Molson Coors Beverage

Molson Coors’ second-quarter 2026 results included a year-over-year 3.6% decline in revenue and a 27.8% decline in income before taxes, both in constant currency. Earnings per share decreased 22.9%. Shares rose 1% intraday on Aug. 6.

Why it matters: Results were below our expectations, as we expected a stronger top-line boost from the World Cup. However, the Middle East conflict weighed on consumer sentiment in the US, and well-capitalized brewer peers were more competitive in the period. With this, and shipment timings, volumes fell 4.8% in the quarter. Molson reaffirmed its 2026 guidance, including flat to 1% sales growth and a diluted earnings per share decline of 11%-15%. We expect results to be at the lower end of guidance. We still see cost inflation from the Midwest Premium pressure profitability, with cost of goods sold/hectoliters rising 6.3% year over year. This was partially offset by cost management, with Molson executing against its savings target of $450 million over 3 years.

The bottom line: We reduce our fair value estimate for no-moat Molson Coors to USD 49 per share from USD 53. At current levels, shares are around 15% undervalued. We see market concern over the full impact of the Middle East conflict on consumer sentiment. However, we view potential headwinds as temporary. Our fair value decrease stems from changes to our weighted average cost of capital framework. Under the updated WACC methodology, we increase our WACC estimate to 8.4% from 8.2%. The change reflects a more granular representation of our existing risk assessment. We have also slightly increased our medium-term advertising expense estimates. We expect the Beyond Beer category to become more competitive, with brewers and distillers both expanding ready-to-drink spirits offerings.

We lower our fair value estimate to USD 49 per share from USD 53, driven by changes to our weighted average cost of capital framework. Under the updated WACC methodology, we increase our WACC estimate to 8.4% from 8.2%. The change reflects a more granular representation of our existing risk assessment. Our fair value estimate implies an adjusted price/earnings multiple of 9 times and an adjusted enterprise value/sales multiple of 1 times.

We project a compound annual revenue growth rate of 0.6% over the next five years. Our revenue forecasts reflect our view that Molson Coors lacks brand-driven intangible assets and scale in the premium category to offset the downdraft in the secularly challenged midrange and economy segments. In its Americas segment, we project volume contraction of 0.5% to 2.0% annually, offset by price/mix growth of 1.5%. We project similar volume headwinds across the EMEA and APAC segments; however, Molson’s expanded on-premises distribution in the UK and Central Europe should mitigate declines. With pricing, we project the EMEA and APAC segments to achieve a 0.9% 5-year compound annual growth rate.

We forecast a 2030 operating margin of 14.1%, down from 14.6% in 2025, but better than the 13.1% average for 2019-23. 2024 profitability was padded temporarily by a reduction in cost of goods sold due to the firm's exit from contract manufacturing, and by lower-than-average marketing and labor expenses as a percentage of sales compared with historical levels. We expect the firm to increase investment in capacity, marketing, and sales to support its growth initiatives in premium beer and its diversification into energy drinks and mixers over the next 10 years. Here, manufacturing and logistics for nonalcoholic beverages will most likely offset the expense leverage Molson has in beer production.

We do not assign an economic moat to Molson Coors. Despite hosting well-known beer brands in its portfolio across North America and Europe, the company has not carved out competitive advantages in the form of intangible assets or cost advantages. Over the last decade, Molson has failed to deliver returns on invested capital above our estimate of its weighted cost of capital of 8%. We do not project Molson’s future returns exceeding its cost of capital, cementing our no moat rating.

Cost advantages in brewing are mostly regional, given the largely parochial nature of beer consumption and production. With rising demand for foreign beer in regions undergoing premiumization, multinational brewers will generally brew their brands as close to the point of sale as possible. We do not see evidence of a cost advantage in Molson’s two segments: the Americas (79% of 2024 sales) and EMEA and APAC (21% of 2024 sales). The majority of the Americas segment’s sales come from North America (Molson has 25% of the North American beer market share), whereas the majority of EMEA and APAC sales come from the UK. Against its major North American brewer competitors, including wide-moat AB InBev (36% of the North American beer market share) and wide-moat Constellation Brands (16% of the North American beer market share), we don’t believe Molson Coors enjoys any scale-based cost savings in ingredient procurement, manufacturing, marketing, or distribution. Molson’s operating income per hectoliter of $26 lags AB InBev’s ($50) and Constellations’ ($92). Combined with a lower estimated regional gross margin relative to peers, this suggests higher per-unit costs of goods sold and operating expenses for Molson, supporting our view that the brewer lacks a cost edge.

The European beer market is more structurally competitive, with lower market concentration and a large number of niche, premium brewers. We do not view European beer consumption (particularly in Western Europe) as a winner-takes-all or most of the market. Due to differences in regional reporting, it is difficult to get an apples-to-apples comparison of brewers’ profitability and efficiency across European countries. However, Molson’s 2024 EMEA and APAC operating profit per hectoliter of $10 is below InBev’s EMEA segment ($19), Heineken’s Europe segment ($18), and Carlsberg’s Western Europe segment ($19).

Molson has a slew of well-established midrange beer brands, defined as those priced near the market average. Top brands in North America include Miller Lite and Coors Light, which together account for roughly 50% of the midrange beer market. The long-term premiumization trend has gradually increased demand for premium and foreign beer, resulting in a structural decline in domestic midrange and economy beer sales, defined as beer brands priced below the market average. According to Euromonitor, the North American domestic midrange beer market shrank by 35% in volume and 13% in value from 2015 to 2025. We expect the market to continue to shrink, with premium beer and spirits categories gaining share. As a result, we expect the midrange and economy segments to become increasingly competitive over time, with Molson competing against well-capitalized brewers that have greater operating leverage, scale, and well-established premium portfolios. While Molson has invested in premium brands and scaled back its economy category in recent years, the company is still overweight in the midrange, accounting for an estimated two-thirds of its total volume. None of Molson Coors’ brands ranks among the top 10 by volume in the premium beer segment in North America, with its highest-ranking brand, Molson 67, at only 0.5% volume share in 2024. By contrast, the top premium brand, Michelob, owned by AB InBev, holds a 23% volume share, while the top premium brewer, Constellation Brands, accounts for approximately 40% of the segment's volume.

While consumers have preferences, it is not uncommon for customers to switch between brands with similar taste profiles and positioning. For example, North American Bud Light sales declined sharply in 2023 following a campaign that was not well-received by consumers. In the same period, Coors Light and Miller Lite gained share. Customers hold the bargaining power, and we argue that brand intangibles are less prevalent in beer. Instead, availability and pricing are the key determinants in purchasing decisions. For example, Guinness has seen a rise in on-trade consumption, resulting in a supply shortage in the United Kingdom in 2024. Demand was met by Murphy’s (owned by Heineken), a less popular but comparable stout, which saw a year-over-year sales increase of more than 630%. Brand choice can be conspicuous in markets undergoing premiumization, with customers trading up from midrange to premium beers. As consumers shift spending to premium brands for perceived quality and social status, we presume drinkers who remain in the mid-priced and economy segments do so for affordability and thus tend to base their purchase decisions more on price and promotion than on brand loyalty.

Instead, for brewers, intangible assets lie in relationships with distributors and suppliers throughout the supply chain. While we presume Molson’s supply and distribution relationships have existed for decades, we are skeptical that this gives Molson a competitive advantage. Molson’s retailers include grocers, stadiums, wholesalers, restaurants, and convenience stores. While we see limited evidence of consumer brand loyalty in mass-produced beer, retailers, whose business depends on volume, prefer to allocate shelf space to high-velocity products. With the continued contraction of the midrange beer market, we believe Molson’s negotiating position with distributors will gradually weaken over time. Furthermore, we see little evidence that Molson’s nonbeer portfolio drives meaningful foot traffic to stores.

Strategic initiatives to expand exposure to the premium and beyond beer categories should lead to margin expansion through positive mix shift.

Molson’s results are less sensitive to economic shocks than those of brewers with premium-skewed portfolios or distillers.

With nearly 25% volume share in the North American beer market, Molson is one of the largest brewers with generational brands including Miller and Coors.

High volume concentration in the secularly challenged midrange and economy beer segments does not bode well for top-line and profit growth.

Molson Coors faces an uphill battle in the premium segment against entrenched competitors like Constellation and AB InBev, which can flex their cost advantages to protect share.

Consumers in developed markets are moderating their alcohol consumption and switching from beer to adjacent categories, including wine, spirits, and ready-to-drink mixed drinks.