i.e. close a brewery). But MC's "pleased with our brewery footprint," Gavin maintained. "Removing Pabst from our system is very, very helpful," he repeated. It allowed co to "remove a lot of complexity," "free up capacity in the summer" and "onshore Peroni," for starters. Change also already "allowed us to tidy up our footprint" and "close a couple of our smaller breweries," Gavin reminded. Finally, losing Pabst "allowed us to bring in Yuengling," which co can "expand further&hellip;when the time is right." MC's already brewing a bit of Yuengling outta Ft Worth and Milwaukee.Give and Take: Shipped 680+K Bbls Ahead in 1st Half, Less Than Last Yr MC entered Q2 with shipments only slightly ahead of depletions, by about 170K bbls (200K hLs). That hit co's trends hard, since it built volume so much in Q1 of 2024 ahead of the strike at its Ft Worth brewery, recall. But co expected US beer biz to improve as summer approached, from down 5% in Q1 to -3% in Q2. The "industry did not get better," tho. So Q2 shipments outpaced depletions by over a half-mil bbls (600 hLs), more than co intended. Tote it up and co ended 1st half 682K bbls ahead (800K hLs), which it'll need to give back in the 2nd half. Trends should realign "mainly in Q3," Tracey explained. Yet co framed that as a "tailwind," since it gave back even more volume in 2nd half of 2024.Headwinds Ease as Incremental NA Volume Kicks In Pressure on volume from cycling contract volume eases as the yr goes on and "next year that all goes away," Gavin reminded. Plus, MC's "non alc strategy is really coming together with the acquisition of Fever-Tree and all of that is incremental in the second half," he continued. Integration costs associated with that deal came in lower than expected, but MC still invested upwards of $100 mil in all, Gavin shared. And it "provides a nice halo effect on ZOA," he asserted. Co also sees bright spots emerging on premise for Blue Moon and Coors Banquet is still "on fire," Gavin shared. Net-net tho, co expects a tuff yr.Unexpected Share Losses and Aluminum Costs Difficult "macro environment" was "probably the biggest driver" of soft industry and MC performance in Q2, Gavin shared. And again, that isn't changing. So total US beer biz likely to decline 4-6% in 2nd half too, co thinks. MC also thought it could gain share in Q2, but "our share performance did not meet our expectations," he said, losing about a half-pt of share. Co thinks that'll hold thru balance of the yr. So it lowered its guidance, now expecting global net sales down 3-4%. It also faced higher-than-anticipated aluminum costs, an indirect impact of tariffs. The midwest premium jumped fully 180% between Jan and Jul, execs explained. So now co foresees a $40-55 mil additional cost across the full yr, including $20-35 mil in the 2nd half. Between soft volume and higher costs, underlying income before income taxes should end the yr down 12-15%, co thinks.

Soft Biz, Lost Volume, High Costs Hit MC's Q2: US Depletions -5.3%; Shipments Shifts & Share Losses

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