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Molson Coors' gains from the Bud Light boycott have run their course, analysts say

By Bill Peters

Citi analysts downgraded Molson Coors, as the brewer laps a record year

When a conservative-led boycott hit Bud Light's sales last year, light-beer rival Molson Coors Beverage Co. was among the brewers whose sales increased. But it appears those gains are quickly coming to an end, Citi analysts said Wednesday.

In the process, the analysts downgraded Molson Coors (TAP) to sell from neutral. They argued that the brewer "is starting to cycle a record year (2023), which greatly benefitted from large U.S. market-share benefits on [its] Coors Light / Miller Lite brands from the Bud Light controversy starting in mid-April 2023."

The analysts added that early-April scanner data showed the trajectory for Molson Coors' beer sales and volumes - a measure of liquid sold - turning negative year-over-year as the company laps last year's gains.

Shares of Molson Coors fell 0.4% on Wednesday. The stock is still up around 9% over the past 12 months.

The boycott, which activists said was coordinated, began last spring after Bud Light, whose parent company is Anheuser-Busch InBev (BUD), ran a brief promotional campaign with Dylan Mulvaney, a transgender influencer.

Its effects were greater than what some analysts anticipated, upending the U.S beer industry and dislodging Bud Light as the nation's best-selling beer. Molson Coors executives, during their earnings call in February, said the company delivered "six years of profit growth" in 2023. The boycott also put greater focus on anti-trans sentiment among the right and the tension between corporations' purported values and their bottom lines.

Former President Donald Trump in February, in a post on Truth Social, called the Bud Light campaign a "mistake of epic proportions." However, he said: "Anheuser-Busch is a Great American Brand that perhaps deserves a Second Chance?"

When an analyst asked about that post during Molson Coors' fourth-quarter earnings call later that month, executives reiterated that they believed the resulting changes in the U.S. were "permanent." And they said that the company's momentum was continuing into the first quarter.

Anheuser-Busch, during its earnings call in February, said that the drop in Bud Light volumes still weighed on sales. But executives said the company's market share had started to rebound, and data from the Citi analysts in the note on Wednesday showed a similar trend.

The analysts said the spring season and lower brewing costs could help Molson Coors' sales and margins. But they suggested the bar for growth moving through this year was high.

"While we expect a very gradual recovery of the share lost by Bud Light, we believe the difficult comps will continue to drive decelerating TAP trends into the summer," they said.

-Bill Peters

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04-24-24 1401ET

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