The opening paragraph of the Molson Coors Beverage Company's Third Quarter Earnings Conference Call includes an introduction by the Operator, followed by Traci Mangini, the Vice President of Investor Relations, who provides an overview of the conference call structure. Traci encourages participants to review the company's earnings release and slides available on their website and highlights important terms of financial reporting, including that the discussion will involve forward-looking statements. She advises that actual results may vary from forecasts and notes that non-U.S. GAAP measures are reconciled in the earnings release. Financial results discussed are compared to the prior year in U.S. dollars and constant currency, except for earnings per share. The data used is sourced from Circana and Beer Canada. The paragraph concludes with Gavin Hattersley taking over the call.

In the third quarter, the company experienced a decline in net sales revenue, pre-tax income, and earnings per share. The EMEA and APAC regions and Canada performed well, but the U.S. faced challenges due to macroeconomic conditions, which affected financial and brand volumes. Specific factors like the exit from a contract brewing volume and shipment timing also impacted results. The U.S. beer industry's softness over the summer and consumer shifts due to economic pressures contributed to these declines. Consequently, the company adjusted its 2024 sales revenue guidance downward but maintained a positive growth outlook excluding contract brewing impacts. Improved cost conditions allow the company to reaffirm its guidance for pre-tax growth in line with long-term goals.

The company is reaffirming its earnings per share guidance, narrowing it to the higher end, supported by share repurchases. The termination of a contract brewing agreement with Pabst, which has reduced financial volumes significantly, is expected to enhance brewery network effectiveness and margins in the long term. The Fort Worth strike led to increased U.S. inventory in the first half, with most of it unwinding in the third quarter. Despite the reduced Pabst volumes, price mix and growth factors, particularly due to premiumization, improved consolidated net sales revenue per hectoliter by 5.2% in the quarter.

The paragraph outlines the company's financial and strategic performance for the first nine months of the year. It highlights generating $856 million in underlying free cash flow, while investing in the business and returning $717 million to shareholders via dividends and share repurchases. The company believes its valuation is compelling due to progress in strategic priorities, particularly with core power brands like Coors Lite, Miller Lite, and Coors Banquet. Despite a slight decrease in market share in the U.S., these brands have largely maintained previous gains, with Coors Banquet showing strong volume growth and increased industry share for the 13th consecutive quarter. The focus remains on expanding brand awareness and market presence, especially among younger consumers. In Canada, Coors Lite and the Molson family of brands have also experienced growth, resulting in 19 consecutive months of share increases amid a challenging industry environment.

In the EMEA and APAC regions, strong performance was driven by the growth of Ožujsko in Croatia and the successful relaunch of Caraiman in Romania. The company is focusing on premiumization, with more than half of its Net Brand Revenue in these regions coming from premium products. Notable successes include the growth of Madrid as the second-largest lager in the U.K. and taking full ownership of the premium Cobra brand. In Canada, the company is also focusing on premiumization, with rising sales of Miller Lite and its flavor portfolio making it the fastest-growing beer brand. In the U.S., the company is focusing on scalable premium opportunities by divesting underperforming craft breweries.

The company is focusing on expanding its premium brand portfolio in both beer and non-alcoholic beverages. They are making strategic investments in Peroni, including local production to enhance supply consistency and introduce new pack sizes, aiming to scale it to the level of major European imports in the U.S. by 2025. In the non-alcoholic sector, they are targeting the Gen Z consumer and growing market segments by increasing their investment in Zoa, an energy drink brand co-founded by Dwayne “The Rock” Johnson, to 51%. This investment is part of their long-term strategy to capitalize on the better-for-you segment that is outperforming the overall energy category.

The company has increased its stake to lead brand marketing, retail, and direct-to-consumer sales, aiming to boost brand awareness and distribution through its network. It emphasizes a consumer-centric approach by utilizing deep consumer insights to innovate and connect culturally, such as targeting Gen Z with non-alcoholic options and bubble-free beverages. The company is also enhancing its shopper insights, particularly in convenience stores, by introducing a C-store innovation pipeline to better compete in under-indexed areas. It highlights success in premiumization across different regions and confidence in its strategy for long-term growth. Overall, it focuses on building capabilities to support innovation, supply chain efficiency, and commercial effectiveness to drive profitable growth.

The paragraph discusses the company's improved financial flexibility, highlighting a strong cash generation and profitability focus. It mentions $856 million in underlying free cash flow achieved through margin expansion, despite challenges such as gross margin pressure. The company continues to invest in marketing and business upgrades, like the completed Golden Brewery upgrade, to support long-term growth while controlling capital expenditures. The balance sheet is healthy with a leverage ratio of 2.1x, aligning with their targets, and their progress has been recognized by a Moody's credit rating upgrade to BAA1 stable.

The paragraph discusses the company's enhanced financial flexibility, allowing for increased investments in business initiatives like mergers and acquisitions, as well as returning more cash to shareholders. They have paid significant dividends and repurchased a substantial number of shares under a five-year, $2 billion plan, with 29% utilized in the first year. Despite adjusting their net sales revenue guidance down due to weaker U.S. market performance, they still project mid-single-digit growth in pre-tax income and earnings per share, supported by cost savings in packaging, logistics, and general expenses, along with share repurchases. They also plan to optimize their brewery network by closing two underutilized breweries and shifting production to Milwaukee. The expected underlying free cash flow remains at about $1.2 billion, with plans to focus on consumption in the U.S. during the fourth quarter.

In the article paragraph, the company discusses its expectations for the fourth quarter, anticipating STRs to exceed STWs by 200,000 hectoliters despite dealing with a 500,000-hectoliter headwind in the Americas due to the end of a tax contract brewing agreement. Costs per hectoliter are expected to be affected by volume de-leverage. The financial strategy includes reducing MG&A costs compared to the previous year by controlling marketing investments and incentive compensations. While the 2024 guidance is not aligned with long-term growth objectives, it still suggests positive top-line growth, excluding Pabst's impact. The long-term growth strategy focuses on pricing, mix, and volume, with North America expecting annual net price increases of 1% to 2%. The company aims for a significant portion of its revenue to come from above-premium brands and is working on stabilizing these brands in the U.S.

The paragraph discusses the optimism of a company in achieving its global premiumization goals by leveraging growth opportunities for brands like Peroni, Madri, and Blue Moon Light, as well as non-alcoholic initiatives. It highlights the importance of markets outside the U.S., such as Canada, EMEA, and APAC, which have shown strong growth and innovation, particularly with Madri. The company's strategy for achieving mid-single-digit pre-tax income growth involves margin expansion through disciplined revenue management and investments in supply chain and commercial capabilities. Additionally, they are committed to returning cash to shareholders via share repurchase programs, aiming for high single-digit earnings per share growth. The company believes in its strategy and is focused on long-term financial growth while continuing to offer dividends and share buybacks. The paragraph concludes with an invitation for questions.

The paragraph is part of a Q&A session following a presentation, where Bonnie Herzog from Goldman Sachs asks about the financial performance of a company in America, focusing on shipment timing, macroeconomic pressures, and their expected sales update for the year. Gavin Hattersley responds by explaining that their guidance, revised to a 1% decline in net sales revenue, is primarily due to challenging industry conditions in July and August. However, he notes an improvement in September and the beginning of the fourth quarter, with better industry performance compared to the earlier summer months. He also mentions that their shipment dynamics played out as expected, given the inventory adjustments following the Fort Worth situation, but acknowledges that some inventory unwinding remains.

The paragraph discusses the challenges and shifts in the beverage industry, focusing on changes in brand volumes and sales, particularly relating to the Pabst brand. Shipments in the U.S. were down, with Pabst contributing to a 2.6% decline. These changes resulted from various factors, including timing and trading days. Gavin Hattersley notes value-seeking behavior among consumers over the summer but mentions improvements in September and October. He explains that industry fluctuations are largely consistent, with consumers continuing to seek value in their purchases. The discussion also touches on how these trends will influence future planning.

The paragraph discusses recent economic trends and consumer behavior, noting that while there was pressure in July and August, the situation improved in September and October, with early November data suggesting better industry performance. Consumers remain value-conscious but also engage in premiumization. There is optimism due to increased consumer confidence. The conversation then shifts to a question from Filippo Falorni about expectations for the fall shelf reset in retail spaces. Gavin Hattersley responds, recalling significant shelf space gains from a competitor's issues last fall, which typically doesn't happen in the fall, but hopes to retain and possibly gain more space this year.

In the paragraph, the speaker reflects on the retention and slight increase in shelf space for their products during the fall and spring, surpassing their goals. Looking ahead, they anticipate similar adjustments from retailers in the upcoming spring, responding to innovations and sluggish items. They emphasize satisfaction with retaining substantial shelf space gains. In response to a question from Bryan Spillane of Bank of America, Tracey Joubert acknowledges not spending as heavily on marketing in the latter half of the current year compared to the previous year. This reduction is because of significant past investments in promoting core brands, which had gained momentum.

The paragraph discusses the company's marketing investment plans for the fourth quarter of the current year and for the full year 2024. While marketing investments are not expected to increase this quarter as they did last year, the company plans to boost marketing spending in 2024 compared to 2022. The focus will be on supporting core and premium brands like Blue Moon, Madri, and Peroni, especially as Peroni production moves to the U.S. Chris Carey from Wells Fargo Securities asks about the challenges faced this year regarding top-line growth and whether these are temporary or part of a larger trend. He also inquires about the sustainability of this year's pricing and mix changes, indicating the difficulty in predicting next year's performance in a more stable market environment.

In the paragraph, Gavin Hattersley addresses a question regarding confidence in meeting long-term growth goals related to net sales revenue (NSR). He acknowledges that 2024 presents challenges due to market noise and the exit of Pabst from their top line revenue. However, he highlights that their core power brands have shown positive performance, with a 190 basis point share growth over the first nine months compared to 2022. He notes significant success with the Coors Banquet brand, which is experiencing double-digit growth. Despite the Pabst transition, they have retained a significant portion of gained market share and are optimistic about their broader business, beyond just the U.S.

The paragraph discusses the company's strong revenue growth in Canada and continued share gains in the EMEA and APAC regions. In the U.S., pricing has stabilized at around 2%, with some price increases happening in the fall. The company is focusing on premiumization strategies, notably doing well in Canada and internationally, and has increased its stake to over 50%. They have plans for product expansions, such as Peroni in the U.S. and Madri in Canada and Bulgaria, among other potential European markets. In response to a question from Rob Ottenstein about the competitive pricing environment, Gavin Hattersley clarifies that there was no promotion activity on Peroni, indicating different strategies for this brand.

The company is focusing on bringing the Peroni brand onshore to achieve three main advantages: ensuring a consistent supply, offering new pack formats demanded by consumers, and increasing margins to reinvest in brand marketing. They are maintaining their pricing strategy in the top historical range and focusing on value rather than promotional pricing, even amidst macroeconomic shifts that encouraged some consumers to seek value options. Although there were deeper discounts in the above-premium tier this summer, the company chose not to react, maintaining its strategic focus for long-term brand strength.

Victor Ma asks about the performance of a brand called Happy Thursday against expectations, and suggests that leveraging a preexisting brand for growth might not be sustainable. Gavin Hattersley responds by stating that the brand is significant, generating $100 million in revenue. He emphasizes the importance of keeping up with consumer demand for flavor innovation, noting that while some original product packs have softened, there is still growth potential through distribution and household penetration. Hattersley highlights a recent successful launch of a cranberry-flavored limited-time offer (LTO) in the Simply Spiked space, demonstrating strong execution and engagement. He expresses confidence in future plans for their flavor portfolio, including Happy Thursday, which is receiving positive feedback and appealing to Gen Z consumers.

The paragraph discusses the company's optimistic outlook on a new, bubble-free beverage brand, emphasizing its unique flavor and market presence. The company is committed to supporting its growth, acknowledging their first mover advantage. The conversation then shifts to questions about revitalizing the Blue Moon brand and expanding Coors Banquet production, considering the potential of increased capacity from a new brewery in Golden. Lastly, the topic of cost of goods per hectoliter for the coming year is raised, specifically around potential financial benefits from reduced contract brewing and the impacts of commodity price hedging. Responses indicate a commitment to improving Blue Moon's market presence with new packaging and repositioning efforts, which are showing positive trends.

The paragraph discusses the performance and strategy of the Blue Moon and Coors Banquet brands. Blue Moon is showing improvement in total industry dollar share, supported by new innovations like Blue Moon Lite and Blue Moon non-alcoholic, now a leading craft non-alcoholic brand. Coors Banquet is experiencing strong growth, with double-digit increases and industry share gains over 13 consecutive quarters. The brand is popular across all legal drinking age generations, appreciated for its quality and lifestyle image, which is enhanced by partnerships like the one with Yellowstone. The company is confident in its capacity and ability to support further growth, particularly through strategic distribution efforts.

In the paragraph, Tracey Joubert, discussing Molson Coors' financial outlook, explains that the company hasn't provided specific guidance for Cost of Goods Sold (COGS) for the next year but will address it in their Q4 call. Joubert emphasizes the significant investments made in breweries, particularly the Golden Brewery, aimed at long-term sustainable growth and efficiency improvements to mitigate inflation. By removing short-run brands like Pabst mix, Molson Coors can enhance production efficiencies, reduce waste, and operate at full capacity, especially during the summer. Cost savings, focused largely on COGS, are integral to Molson Coors' operations, aligning with sustainability goals. Peter Grom from UBS asks if recent category improvements are factored into Molson Coors' Q4 guidance or if there's flexibility should the category weaken, hinting at its volatility over the past year.

The paragraph features a conversation primarily involving Gavin Hattersley discussing the company's outlook and market performance. Hattersley explains that they have a good understanding of their drivers for the fourth quarter and have implemented price increases. He addresses a question from Lauren Lieberman about volume declines in the EMEA and APAC regions, noting that consumer demand in the U.K. has been weak, partially due to poor weather offsetting any gains from the Euro tournament. Furthermore, the market is highly competitive with intense promotions, but the company, particularly with its Carling brand, is opting for a value-over-volume strategy and not participating in aggressive promotions.

The paragraph discusses the potential and strategy for Zoa, a "better-for-you" energy drink. Gavin Hattersley expresses optimism about Zoa's growth potential, noting its alignment with trends in the energy drink market that favor healthier options. He highlights Zoa's strong brand attributes, such as quality product, appealing packaging, and a powerful spokesperson who actively participates in the business. Michael Lavery's questions probe into the potential market execution and timeframe for Zoa's growth, indicating that it is currently a small brand with room for significant development.

Zoa has become a top-ten brand on Amazon this year, despite strong competition in the energy category. The brand is attracting new consumers and securing better distribution and chain mandates. With a majority stake, the company now has greater control over marketing and other areas, promising substantial revenue growth and supporting their strategic approach. This success led to the decision to increase their stake from minority to majority. The call concluded after this discussion.

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