Montreal, Que.-based Molson's fiscal 2003 (year ended March 31) operating income improved 35% to C$601 million on a 19.6% sales increase to C$2.5 billion. Meanwhile, Molson's fiscal 2003 lease-adjusted operating margin of 23.9% was the highest ever for the company. In the first quarter of fiscal 2004 (ended June 30), sales declined 3.6% to C$662 million; however, comparable lease-adjusted operating income rose 11% to C$170 million.
In Brazil, Molson posted weaker first-quarter sales and market share has declined in the past year due to pricing pressures, a sluggish economy and distribution issues. The lower quarterly sales were almost exclusively attributable to a 27% volume decline in Brazil. Molson did, however, manage to limit the first-quarter sales decline in Brazil to 9% through sales price increases. In the first quarter, Molson implemented controls to eliminate transregional shipping and closed its largest sub-distributor in Sao Paolo that was underperforming. A new director of sales has since been hired, with new regional selling teams now in place. Molson has also instituted significant cost reduction programs, such as reducing capacity with the recent closure of a brewery. After very poor volumes in April and May, June volumes recovered to normal levels while those in July were ahead of plan. Consequently, the company is well positioned for the upcoming critical summer selling season in Brazil.
Canada remains by far Molson's most important market, generating 80% of Molson's 2002 net sales and 94% of unadjusted EBIT. The company's Canadian market share is 44%, and despite losing 0.6 market share points last year due to aggressive price competition in the super premium and discount categories, core brand market share rose 1%. First-quarter volumes rose 2.3% as core Canadian brands grew share by 0.7 percentage points. This year has been characterized by the launches of Molson Canadian Light in western Canada, Export Light in the Province of Quebec, and the nationwide introduction of Brazilian super-premium import A Marca Bavaria-leveraging off the company's Brazilian investment.
24 September, 2003
