The beer industry’s pricing battles have ended, sparing their biggest casualty: profits. A number of mergers and acquisitions have turned what used to be a World War I-style battle for inches – in earnings, store shelf space, etc. – into a “virtual oligopoly,” Cramer said Friday.
The result has been increased numbers for companies across the board, even despite shrinking sales. People aren’t drinking more, but the InBevs , SABMillers and Molson Coors of the world sure are making more. Molson Coors saw a decline in shipments last quarter in Canada, the UK and the US, but pricing “is up huge” in these areas, Cramer said. As much as 20% in the UK.
Take this industry shift, add a drop in raw and distribution costs, and “you have the making of some great multiyear profits,” Cramer said. He picked Molson Coors as the best play on the trend.
Not only did TAP enjoy those prices increases, but it beat earnings expectations by 14 cents a share last quarter. Also, the company is seeing “major cost savings” from its joint venture with SABMiller, where the two have combined their US brewing operations.
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Even after the summer season, both pricing and volumes are holding up for that JV, and prices are expected to rise over the next six months. The increases look like they’ll carry over to Canada and the UK, too. And BUD’s intention to raise prices in October and February gives TAP permission to do the same.