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Molson Coors CEO: 2022 ‘is going to be a big year for seltzer’

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Molson Coors CEO Gavin Hattersley joins Yahoo Finance Live to discuss the outlook for the beverage space in 2022, the Miller Lite and Coors Lite brands, the development of Topo Chico hard seltzer, and the success of Dwayne "The Rock" Johnson's ZOA energy drink.

Video transcript

- After bouncing back from the lows of the pandemic in 2021, Molson Coors is looking to keep that momentum going in the new year. And to talk more about the outlook for 2022 in the beverage industry, we've got the CEO of Molson Coors joining us this morning-- Gavin Hattersley joining us alongside Yahoo Finance's Brian Sozzi.

Gavin, it's great to talk to you. I want to get into the product lineup for Molson Coors in just a bit, but give me a sense of where things stand right now. We've had so many conversations with companies who say they saw a big bounceback in 2021, and then things kind of came to a halt when we started to see this variant surge. What have you found, or what have you seen over the last month or so?

GAVIN HATTERSLEY: Well, thanks for having me on-- appreciate that. Look, as an industry-- beer industry-- overall alcohol beverage industry-- we've learned over the last 18 months or so that, when you have a surge in the virus you and governments and local authorities put in place restrictions, it does obviously have an impact that's not positive on the on premise in particular bars and restaurants.

And with the surge in the Omicron virus in-- I think it's started in mid-November, and obviously it's still ongoing-- we've seen an impact in on premise. The positive side, though, is that we've also learned that, when consumers are feeling comfortable with the environment and the virus isn't as front and center as it is right now, there's a strong propensity to want to get back into bars and restaurants. So we just need to get through this current phase, and consumers will be back.

BRIAN SOZZI: Gavin, despite everything that's going on with the pandemic, you're seeing strength in two of your largest beer brands. Why do you think that's happening at the same time?

GAVIN HATTERSLEY: Well, yeah [? I'm guessing, ?] Brian, you're talking about Miller Lite and Coors Light, and there's a couple of things going on there. One is the marketing and the brand health of those two brands is as strong as it's been for quite some time. We've had a really consistent campaign behind both of those brands, and it's working.

And then the other thing, which we've been fairly consistent about almost since the pandemic began, is consumers are looking for brands that they trust and they're more familiar with. And they have gone back to those brands, and they've stuck there, both in on premise and the premise.

- Yeah. Gavin, the other interesting push that I've been watching closely here has been the Topo Chico Hard Seltzer expansion. And it's been exciting to watch, obviously at a time that we've heard from some other competitors out there that maybe seltzer has already had its time in the sun.

And also, I guess, when we look at the portfolios here, obviously your competitor, Constellation Brands, has long boasted their positioning with Hispanic consumers. I wonder what kind of strengths you're seeing from the seltzer now, and then also if it is kind of a play or maybe some inroads with those Hispanic consumers.

GAVIN HATTERSLEY: Well, certainly, the seltzer market has slowed down, but that wasn't a surprise to us. We never believed that it was going to continue growing at triple digits. So yes, it has slowed down, but it's still growing quickly, relative to other alcohol types. I think, when the data comes in for 2021, it'll probably grow in the low teens.

The advantage we've got right now is we've got the two fastest-growing seltzers of the big companies in the marketplace at the moment. [INAUDIBLE] Topo Chico Hard Seltzer combined will probably be in the triple digits growth for 2021. Topo Chico, as you rightly point out, does skew towards the Hispanic consumer. It got off to a really nice start in 2021.

And despite the fact that we were only in-- I think it was nine states and seven big cities beyond that, we got a three share, and that's given us the confidence to go national with the brand, which started last week. So we're very excited about the potential of this brand-- not only in terms of all the increased distribution we're going to get, but also our ability to tap into a market which has not been a huge consumer of seltzers in the past.

BRIAN SOZZI: And Gavin, everything that the Rock seems to touch appears to turn to gold. His Teremana tequila brand is absolutely on fire. His Under Armour products seem to sell out as soon as they hit online. Within that ZOA energy drink brand that you helped launch with him, how big is that right now? What are your plans this year for it?

GAVIN HATTERSLEY: It is one of the fastest-growing energy-- or if not the fastest-growing energy drink out there. And for us, it's been a real success story from 2021, Brian. It beat our expectations-- in fact, far exceeded them. And this is going to be a big year for ZOA in 2022. We've got a lot of increased distribution coming down the line with-- as the chains reset their shelves. And as you rightly point out, the Rock has got a huge following, and everything he touches has turned to gold. And we're very hopeful that ZOA will be one of those too.

BRIAN SOZZI: All right, well, that is good to hear. Switching gears a bit to the stock price, I'm surprised, just given the growth areas you have seen in the business. The stock really, over the past year, is flat. And I know you recently posted a blog post saying that this year will be a step change for the company. What's your message to investors, and why do you write that?

GAVIN HATTERSLEY: Well, I'm not going to predict or get into why the stock price does what it does, Brian. And I'll leave that to the experts. From our point of view, we're in the third year of our revitalization plan. Obviously, we got knocked a little bit off at the beginning of the revitalization plan, with the pandemic, but we've made tremendous progress against all of the pillars which we put in place, whether that's our core brands of Miller Lite and Coors Light; whether it's our growth into the premium space, with brands like Mercury in the United Kingdom; whether it's in the seltzer space, as we were talking about a little bit earlier.

And certainly, from a beyond beer point of view, we've really laid a strong foundation for all-- on all three of those elements. And this was going to be the year where all of those things need to come together, and that certainly is our plan for 2022.

- Gavin, let's talk about how you are thinking about the return to the office, because your employees did, in fact, go back to the office in the fall. You're now, as I understand it, back to being remote. There's been some complications on the way here. How are you thinking about the adjustments that are necessary, once this surge maybe makes it a little easier, more comfortable for employees to come back?

GAVIN HATTERSLEY: Thanks. Yes, we brought all our employees back-- I think it was in the early part of October. We did choose to mandate vaccines, and our-- the vast majority of our corporate employees were very supportive of that mandate. And we came back in early October. The energy, the excitement about being back together again was there were strong [? and ?] [? palpable. ?] And it's obviously very good from a culture point of view.

With a surge in Omicron, we thought it would be best if we went back to voluntary in January. The decision, I think, was the absolute right one, given the infection rates that exist. And we're looking forward to getting everybody back together again at the end of January. We also have mandated the booster shot for our employees, and again, it's been widely supported by our employee base.

- And Gavin [INAUDIBLE] when our viewers are listening to this, there's a lot to be excited about when you talk about the growth. Triple-digit growth rate's obviously always exciting. But just talk to us about the size of the portfolio. Obviously, if you're talking beer, that's the behemoth that people care about when we talk Molson Coors-- even though some of these other endeavors, including the energy drinks and coffee even, might be growing.

But last year-- you saw the poll from Gallup-- 39% of US beer drinkers-- or drinkers rather-- said beer was their go-to. That was down from 46% back in '01, so it is kind of slipping to hard liquor and other things. How can you look at the portfolio and say, some of that growth in our high-end stuff is going to be able to offset maybe a slowdown we see in beer?

GAVIN HATTERSLEY: Well, our high-end stuff came off a pretty low [INAUDIBLE] our revitalization plan in 2019. But certainly, we've seen strong growth. Seltzers-- we've gone from almost no share to the mid, close to high single-digit range. We'll get the data out in then the next couple of weeks. But this is not a small segment, the seltzer segment. It's almost 10% share of the overall beer market, which is 20 million barrels. And we intend to get a decent share of that.

Beyond beer is also a huge untapped space for us. And we certainly started off small, because we were practically not in there. But as we talked about a little earlier, ZOA is playing in a huge market. The energy drink space is a huge market, and we think it's got lots of upside potential. But again, that's why it's so important for us to make sure that we have strong and healthy brands in our core beer segment, and we think we've got that with Miller Lite and Coors Light, both here in the United States and up in Canada.

Our core brand focus in Europe remains very strong. And in the [? above premium ?] space, we've got the largest craft brand in the country, with Blue Moon. And with the return of the on premise, we're seeing that brand in the publicly available data showing growth. So it's not either all for us. It's both and, and that's why we're putting a lot of emphasis on our core portfolio.

- Molson Coors CEO Gavin Hattersley, good to talk to you on this Monday-- and our thanks to Brian Sozzi as well.

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