The Molson Coors Beverage Company Second Quarter Earnings Conference Call has begun and Traci Mangini, Vice President of Investor Relations, is introducing the call. She reminds participants to limit themselves to one question and directs them to the company's website for financial and operational metrics. She also mentions that the discussion will include forward-looking statements and references to non-US GAAP measures. Gavin Hattersley, CEO of Molson Coors, then thanks everyone for joining the call and expresses satisfaction with the company's quarterly results.

The company acknowledges that there are some short-term timing factors affecting their quarterly performance this year. Despite this, they maintained their guidance for the full year and saw growth in net sales revenue and earnings. The EMEA & APAC business contributed significantly to their results. However, there are some timing factors that will impact the third and fourth quarters, but the company remains confident in their long-term growth plan. The most important factor is U.S. shipment timing, as they increased inventories during a strike at their Fort Worth brewery.

The company made strategic decisions to ensure healthy inventories during peak season, resulting in higher STWs compared to STRs. The exit of Pabst contract brewing volume also impacted financial volume, but the company saw an increase in net sales revenue per hectoliter due to mix benefits and premiumization in certain regions. The company also generated strong cash flow and remains on track to meet their 2024 guidance. Their strategic priorities include focusing on core power brands.

In the U.S., Coors Light, Miller Lite, and Coors Banquet have seen a slight decline in volume share compared to last year, but still have a 2% increase compared to 2022. Coors Banquet has been performing well and has attracted new younger consumers. In Canada, Coors Light remains the second most popular brand and the Molson family of brands has gained volume share. In EMEA & APAC, Ožujsko and Caraiman have seen success in their respective markets, while Carling's partnership with the FA Cup has helped boost its brand equity. The company's above premium portfolio accounts for over 26% of total net brand revenue and has seen success in various markets.

In the EMEA & APAC regions, the above premium share of net brand revenue has increased by 10 percentage points, mainly due to the successful launch of Madri. In the Americas, the above premium share has also grown, driven by the success of Miller Lite, Coors Seltzer, and Vizzy. In the U.S., the above premium share has improved, but there is still work to be done. The company is focused on their key above premium brands and innovations, particularly in the flavor category, to continue to grow in the Beyond Beer market.

The company has achieved success in launching new brands and has plans for further growth, such as onshoring production for Peroni. They are confident in their strategy and have seen strong financial performance, allowing them to invest in their business and return cash to shareholders. These investments have helped offset inflationary pressures and support long-term growth. Examples of investments include adding production capabilities, expanding the supplier base, and building new facilities.

The company has been focusing on modernizing their Golden, Colorado brewery and increasing their brewing and packaging capacity in the U.K. to offset inflation. In the second quarter, their cost per hectoliter increased due to inflationary pressure and decreased contract volumes. The company has also improved their marketing strategy and built an in-house agency to better analyze and evaluate the effectiveness of their marketing investments.

The company has been able to improve their return on marketing investment and has returned cash to shareholders through dividends and share repurchases. They have a strong balance sheet and have reaffirmed their financial outlook for 2024.

The company has set key metrics for the year, including low single-digit net sales revenue growth and mid-single-digit pretax income growth. The slower trends in the second half of the year are due to shipment timing and the winding down of a contract with Pabst. This will result in volume deleverage, but the company expects to partially offset this with roll forward pricing, premiumization, and cost savings.

The company expects SG&A to be down in the second half of 2023 compared to the previous year due to decreased market investment and incentive compensation. They remain confident in their growth algorithm and have various levers to achieve it. They had a strong financial quarter and are committed to their short and long-term goals. The guidance for the full year implies a deceleration in the second half, with volume deleverage and lower marketing spend levels expected. The company is focused on maintaining their share gains and has strategies in place to mitigate the impact on margins.

The company expects higher COGS in 2024 compared to 2023 due to deleverage and mix. Inflation and hedging programs also contribute to this increase, but cost savings and the removal of low-margin contract brewing volume will help offset it. MG&A is expected to be lower in the second half of the year, with an additional $100 million in marketing planned for the second half of 2023 to drive brand momentum.

The speaker is discussing the expected decrease in marketing spend in the fourth quarter. However, they assure that there will be no pull back on marketing and investments will continue to be made in their brands. In terms of brand volumes in the US, the second quarter was impacted by holiday timing and turbulent weather, but there was some improvement in June. The speaker also mentions that consumers are not trading between brands, but rather shifting within the brand portfolio in terms of pack sizes.

The speaker reflects on the lessons learned from Q2 and the importance of looking at longer-term trends rather than short-term data. They also provide context for the company's domestic shipments and mention their partnership with Pabst. The next question is about the on-premise strategy, specifically regarding kegs and draft. The speaker explains that the on-premise channel is performing slightly better than the off-premise, and emphasizes the importance of the on-premise in building brands.

The speaker, Gavin Hattersley, acknowledges that while their core brands like Miller Lite and Coors Light are performing well, they have work to do in the premiumization space, particularly in the US. He mentions that their premiumization progress outside of the US is strong, but they are committed to turning around their biggest above premium brand, Blue Moon, with new packaging and a new campaign.

In this paragraph, the speaker discusses the company's plans to reinvigorate their brands, particularly Blue Moon and Peroni. They mention new innovations and changes they have made, such as shifting to domestic production for Peroni in the US, which they believe will lead to more consistent supply, increased pack formats, and higher margins. The speaker also mentions their high expectations for Peroni, as its awareness and distribution are still fairly low. They conclude by discussing their tracking of overall category trends.

The speaker addresses the concern about the consumer market and its impact on their business. They mention that there have been some changes in consumer demand in certain markets, such as Central and Eastern Europe where there has been an increase in market demand due to a reduction in CPI. In the UK, the consumer has remained resilient despite challenges, and in Canada, the industry is performing similarly to the US with a decrease in consumer spending and inflation. However, the speaker is pleased with their company's performance in Canada due to their revitalization strategy.

In paragraph 17, the speaker discusses the company's increase in market share and notes that value-conscious consumers are still shifting channels and packs but not brands. The speaker also mentions that they will have a better understanding of the trend in the third quarter. In response to a question about the 4% price mix in the Americas, the speaker explains that over half of the increase came from net pricing, with the rest coming from mix benefits from Pabst or brand pack mix. The speaker is also asked about the company's preparedness for a potential recession in the US and responds that the net pricing increase was a little over half of the overall increase, with the rest coming from mix benefits from Pabst or brand pack mix.

The speaker, Gavin Hattersley, is responding to a question about the US market and shelf space gains for their company's brands. He explains that they have gained a 13% share of space for their core brands, with Coors Light and imports being the biggest winners. He also mentions that last year there was a higher percentage of retailers executing resets, but this year they do not expect any significant changes.

The company has only made minor adjustments to shelf space, mostly adding new items or discontinuing underperforming brands. They have retained 80% of their share gains from the previous year and expect retailers to continue making minor adjustments. The company also strategically planned their shipments to meet high demand and avoid out of stocks, resulting in them being the number one supplier on a recent survey.

The speaker discusses various factors that impact the company's performance, such as shelf resets, supply, and consumer perception. They also mention that pricing is expected to increase by 1-2% and that the addition of Pabst volume will be mix favorable.

During the first half of the year, the company shipped 1.1 million hectoliters ahead of demand, but expects this to reverse in the second half of the year. Additionally, there is still 1 million hectoliters of Pabst volume remaining, with over half of it expected to exit in the third quarter. In regards to shelf resets, the company was able to adjust for some consumer trends, but not all. As for the new brand launch in Romania, the company wanted to expand its portfolio and saw success with a similar launch in the past.

The speaker discusses the company's improved ability to hold inventory and the success of their brand Caraiman in Romania. They also address the industry backdrop in the US, acknowledging a decline in overall volume but attributing it to intentional over-shipment and not being fully representative of the market. The company's market share is down 50 basis points.

Gavin Hattersley, CEO of Molson Coors, confirms that their share gain in the second quarter of 2021 was the highest in the past year, and they have retained 80% of that share. They attribute this success to shelf resets, increased distribution, display and feature, and relevant marketing campaigns. They plan to continue executing and retaining as much of this share as possible. In terms of the industry, they believe there was some noise in Q2 but overall it balanced out as expected. Molson Coors intentionally did not over ship in the first half to avoid inventory challenges going forward. The next question is from Eric Serotta of Morgan Stanley.

The speaker answers a question about the company's performance in the US market and mentions that beer has been struggling but is gaining share against spirits. They also discuss the success of their recent innovation, Simply, which has become a $100 million brand in just two years. The focus now is on driving trial and continuing to appeal to the flavor-focused consumer.

The company has a strong marketing and sales program, and their brand is performing well in Canada. They have achieved a 10% share in the RTD category, driven by Simply Spiked. Other innovations, such as Madri and Happy Thursday, are also performing well. ZOA, a new energy drink, is attracting new customers and has a strong spokesperson. The company is pleased with their progress and plans to accelerate their performance.

The speaker is thanking the audience for joining the meeting and instructing them to disconnect their lines.

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