MillerCoors Attempts to Capture a New Demographic

Investors should pay close attention to the company's strategy to market new products directly to the U.S. Hispanic demographic.

May 17, 2014 at 10:00AM

If beer investors know one thing, it's that brand management and marketing are crucial to success in the industry. The market is mature, the competition is fierce, and as a result companies have to put up a massive amount of capital to grow or maintain market share.

MolsonCoors (NYSE:TAP) knows this all too well. Though the company's "marketing, general and administrative" segment costs declined in 2013, it was because of reductions in compensation and overhead costs, not actual marketing. The company also announced that sales of Coors Light declined in the mid-single digits in the first quarter. As a result of these twin realities, investors are wise to keep their eye on what the company is doing from a marketing perspective to grow market share for its brands. Today, we're looking at the first line extension of its Coors Light brand, Coors Light Summer Brew.

Coorslight Summer Brew

Source: MillerCoors.

Coors Light Summer Brew is technically distributed by MolsonCoors' U.S. joint venture with SAB Miller, MillerCoors. According to the company's recent quarterly earnings press release, management announced it was aiming the new beverage squarely at millennials.

"This month, we will continue to engage legal drinking age millennials around Premium Lights with the release of Coors Light's first line extension, Coors Light Summer Brew," Chief Executive Tom Long said earlier this month. 

On the other hand, Fortune reported at the beginning of May that MillerCoors was targeting a Hispanic audience for the new beverage, a "citrus radler." The magazine cites MillerCoors' senior director of multicultural marketing, Rudy Rodriguez, who said "[It] was designed specifically for the Latino drinker to bring new users into the franchise."

So, which is it? Is this the beer for millennials or Hispanics? After all, it makes a big difference from an advertising standpoint, especially in this industry when every marketing penny counts. Hopefully, the answer is a combination of the two demographics.

Many of us know by now that Hispanics are the fastest-growing demographic in the U.S., and while many companies have ignored the group for their marketing strategies in the past, few dare to do so now. Nielsen estimates expect the demographic to spend $1.5 trillion next year, up from $1.0 trillion in 2010.

What some of us have missed, however, is that Hispanic millennials are quickly becoming a valuable niche demographic. At the end of last year, Clare O'Connor of Forbes pointed out that Hispanic millennials are more fiscally fit than other millennials. They have less debt, fewer monetary obligations, and a better sense of budgeting. Somewhat paradoxically, they also spend more at certain times of the year. "They spend proportionally more on clothes and shoes than other demographics, according to data released by the Association of Hispanic Advertising Agencies," O'Connor writes.

It's now MillerCoors' job to capture some of that spending and use it to buoy flagging sales of its Coors Light line. According to Fortune, prior to this launch, the company has failed to capture a meaningful share of the Hispanic beer-drinking market. The company's research has shown that Hispanics are partial to flavored drinks, so despite hoping Coors Light Summer Brew appeals to a mass audience, it was developed specifically with Latinos in mind.

Bottom line
Investors should be heartened by MillerCoors' attempt to capture a slice of one of the most important American demographics. U.S. Census data suggests that Hispanics will make up 15% of the drinking-age population by 2015. That number could go a long way in the company's quest to revive its flagging Coors Light brand.

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Aimee Duffy has no position in any stocks mentioned. The Motley Fool recommends Molson Coors Brewing Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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