EMILY FREDRIXNEW YORK (AP) â¿¿ People cautious about the economy and their job prospects, particularly young drinkers who like light beers, bought less beer in the first three months of the year, Molson Coors Brewing Co. said Tuesday. The company's net income in the first quarter rose 38 percent on a tax gain, but its adjusted results missed Wall Street forecasts as its costs rose, including most notably a 30 percent increase in marketing and general expenses. The Denver-based company is courting drinkers with increased marketing and introductions of new brews like Molson Canadian 67 â¿¿ a low-calorie beer in Canada â¿¿ to keep them buying during the downturn. During the quarter, Molson Coors sold 3.8 percent less beer worldwide, including an 11 percent drop in its stronghold of Britain, although net sales rose 18 percent on price hikes and sales of higher-priced drinks. The company's U.S. business â¿¿ a joint venture called MillerCoors â¿¿ posted a 4 percent drop in sales to retailers as sales of mainstays like Miller Lite and Coors Light fell. Molson Coors blamed its worldwide decline on high unemployment and a slow recovery in consumer confidence. People have cut back on their trips out to bars and restaurants during the recession to save money, and they've traded down to less expensive brews when they do drink. CEO Peter Swinburn said the weak job environment is disproportionately hurting its core customer, men ages 21 to 30 who make up to $40,000 a year, who tend to drink premium light beer, such as Coors Light, but are having trouble in the job market. "Consumers who are employed are feeling pretty good, and those who are unemployed are feeling pretty bad," he told The Associated Press in an interview, noting beer sales declines have eased in recent weeks.
Molson Coors earned $104.6 million, or 56 cents per share, for the quarter that ended March 27. That's up from $75.7 million, or 41 cents per share, during the same period a year earlier.Excluding a legal settlement in Brazil that produced a tax gain, the brewer earned 37 cents per share, however. That fell well short of the average forecast for net income of 45 cents per share from analysts polled by Thomson Reuters, who normally exclude one-time items. The company's spending on marketing, general and administrative expenses, rose to $237.5 million from $182.6 million. UBS analyst Kaumil S. Gajrawala said that the increase in marketing costs was what led the company to miss forecasts. Net sales, excluding excise taxes, rose to $661 million from $559 million, beating Wall Street's forecast for $636.7 million. Revenue rose as the company held onto its price hikes. Many brewers have raised their prices to compensate for rising production costs. Molson Coors has fought pressure to drop prices, saying it doesn't want to dilute the value of its brands just to earn temporary sales bumps. Instead, the company is creating new beers and making changes to packaging, such as adding clear "windows" that let people see into their packages of beer. Swinburn said people will continue to pay for products that they think have value to them. The company's U.S. operation, MillerCoors, is evaluating how to spend what it calls a "significant amount" of marketing dollars after it decided not to renew its Coors Light sponsorship deal with the National Football League. MillerCoors plans to maintain deals with individual teams but is looking into spending the NFL dollars elsewhere. MillerCoors CEO Leo Kiely declined to say just how much money it will spend on marketing after its NFL sponsorship ends with this season. Earlier Tuesday, the MillerCoors joint venture in the U.S. with SABMiller PLC, said its first-quarter profit rose slightly on cost-cutting and higher prices although sales of some brands slipped.
Shares fell 41 cents to close at $44.13 in heavy volume Tuesday.___ AP Retail Writer Michelle Chapman contributed to this report.