The operator welcomes listeners to the Molson Coors Beverage Company Fourth Quarter and Fiscal Year 2023 Earnings Conference Call. Traci Mangini, Director of Investor Relations, will be leading the call. The discussion will include forward-looking statements and GAAP reconciliations. Gavin Hattersley, CEO, will be leading the call in place of Tracey Joubert, who had a prior family commitment.

In 2023, Molson Coors experienced unexpected growth in both their top and bottom line, surpassing expectations and setting a new baseline for the business. Despite challenges in the beer industry, the company has successfully navigated through them and delivered on their commitments for the past 3 years. This growth has been driven by their top 5 brands, which saw an increase of over 2 million hectoliters. The company is confident in their ability to continue this growth in the future.

In the U.S., the company's core brands are experiencing growth in both distribution and on-premise share. They have gained more space in the market and have added an additional $1 billion in distributor revenue. The company's focus for 2024 is to bring in even more new consumers, with a particular emphasis on their core brands. Coors Light, Coors Banquet, and Miller Lite all experienced double-digit growth in the fourth quarter, with Coors Banquet showing consistent growth over the past 11 quarters. The company sees potential for further growth with younger legal age consumers.

In 2023, the company saw a significant increase in distribution and on-premise draft lines for Banquet. They plan to focus on Banquet, Coors Light, and Miller Lite this year. These brands have gained more dollar share of displays at retail, and this trend has continued in 2024. The company expects to gain even more distribution and space for their brands during spring resets, with one large chain retailer already confirming increased space for their core brands. The impact of these resets will likely be seen between March and July of 2024.

In 2024, the company plans to run large integrated campaigns for Coors Light and Miller Lite, with the former already showing success through increased sales and velocity. The company also has plans for growth in global markets, with Coors Light and Molson Canadian being the top-selling beers in Ontario and Miller Lite experiencing rapid growth in Canada. In other markets such as Croatia and the UK, the company's core brands continue to perform well and the higher-end portfolio has potential for growth in 2024.

In the fourth quarter, EMEA and APAC business grew to 52% of net brand revenue at an above premium price point. Madri Excepcional was the fastest growing beer brand in the U.K., with volumes growing by 80% for the full year. The company plans to expand Madri globally, starting with Canada and select European markets. Simply Spiked continues to be a growth engine, with volumes doubling in the U.S. and gaining ground in Canada. The company plans to launch Simply Spiked Lemonade and a new-to-the-world innovation, Happy Thursday, in the U.S. this month and in March.

The company has received positive feedback from retailers for their recent launches and plans to support them with marketing and sampling. They are confident in their ability to deliver results in 2024, despite challenges in the industry and macro environment. The beer industry saw an improvement in volume trends and the company's brands led this improvement. They are committed to growth and intend to deliver on their growth algorithm. The CFO, Greg, will share financial details and guidance for the year.

The company experienced strong growth in net sales revenue, driven by favorable pricing, volume growth, and successful innovations. Both business units contributed to this growth, with above premium brands performing well. Financial volume and brand volume also saw increases, thanks to the supply chain team's efforts. Despite inflationary pressures, the company saw strong margin expansion and exceeded expectations in terms of underlying pre-tax income and free cash flow. The company is confident in continued growth in the future, as shown by their outlook for 2024. In the fourth quarter, both business units saw solid top line growth, and underlying pre-tax income increased despite strong investments in brand support.

Net sales per hectoliter grew by 4.2% due to favorable pricing and sales mix. Consolidated financial volume increased by 0.8%, with growth in Americas offset by declines in EMEA and APAC. Americas shipments increased by 2.2%, driven by strong performance of core premium brands. However, lower contract brewing volume related to the PEPs agreement had a negative impact. Consolidated brand volume grew by 4.3%, with strong momentum in core brands. In Americas, brand volume increased by 6.7%, led by the U.S. where Coors Light, Miller Lite, and Coors Banquet saw double-digit growth. In Canada, brand volume increased by 0.7%, with strong share growth. In Latin America, brand volume was down 5% due to economic challenges. In EMEA and APAC, brand volume declined by 2.2%.

In the U.K., the strength of the above premium portfolio was offset by industry softness, while inflation continued to affect performance in Central and Eastern Europe. Cost of goods sold per hectoliter increased by 1.4% due to inflation, but was partially offset by cost savings and volume leverage. In the Americas, cost of goods sold per hectoliter decreased by 0.7% due to cost savings and volume leverage, but increased by 8.8% in EMEA and APAC due to inflation and premiumization. Marketing expenses increased by 17.4% as the company invested in retaining and attracting new customers, while general and administrative expenses were higher due to variable compensation. Free cash flow for the year exceeded expectations due to strong operating performance and the company plans to use this cash to drive shareholder value.

The company has invested $690 million in capital projects and made strategic acquisitions to drive growth. They have also reduced their debt and earned credit rating upgrades. They have increased their dividend and announced a new share repurchase program. The company is now providing their outlook.

For 2024, the company is expecting low single-digit net sales growth and mid-single-digit pre-tax income growth on a constant currency basis. They also anticipate mid-single-digit earnings per share growth and $1.2 billion in underlying free cash flow. The company expects net pricing to return to historical levels and for mix benefits from premiumization. They also anticipate a decrease in financial volume due to a contract brewing arrangement ending and inflationary pressure. Gross profit is expected to increase, but underlying cost of goods sold per hectoliter will also increase due to inflation and higher costs related to premiumization.

The company expects to face headwinds in 2024 due to commodity hedges and a higher effective tax rate. However, they plan to support their brands and innovations through strong media plans and retail programming. They are confident in their ability to deliver their long-term growth algorithm in 2024 and beyond.

The speaker, Gavin Hattersley, responds to a question about the company's expected market share and volume growth in the U.S. for 2024. He mentions that the changes in the U.S. beer industry are permanent and the company has had a strong start in Q1, leading all brewers in year-to-date dollar share growth. He expects the industry to fall back to flat or down one level and for the company to gain share. He also discusses the various factors that will contribute to the company's top line growth, including pricing, premiumization, and PEPs. The company has given guidance for low single digits growth and the speaker is asked about the introduction of EPS guidance.

Bonnie asks about the company's mid-single-digit pre-tax income growth and EPS growth guidance, wondering why there is no leverage on the bottom line. She also asks about share repurchases for the year. Gavin explains that the 2024 guidance covers the long-term growth algorithm introduced at the Investor Day, with EPS being slightly lower due to a higher tax rate. The company has a sustained and opportunistic approach to share repurchases, with a $2 billion program over 5 years. They will consider cash holdings and capital allocation when executing the program. Peter Grom from UBS asks a question, but it is not specified in the paragraph.

The speaker is discussing the performance of the company in the EMEA and APAC regions, specifically in terms of volume. They mention that there has been weak consumption in the U.K. and sustained pressure in Central and Eastern Europe, but they expect improvements in these markets in the future. They attribute their success in these regions to premiumization and the launch of a new product.

Gavin Hattersley discusses the success of launching a brand during the pandemic and the potential for growth in the future. He also addresses the impact of PBR and the team's efforts to optimize the supply chain and reduce COGS per hectoliter.

The speaker praises the company's supply chain team for their ability to handle crises and adapt to industry changes. They mention ongoing efforts to optimize sourcing and the potential for further optimization with the release of PEPs. The speaker also acknowledges that as the company focuses on premium products, there may be a negative impact on COGS. The CFO adds that there are several factors, including premiumization and material cost inflation, that will be headwinds for COGS. This all contributes to the company's guidance for mid single digit growth in underlying profit.

During a conference call, Filippo Falorni from Citi asked about the volume performance and guidance for the rest of the year. Gavin Hattersley, the operator, mentioned that the overall beer category grew in 2023 despite negative headlines. He also stated that the company has various strategies in place to continue taking market share and expects to see positive results in the second quarter. Another question from Nadine Sarwat from Bernstein was about the surprise increase in constant currency underlying income before tax in Q4 compared to previous guidance of a decline. The company believes that the recent share shifts in the U.S. are permanent.

Gavin Hattersley, CEO of Budweiser parent company Anheuser-Busch InBev, discusses the company's fourth quarter performance and its share gains in the U.S. market. He notes that while the industry performed slightly better than expected, there were no major surprises. He also expresses confidence in sustaining their share gains, citing consistent growth in core brands, data showing the majority of consumers who switched to their brands have stayed loyal, and leading in year-to-date dollar share growth. He also mentions the possibility of a competitor claiming any improvement in their performance as a win.

The speaker expects strong growth in Q1 and believes that momentum from Q4 will continue. They anticipate benefits from increased retail space and spring resets, as well as stronger display activity. In the on-premise market, they were the largest share gainer last year, with Coors Light and Miller Lite growing more in dollars than Constellation.

Nielsen is confident in their guidance for marketing campaigns and strong reasons to believe in the success of Miller Lite. The next question is about COGS per hectoliter, with the expectation that it will continue to decrease in the Americas but increase in Europe, leading to an overall increase for the company. There are regional differences in COGS, but the hedging program is designed to eliminate highs and lows of input costs. Another question is about the portfolio outside of Miller Lite and how it will perform on shelves this year.

The speaker discusses the company's plans for deploying their balance sheet and using cash in the face of potential challenges in growth and volume. They mention strong share growth in Canada due to the strength of their core brands and expansion into flavor, and potential improvements in the macroeconomic environment in Latin America.

In the Central Eastern Europe region, inflation is slowing down and consumers are benefiting. In the U.K., there is caution due to excise tax impacts, but the overall portfolio is strong. The company's capital allocation priorities remain the same, with a focus on investing in the business, reducing leverage, and returning cash to shareholders. The company has raised its dividend and made progress on its $2 billion share buyback program. The specific level of repurchases for the 2024 guidance was not mentioned.

The speaker addresses questions about the company's share buyback program and the performance of the Blue Moon brand. They state that the buyback program will be executed on a sustained and opportunistic basis, and that they have plans to turn around the brand's performance in 2024 with redesigned packaging and a new marketing campaign launching in March.

In paragraph 26, the speaker discusses the strong media pressure and innovations that will bring more drinkers to the Blue Moon brand in 2024. They mention the repositioning of Blue Moon Light and the introduction of Blue Moon Non-Alcoholic, which have both received positive feedback from retailers and consumers. The overall Blue Moon family of brands is expected to perform well in 2024. Regarding interest expense, the guidance for 2024 is consistent with 2023. In response to a question about the overall beer category in the U.S., the speaker predicts it will revert back to flat to down 1% in terms of volume, and this is reflected in their 2024 guidance.

Gavin Hattersley, CEO of Molson Coors, discusses the performance of the beer category in 2023 and expectations for 2024. Despite headlines, the beer category grew in dollar share of total alcohol beverage, unlike wine and spirits. The first quarter of 2023 was tough for the industry due to bad weather on the West Coast, but volume trends improved throughout the year. Molson Coors expects the category to return to its historical levels of flat to slightly up on a value basis, with a slight decline in volume. They also expect to continue growing share in this environment. The category has taken higher pricing over the years compared to other alcohol categories, and Molson Coors expects pricing to fall in the 1-2% range for 2024.

The speaker discusses the improvement of the beer industry in 2023 and the potential impact of cannabis legalization on the industry. They mention the underperformance of the cannabis beverage market and state that they have not seen much impact on the beverage alcohol market in more developed cannabis markets like Canada. They also mention conducting research on a state-by-state basis.

The speaker discusses the performance of Colorado in the cannabis industry and reassures that the cannabis market has not negatively impacted alcohol consumption. The final question is about addressing industry draft weakness in the U.S. and the importance of returning to pre-COVID levels for the health of the industry. The speaker attributes the negative draft performance to the proliferation of craft brands and mentions that their portfolio is strong in the on-premise market. The Q&A session ends and the call is handed back to Traci for closing remarks.

The paragraph is thanking participants for joining the call and inviting them to follow up with the Investor Relations team for any additional questions. They also mention the upcoming CAGNY event and express their excitement for the year ahead. The call has now concluded and participants can disconnect their lines.

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