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Molson Coors Brewing Company (TAP): Good Product But An Expensive Stock

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Molson Coors Brewing Company (NYSE:TAP) is the largest brewer based in America, ever since the InBev acquisition of Anheuser-Busch InBev NV (NYSE:BUD).  Molson Coors has a 30% share of the U.S. market, 40% of Canada, and 19% of the U.K.’s market, making it the fifth largest brewer in the world.  The company has traded pretty flat in recent years, and seems to be stuck in a range between about $38 and $50.  With the company set to report earnings on Valentine’s Day, investors will be looking for signals that the stock may finally break out of that range.

Profile

Molson Coors Brewing Company (TAP)Molson Coors has over 65 brands, including many very well-known names such as Coors Light, Molson Canadian, Miller Lite, Miller Genuine Draft, and more.  They also have a line of craft and specialty beers such as Blue Moon, Killian’s, and Leinenkugel (my personal favorite!).

The general growth strategy of the company is to expand its brands into new markets.  A great example is the results of marketing efforts of Coors Light in Canada, where it now has a 14% market share.  Molson Coors continues to try to integrate their brewing processes, which they have been trying to do since their 2005 merger.  Once this is fully complete, the company should realize even more cost savings as a direct result of the merger.

The Beer Industry

In the U.S., 79% of the beer market is controlled by the largest two companies, Molson Coors and Anheuser-Busch InBev NV (NYSE:BUD). While successful, other American beer companies like Boston Beer Co Inc (NYSE:SAM) are a distant threat.  The general trend in the beer industry has been away from the basic beers (Bud Light, Miller Light, etc.) and towards premium and super-premium beers.  I’ll bet that most readers of this article have a “tap room” style place somewhere near their home that sells an absurd number of premium beers, and that has opened in the last five years or so.

This is why the large beer companies have been acquiring smaller, premium brands like my beloved Leinenkugel.  With the general trend toward luxury items in the U.S. since 2000 (granite countertops in every home, luxury cars, etc.), it only makes sense for the beverage industry to follow suit.  When they company reports, pay attention to sales trends and what the company is doing about them to gain market share.

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