The following is a line from today’s earnings pre-announcement from glass behemoth Owens-Illinois. Explaining a 2Q earnings hiccup, this is what OI had to say about bottle sales down under ….
“Beer consumption in Australia also is down as consumer sentiment is extremely conservative due to high interest rates leading to lower disposable incomes.”
Perhaps we now have a reason for why Molson Coors (and Modelo) may be shying away from buying Fosters. Now Austrailian beer consumption has been pretty resilient since 2005. So says Stifel Nicolaus beverage analyst Mark Swartzman in a report issued yesterday that downgraded the shares of Molson (TAP). But with the Aussie interest rates moving up and consumer confidence down under at two year lows, perhaps not even beer consumption is safe. That is a damn shame.
But before we single out the Aussies for cutting back on their beer, OI had this to say about North America ……
“While shipments to beer customers have been lower than anticipated due to a continued sluggish U.S. beer market, demand for the wine, spirits and food segments remains strong.”
With gasoline prices still stubbornly high and unemployment benefits running out for thousands each week in this country, it is no surprise that beer consumption is punk. This blog had nothing nice to say about Molson Coors (TAP) a few weeks back when it issued its 1Q earnings and given this news from OI, there doesn’t seem to be much reason to get more constructive on the summer drinking season. That said, give me two or three more dollars of downside in Molson and I am a buyer of all that free cash flow.
