The operator welcomes listeners to the Molson Coors Beverage Company's third quarter earnings conference call. Speakers include the CEO and CFO, and there will be a Q&A session after prepared remarks. Forward-looking statements and GAAP reconciliations will be discussed, and all financial results will be compared to the prior year in US dollars. The CFO will now begin the presentation.

The speaker will discuss the company's results, guidance, and expectations for the fourth quarter at the beginning of the call. They had a strong third quarter with double-digit growth in both business units and significant margin expansion. They have also been prudently executing their capital deployment plan and are confident in their ability to sustainably grow both the top and bottom line. They are reaffirming their high single-digit top line growth guidance for 2023 and raising their underlying pretax growth guidance and reducing their interest expense guidance. These changes are due to the strong momentum in their business and the actions they are taking to sustain it.

The beer category has been doing better than expected, with stronger brand volume growth and better pricing. The fourth quarter is expected to see mid-single-digit top line growth and a high single-digit decline in underlying pretax income. The company is not seeing any slowdown in market share gains in the U.S. and expects pricing benefits to decrease in the U.S., EMEA, and APAC. U.S. brand volume is expected to outpace financial volume growth in the fourth quarter due to strong brewery performance and healthy inventory levels.

The fourth quarter was successful for the company, allowing for employee time off and planned downtime for system maintenance. Inventory is expected to increase ahead of peak season and a large contract is winding down. COGS per hectoliter is expected to be a headwind due to high inflation and lower volume leverage. MG&A is expected to be up by $90 million, driven by marketing and G&A. The third quarter saw strong results with net sales revenue growth, driven by positive global net pricing and favorable sales mix. Consolidated financial volume increased, with particularly strong performance in the US.

The brewery's strong performance and momentum behind premium brands resulted in a 1.1% increase in consolidated brand volume. The Americas saw the highest growth, with the U.S. leading with a 4.5% increase. Canada also saw growth in its above premium portfolio, while Latin America and EMEA and APAC saw declines due to industry softness and economic conditions. Despite these challenges, the above premium portfolio continued to perform well, leading to a significant increase in bottom line results. This was achieved through careful cost management and strong brand investments.

The underlying cost of goods sold per hectoliter increased by 2.6%, with inflationary pressures being a headwind. In the Americas, COGS decreased by 1% due to cost savings and volume leverage, while in EMEA and APAC, inflation drove costs up by 15.8%. Cost inflation was the main driver of the increase, with volume leverage providing a slight benefit. Marketing, general, and administration expenses increased by 11.6%, with half of the planned marketing spend for the second half of 2023 being used to support core brands. General and administration expenses were also higher due to incentive compensation tied to strong operating performance.

The company's main priorities are investing in the business for sustainable growth, reducing net debt, and returning cash to shareholders. They have made progress in all three areas, with a focus on capital expenditures, debt reduction, and increasing dividends. The company also announced a new share repurchase program.

The company has implemented a new repurchase program to improve shareholder value creation. They are pleased with their third quarter performance and are confident in their ability to sustain growth in the future. In the third quarter, all of their top markets showed growth in net sales revenue, volume, and share. They were the top volume share gainer in the U.S. and their economy brands grew in both dollar and volume share. They also gained share in Canada and the UK, with Coors Light remaining the #1 light beer in the country.

The company has experienced significant growth in the UK market, with a rise in rankings and successful portfolio transformation. In Central and Eastern Europe, their core brand is also showing growth. The company's success is not solely due to the US market, as they have seen growth in other markets and segments. The company plans to continue this growth in the future and has already gained more tap handles and shelf space. The CEO clarifies any misunderstandings about shelf space.

The majority of chain retail accounts update their shelf space once a year, typically in the spring. However, due to changes in consumer behavior, over 50 retailers made adjustments in the late summer or fall, which is uncommon. Molson Coors was the biggest beneficiary of these changes, gaining significant shelf space for their big brands. The company expects to gain even more shelf space in the upcoming spring resets. The current dynamics in the industry and their efforts to improve business trajectory make the company confident in their ability to grow in the coming years.

In the paragraph, Gavin Hattersley discusses the performance of the beer industry in Q1, Q2, and Q3. He mentions that there has been an improvement in Q3, but it was not as significant as expected. He also notes that hard seltzers continue to contribute to the decline in the industry, but Miller Lite and Coors Light are gaining share. Tracey Joubert adds that the company's free cash flow range is wide and they are comfortable leaving it where it is. She also mentions that their priorities for capital allocation remain the same.

The company is focused on investing in their business to drive long-term growth and reduce net debt while also returning cash to shareholders. They have announced a $2 billion share repurchase plan and will prioritize investments that provide the highest return for shareholders. They are tracking the development of their incremental spend and their market share remains solid despite potential recovery from a competitor. The company's outlook for next year takes into account potential market share gains.

Gavin Hattersley discusses the company's focus on the quality and effectiveness of their marketing spend. They have tools in place to determine which creative assets and channels are most effective. They have spent $50 million on marketing in the third quarter and plan to spend another $50 million in the fourth quarter. The company's share position has remained stable for the past 25 weeks, with Coors Light and Miller Lite showing double-digit growth while Bud Light has lost share. The overall portfolio of their biggest competitors has also lost share points.

The CEO of Bud Light states that the brand's dollar share loss has been the highest in the last 4 weeks and that they have a clear plan to retain their share gains. At the Strategy Day, they presented an acceleration plan to retain their share gains and received a 95% positive score from distributors. The underlying COGS per hectoliter has increased due to inflation in EMEA and APAC, but is expected to moderate in the back half of the year. In Q4, COGS per hectoliter is expected to be a headwind.

In paragraph 15, the company discusses the reasons for the continued inflation in the EMEA and APAC regions, including lower volume leverage, expected brand volume growth, and higher planned maintenance costs in the fourth quarter. In the following question, the company mentions their plans to invest in marketing for their brands, including Coors Light, Miller Lite, and Coors Banquet, through effective campaigns, targeted media and digital tactics, and upcoming innovation such as the launch of Blue Moon non-alcoholic in December.

The company plans to invest in creating more space in stores for their products and will support this with strong marketing. They also plan to focus on their EMEA, APAC business and certain brands. In response to a question about brand volumes, the company explains that their adjusted numbers are lower due to trading adjustments and a lack of significant load-in compared to last year. They also mention that they expect brand volumes to accelerate in Q4 but may not ship as much in order to catch up in Q1 of next year.

The company is discussing the differences between their brand sales and shipments, with one representing consumer behavior and the other representing distributor behavior. They also mentioned that their brand volume is expected to exceed their financial volume due to healthy inventory levels. When asked about the current consumer climate, they expressed caution and mentioned being particularly cautious in Central and Eastern Europe.

The tough economy and high inflation have impacted the Central Eastern Europe business more than the UK business, but conditions are expected to improve as inflation falls. In Canada, there is softness in the market, but the company's performance there has been strong. In the US, there is still premiumization, but consumers are seeking more value through purchasing decisions. The company is prepared for any potential trade down to economy brands. The stock is trading at a 10% free cash flow valuation, but there are no impediments to buying back stock before the end of the year.

The speaker is asked two questions, the first being whether there is anything stopping them from buying back stock and the second being whether the business is better globally or just in a particular region. In response, the speaker reiterates their confidence in their company's progress and success in achieving their goals, including streamlining, growth, and diversification. They also mention their stable share position and growth in above premium brands. The speaker then jokes about the interviewer agreeing with their points before continuing to address the question about stock buybacks.

During a question and answer session, the company's CEO and CFO addressed concerns about miscommunication and the sustainability of market share gains. They stated that the company's capital allocation priorities are on track and any share buybacks will be disclosed in the next quarterly report. The next question was about the company's strong earnings and whether they were due to temporary or permanent factors. The CFO explained that volume leverage had a positive impact on fixed costs, resulting in an 80 basis point increase. The CEO then addressed concerns about the sustainability of market share gains, stating that they have data and insights that support the belief that the gains will continue to be sticky.

Gavin Hattersley responds to a question about the impact of fixed costs on the company's performance in Q3. He mentions that sales are continuing to do well, with share gains remaining unchanged for 4 weeks, 13 weeks, and 26 weeks. He also mentions that the company has plans in place to retain these share gains. Another analyst asks about the performance of the company's other brands, and Hattersley responds that there were adjustments and timing factors that impacted the overall performance, but some brands did not perform as well as others.

The company has noticed a decline in the popularity of hard seltzers, but they have a diversified portfolio of brands in the flavor space. They have seen success with their FABs and RTDs and have plans for further innovation, such as their Simply Spiked brand. Blue Moon has been affected by challenges in the craft category, but the company has a plan in place to improve its performance, including new innovations in December.

The speaker discusses the company's performance in the economy segment and mentions their success in gaining market share with their two main brands. They then answer a question about the price mix tailwinds and whether they are sustainable or cyclical, as well as any changes in competitive activity and pricing in other regions. The speaker explains that the strong pricing in the EMEA and APAC segment is a result of a combination of factors, including premiumization and list pricing.

The company's mix of brands is benefiting from strong growth in Madri, an above premium brand, which has contributed to the company's success in becoming the #2 brewer in London. Pricing and shelf space allocation vary by country and are driven by local dynamics. In the US, the company expects pricing to return to historical levels in the new year and is fighting for increased space for its brands in the spring reset.

The speaker acknowledges that there may be unanswered questions and encourages listeners to reach out to the Investor Relations team. They express excitement for future conversations and thank participants for joining the call. The operator confirms the end of the call and bids everyone farewell.

This summary was generated with AI and may contain some inaccuracies.