Molson Coors Brewing Co. posted a 38% increase in first-quarter profit amid a liability-settlement gain in Brazil, which masked the effects of lower beer-sales volume and higher marketing and other expenses.

The beer maker, whose portfolio includes Coors Light and Blue Moon, said during a conference call with analysts that sales to retailers remain weak in the current quarter, indicating the world-wide slump in the beer market isn't over yet. World-wide volume fell 3.8% from a year earlier in the first quarter.

Still, Denver-based Molson Coors said it is starting to see some pockets of improvement.

The company has tried to combat lower volume by promoting its premium product lines. That tactic has shown some success, helping Molson Coors post sales growth for the second consecutive quarter from year-earlier levels. Executives said they saw sales shift toward higher-price products in the U.K. and are implementing selective price increases in parts of Canada.

Molson Coors said its first-quarter profit rose to $104.6 million, or 56 cents a share, from $75.7 million, or 41 cents a share, a year earlier. Excluding a gain stemming from a Brazilian tax-amnesty program and other items, per-share earnings fell to 37 cents from 53 cents amid higher marketing and other expenses, as well as lower volume.

Sales climbed 18% to $661 million.

Gross margin widened to 38.8% from 38.1%.

Separately, Molson Coors announced a $40 million investment in a new venture with Hebei Si'hai Beer Co. of China. The partnership, which will be 51%-owned by Molson Coors, will directly oversee Si'hai brewing operations.

Chinese sales have been a rare bright spot in the global beer market. Molson Coors's business in the country has been growing at 30% a year, according to Kandy Anand, president of Molson Coors International.

Canada, one of Molson Coor's key markets, saw some improvement in the first quarter, boosted in part by the Winter Olympics in Vancouver. Sales to retailers rose 5% in the country, outpacing the industrywide increase of 3.8%. Molson Coors's total Canadian sales volume rose 3.3%.

The Molson Canadian brand posted growth for the first time in four years.

Still, Molson Coors is struggling in other core markets. Owned-brand volume sank 11% in the U.K., which Molson Coors attributed in part to poor weather.

Overall industry volume only fell 5% in the quarter. The cost of goods sold soared 22%, or 18% excluding a pension charge.

Also Tuesday, MillerCoors LLC-the joint venture of Molson Coors and SABMiller PLC's U.S. brewing operations-said its first-quarter profit edged up 1.3% amid lower excise taxes and other expenses, although sales declined as overall volume continued to slide.

For the first five weeks of the current quarter, sales to retailers were down in the low single digits on a percentage basis in Canada and the low double digits in the U.K. Sales to retailers were off by the low single digits in the U.S. during the first four weeks of the period.

MillerCoors, based in Chicago, said its first-quarter profit rose to $208.6 million from $206 million a year earlier. Excluding items such as severance expenses and pension costs, earnings rose to $217.2 million from $216.4 million. Net sales after excise taxes declined 0.9% to $1.7 billion, and overall volume dropped 3%.

Gross margin fell to 36.6% from 38.8%.

The company said it delivered $60 million in cost savings during the quarter, saying it was on track to cut costs by $750 million by the end of 2012.

A Scottish microbrewery that has received intense criticism for marketing products with an alcohol content far exceeding popular brands is shipping one of its beers to select retailers in California and New York City, Time magazine reported April 10.

BrewDog co-founder Jim Watt's interest in the U.S. market stems from the fact that about half of the orders on his company's website come from American customers. "We're keen to push the envelope and challenge people's perceptions of how beer can be enjoyed," Watt said.

The beer being shipped to the U.S. market, called Tactical Nuclear Penguin, contains 32 percent alcohol by volume, more than six times what is found in typical domestic beers.

BrewDog's marketing tactics have gotten the company in trouble on numerous occasions in Europe. Last December, British alcohol regulators ordered stores to stop selling its 18.2 percent alcohol beer. Jack Law, chief executive of the group Alcohol Focus Scotland, has referred to BrewDog's products as "irresponsible" as his nation deals with significant alcohol problems.

Tactical Nuclear Penguin isn't even BrewDog's highest-alcohol beer. In response to a German brewer's release of a 40 percent alcohol beer, BrewDog created a 41 percent brew.

Some observers say the extremely high cost of these products (Tactical Nuclear Penguin costs around $53 a bottle) is likely to keep them out of the hands of most young drinkers.

 

Gudrun Baccus at work!

Phew! A 40% abv brew - billed as the world's strongest beer - is now available in the UK.

Schorschbock is a lager from German craft brewer Schorschbräu, which - unsurprisingly - specialises is stronger brews. It's home is Oberasbach, in the middle of the Franconia's lake region.

It's available in these shores from Glasgow-based brewery West, which is headed by Franconian Petra Wetzel.

She said: "The Schorschbock has a totally unique flavour that will appeal to any beer connoisseur. Due to its exceptional strength and rarity, we are restricting sales of Schorschbock to one measure per customer."

Schorschbock is produced through Schorschbräu's own proprietary fermentation process. It includes a rarely-used method for producing ice bock, supplemented by extended cold-lagering for a minimum of six months.

Schorschbock's rival for the strongest beer crown is also available from Scotland - the 32% abv Tactical Nuclear Penguin from Aberdeenshire's BrewDog.

The brew from the controversial Scottish microbrewer came under heavy criticism from the health lobby when it was launched late last year.

Heineken said Monday that it would buy the beer operations of Femsa, one of the biggest brewers in Mexico, in an all-share transaction that values the business at $7.6 billion. The move would further consolidate the beer industry into a few global players.
The move will make Heineken a “more competitive player in Latin America, one of the world’s most profitable and fastest-growing beer markets,” the chairman and chief executive of Heineken, Jean-François van Boxmeer, said in a statement.
Heineken will issue 86 million new shares to finance the deal, the first time it has done so for a takeover since 1968.
Heineken shares were up 1.075 euros, or 3.26 percent, to 34 euros on the Amsterdam exchange.
After the deal closes, Femsa will hold 20 percent of the Heineken Group, making it one of the Dutch brewer’s largest shareholders. Femsa will also have the right to appoint two nonexecutive directors. The transaction is expected be completed in the second quarter of 2010.
Femsa, which is formally known as Fomento Económico Mexicano S.A.B., makes Dos Equis and Tecate.
“It’s a transformational deal for Heineken,” said Marco Gulpers, beverage analyst at ING. “We were expecting a deal north of $10 billion. The way they structured it, this is creating more value.”
Over the last decade, companies in the beer industry have combined rapidly.
One of the most notable deals included the 2002 sale of Miller Brewing of the United States to South African Breweries for $3.6 billion.
Against the backdrop of “the reconfiguration of the global brewing landscape, scale and geographic diversification are more important than ever,” José Antonio Fernández Carbajal, chairman and chief executive of Femsa, said in a statement Monday.
Besides giving Heineken a bigger foothold in Latin America, especially the highly profitable Mexican market, the deal with Femsa also offers Heineken the 83 percent of Femsa’s Brazilian beer business that the Dutch company does not already own.
Femsa’s share of the Mexican beer market is 43 percent; it has a 9 percent share in Brazil.
For Femsa, merging with Heineken could help bolster its competitive position, especially as it continues to battle its larger Mexican rival, Grupo Modelo, in which AB InBev has a noncontrolling 50 percent stake. AB InBev is also strongly positioned in Brazil.
About a quarter of Femsa’s revenue in 2008 of 168 billion Mexican pesos ($13.3 billion) came from its beer operations. The company posted about $1.6 billion in operating profit that year.
Heineken said in its statement that it expected the transaction would provide cost savings of 150 million euros ($218 million) a year, within three years.