Molson Coors (NYSE:TAP) investors sat out the stock market rally of 2019 as shares trailed the broader market by over 30 percentage points. Selling conditions haven't been positive for the world's biggest beer giants as consumer demand shifts away from established light brands and even from the craft beers that dominated consumption just a few years ago.

The owner of powerhouse global franchises such as Coors Light and Miller Light has responded to that shift by adding things like hard coffee, cider, and canned wine to the portfolio. Those moves weren't enough to avoid a tough drop in sales volume for fiscal 2019. However, Molson Coors' earnings report this week suggests the worst might be over for the business.

Let's take a closer look.

Friends drinking beer at a bar

Image source: Getty Images.

Weak volume trends

For the full year, Molson Coors reported a 3.5% drop in global sales volume as consumers continued shifting spending away from light beer brands and toward new products such as hard seltzers. The fourth-quarter results looked slightly better, with volume ticking up 1%.

However, management explained that a good portion of that bump came from the timing of retailer orders, and that broader industry trends are still negative. "[This] was a challenging year for Molson Coors," CEO Gavin Hattersley said in a press release. "We know we have a lot of work still to do," he continued. 

Showing financial progress

There were some encouraging signs of progress on the turnaround plan. Pricing is rising, for example, thanks to support from new category introductions in high-margin niches such as cider and kombucha. Molson Coors also slashed costs over the past few months. As a result, adjusted operating income held steady at $1.3 billion in 2019 despite the lower revenue and sales volume. Management celebrated other financial wins, too, all aimed at positioning the beer giant for faster growth. "We ... delivered strong free cash flow and cost savings," Hattersley said, "reduced our debt, and started making progress toward premiumizing and modernizing our portfolio."

For the full year, adjusted non-GAAP earnings fell 3% after adjusting for currency exchange rate shifts.

Looking ahead

That portfolio transformation effort might start paying off soon, but investors will need to be patient. The bad news is, executives predicted that sales in 2020 will likely tick down again. However, the forecast also leaves the door open for a modest improvement in volume and revenue trends. That success will depend on the company making strides in surging niches such as hard selzers, which have helped Boston Beer's volume spike by 20% over the past year.

In the meantime, Molson Coors' lower debt burden, rising profitability, and robust cash flow all suggest the company has plenty of resources it can direct toward pivoting the business toward more in-demand products. The way to judge success on these initiatives is to follow sales volume, which isn't projected to jump back into positive territory any time soon. Until then, shareholders might be happy watching Molson Coors become more flexible as it aims to expand its influence beyond the beer aisle.