Many people think breweries perform well in recessions, but this is a Wall Street myth. While it’s true that breweries perform better than most companies during recessions, they’re not the most resilient stocks available. Therefore, if you’re concerned about the broader market eventually hitting a wall, then you might want to look into Wal-Mart Stores, Inc. (NYSE:WMT), Dollar Tree, Inc. (NASDAQ:DLTR), or Johnson & Johnson (NYSE:JNJ) (amongst many others).
However, if you’re confident that the economic turnaround is for real, or if you don’t want to worry about timing the market and you simply want to invest in a well-run company for the long haul, then you might want to consider Molson Coors Brewing Company (NYSE:TAP).
Dedication to quality
Many companies say they’re dedicated to quality, but more times than not it’s just hot air. Molson Coors Brewing Company (NYSE:TAP), on the other hand, is telling the truth. The company’s World Class Manufacturing (WCM) strategy started off slow, but it’s now showing excellent results.
In 2012, malting plant reliability jumped from six days to 18 days, maintenance costs per ton of malt produced dropped 18%, factory efficiency for the Tadcaster Brewery jumped 15%, Moncton Brewery efficiency improved 8%, and Molson Coors Brewing Company (NYSE:TAP) as a whole achieved $851 million in savings over the past five years.
Molson Coors Brewing Company (NYSE:TAP) is well known for its cost-cutting expertise, and rightfully so. But it’s also known for its strong company culture and innovation. According to Glassdoor.com, an impressive 71% of employees would recommend the company to a friend, and an even more impressive 83% of employees approve of CEO Peter Swinburn. Based on anonymous reviews, it’s clearly evident that Swinburn is liked and trusted. It all starts at the top, and Swinburn has done an excellent job creating a family-oriented environment where teamwork is commonplace.
This strong company culture leads to fewer distractions when a company is attempting to innovate and hit its targets. Therefore, it should come as no surprise that Molson Coors Brewing Company (NYSE:TAP) is highly innovative.
One very impressive aspect of the company’s philosophy is that it never wants to stop changing. Many companies want to rely on products or services it currently offers for future growth. That might work for several years, but this game plan will eventually run out of steam and fail.
Molson Coors understands that consumers are ever-changing, and in order for consumer interest to remain piqued, new products, or twists on old products, must be introduced on a consistent basis. Simply put, Molson Coors keeps its product line fresh. By taking calculated risks, Molson Coors greatly increases its odds of thriving through innovation.
Molson Coors vs. peers
Molson Coors has seen revenue increase over the past three years. Earnings have declined over that same three-year period, but profits have still been strong. It should also be noted that Molson Coors delivered strong profits in 2008 and 2009, which wasn’t an easy task for any company in any industry.
Another example of Molson’s quality efficiency is its profit margin of 9.8%. And its debt-to-equity ratio of 0.6 is right inline with the industry average. Furthermore, Molson Coors yields 2.5%, which is better than what you will find for the companies below.
Boston Beer Co Inc (NYSE:SAM) has been on a tear. Over the past three years, the stock is up more than 157%. Revenue has consistently improved annually, and though earnings dipped slightly in 2012, Boston Beer has still been able to deliver healthy profits on a consistent basis.
What might stand out most about Boston Beer Co Inc (NYSE:SAM) is a short position of 21%. This may seem odd considering Boston Beer owns a stellar balance sheet and sports a profit margin of 9.8%. But this elevated short position is all about valuation — Boston Beer is currently trading at 42 times earnings, which makes it very expensive. Boston Beer doesn’t offer any yield.