The paragraph introduces the Molson Coors Beverage Company's First Quarter Fiscal Year 2025 Earnings Conference Call. The operator hands over to Traci Mangini, VP of Investor Relations, who welcomes participants and outlines the content of the call. She mentions that the call will include forward-looking statements and advises participants to check their earnings release and slides for detailed metrics. The discussion will cover financial results in U.S. dollars and constant currency, and share data will be sourced from Circana and Beer Canada. She then hands over to Gavin Hattersley for further remarks.

The first quarter was challenging for the beer industry due to a volatile global macroeconomic environment influenced by geopolitical events and trade policies, affecting consumer confidence and consumption trends. Despite these challenges, the company's U.S. and Canadian operations are well-positioned because their products are made locally. However, additional factors such as shipment headwinds and transition fees related to Fever-Tree impacted results during what's typically the lowest revenue quarter. The company remains confident in its core brands' long-term growth and premiumization strategy, despite current macroeconomic uncertainties. They are prioritizing aspects within their control to navigate short-term impacts.

The company is implementing strategies to handle short-term challenges while supporting long-term growth. Efforts include strengthening core brands, optimizing costs, and adjusting capital expenditures to focus on high-priority growth initiatives while maintaining shareholder returns. Despite these efforts, the economic environment has impacted the company more than anticipated, leading to revised expectations for the year: a low single-digit decline in net sales revenue, pre-tax income, and lower earnings per share growth than previously expected. However, they maintain their free cash flow guidance at approximately $1.3 billion. Further details on these updates will be discussed by Tracey.

The paragraph discusses the decline in consolidated net sales revenue, underlying pre-tax income, and earnings per share, attributed largely to a decrease in U.S. financial and brand volumes. Various factors contributed, including macroeconomic pressures influencing consumer behavior, high demand from the previous year, one less trading day, and shipment timing dynamics related to inventory preparation for a potential brewery strike. Additionally, the exit from certain contract brewing agreements with Pabst and Labatt led to further volume declines. However, these changes are expected to improve mix, margin, and brewery network effectiveness in 2025, as net sales revenue per hectoliter in the Americas actually increased by 4.8%.

The paragraph discusses the financial performance and strategic actions of a company. Favorable net pricing and positive brand mix, notably from the addition of Fever-Tree in the U.S., contributed to growth. However, financial volume in EMEA and APAC decreased by 9.7% due to low industry demand and competition, partly offset by a 5.4% rise in net sales revenue per hectoliter. Despite efforts to manage costs and support global brands, lower volumes, higher input costs, and $30 million in transition fees related to Fever-Tree clouded earnings. The underlying free cash flow was negative $265 million as the first quarter typically generates low revenue and profit. The company invested $88 million for an 8.5% stake in Fever-Tree Drinks PLC and returned $160 million to shareholders through dividends and share repurchases. Despite a difficult quarter, the company remains confident in its valuation and long-term strategy, having already completed over 40% of its share repurchase program, exceeding the initial plan's timeline.

The paragraph discusses the progress of the company's core power brands, highlighting a 1.9 share point increase in volume for Coors Light, Miller Lite, and Coors Banquet in the U.S. since the first quarter of 2023. Coors Banquet is noted as having sustained momentum, achieving double-digit volume growth and industry share increases for the 15th consecutive quarter. It has become the fastest-growing top 15 brand in the U.S. by volume percentage growth, with 20% distribution gains in the quarter. Despite its success, Coors Banquet still has significant growth potential. In Canada, Coors Light is the top light beer, and the Molson family of brands continues to gain volume share.

The company achieved eight consecutive quarters of growth, supported by strong performance of core brands in America, APAC, Central and Eastern Europe. Carling remains a top UK lager, while Ožujsko in Croatia and Caraiman in Romania are expanding their market share. Despite regional industry challenges, there's a continued focus on premiumization, with brands like Miller Lite driving success in Canada. In the U.S., premiumization strategies are underway, with Blue Moon maintaining market share, despite short-term setbacks due to packaging changes. Blue Moon non-alcoholic beer is also gaining market share.

The paragraph discusses the strategic initiatives for the Peroni brand and their "Beyond Beer" segment. Peroni is benefiting from cost savings through onshore production, which are being reinvested into expanding distribution and retail presence, with placements increasing by nearly 50%. The brand aims to match other major European imports in the U.S. market. In the "Beyond Beer" segment, the focus is on premiumization and capturing a range of consumer preferences by investing in non-alcoholic products, particularly for Gen Z. The company has increased its stake in ZOA and is leading its marketing and distribution efforts, including a new campaign with Dwayne Johnson and expanded distribution, to drive brand awareness and capitalize on emerging markets.

The paragraph discusses the strategic partnership between Molson Coors and Fever-Tree, a leading supplier of premium carbonated mixers in the U.S., with Molson Coors gaining exclusive commercialization rights in Fever-Tree's largest market. Fever-Tree's U.S. sales volume reached about 500,000 hectoliters in 2024, significantly impacting Molson Coors' non-alcoholic operations. The partnership is expected to exploit Molson Coors' extensive distribution network to boost growth. Additionally, the paragraph highlights the success of the Madrí brand, which has seen substantial revenue growth and has expanded its market presence in countries like Bulgaria and Romania, as well as launching a non-alcoholic version in the U.K.

The paragraph covers key points about the company's strategies and achievements during uncertain times. Gavin discusses the company’s commitment to protecting profitability and driving long-term growth through premiumization, strategic initiatives, and financial flexibility. The aim is to enhance core brands and expand globally while investing prudently. Tracey Joubert adds that recent efficiency improvements have bolstered margins, although various factors like pricing, input costs, and shipment trends affect margins differently each quarter. Specifically, in the first quarter, costs per hectoliter rose by 6.1% due to volume de-leverage in the U.S.

In the first quarter, volume de-leverage increased the cost of goods sold per hectoliter, offset partially by favorable mix dynamics and premiumization efforts. Inflation in input costs was mitigated by cost-saving measures and hedging programs. MG&A expenses rose slightly due to one-time fees associated with the Fever-Tree partnership. The net debt to underlying EBITDA ratio increased to 2.47x, aligning with the long-term target, indicating a strong balance sheet. This financial stability enables strategic investments in growth and allows for cash returns to shareholders, including $99 million in dividends and $60 million in share repurchases. The company has repurchased 7.2% of its class B-shares since October 2023.

The paragraph discusses a five-year, $2 billion plan, of which over 40% has been utilized in the first six quarters. The company raised its quarterly dividend by 6.8% to $0.47, marking the fourth consecutive year of increases, achieved without higher overall cash payments due to share repurchases. The financial outlook highlights uncertainty due to global macroeconomic volatility, geopolitical events, and trade policies, which may affect economic growth and consumer trends. Despite this, the company is well-positioned as most of its products sold in the U.S. and Canada are made domestically. With limited imports and domestic sourcing of materials, the company anticipates minimal impact from tariffs and continues to explore ways to mitigate risks by increasing domestic supplies where possible.

The company is adjusting its financial guidance metrics due to unexpected industry trends and macroeconomic shifts leading to consumer uncertainty and consumption pressure. They now anticipate a decline in net sales revenue and pre-tax income on a constant currency basis, revising previous growth predictions to reflect decreases. Underlying earnings per share growth has also been adjusted downwards. Capital expenditures are now expected to be $650 million, lower than the prior estimate of $750 million. However, the guidance for underlying free cash flow remains unchanged at $1.3 billion. The company anticipates a 1% to 2% annual net price increase in North America and expects other markets to align with inflation. They also foresee benefits from contract brewing cycles and premiumization beginning in 2024.

In 2025, the company anticipates growth in premium net brand revenue across EMEA, APAC, and Canada, while working on improving its position in the U.S. Despite benefits from Fever-Tree and ZOA, the company expects a 1.9 million hectoliter decrease in America's financial volume due to the termination of certain contracts in 2024. The catch-up in shipment trends will likely happen in the third quarter of 2025. Although the company foresees fixed benefits from reduced contract brewing, premiumization, moderating inflation, and cost efficiencies, these will be offset by expected volume reductions. Management, general, and administrative (MG&A) expenses are expected to rise, mainly due to infrastructure investments for non-alcoholic (non-alc) initiatives and transition fees related to Fever-Tree.

In the paragraph, the company discusses its financial strategy amidst the current macroeconomic environment. It expects to record under $10 million in additional fees in the second quarter, after recording approximately $13 million in the first quarter, but anticipates recovering these fees through a credit to net sales revenue over the next three years. To manage costs, the company is adopting a more restrictive approach to recruitment and reducing non-essential expenses like travel and entertainment. It is focusing marketing efforts on core brands such as Peroni and Blue Moon, and refining capital projects for 2025 by lowering capital expenditure guidance by $100 million, postponing projects not critical for cost savings or growth. The company is committed to maintaining free cash flow and making prudent capital allocations to support growth initiatives and ensure shareholder returns. The paragraph concludes with CEO Gavin Hattersley announcing his retirement at the end of the year.

After 45 years in the workforce, including 28 years in the industry and six years leading Molson Coors, the speaker announces their decision to step aside, expressing pride in the company's achievements and confidence in its future. The board is handling the succession process, and the company continues to work towards its strategic and financial goals. The speaker looks forward to engaging with the investment community as they prepare for new leadership. During a Q&A session, Bryan Spillane from Bank of America congratulates the speaker, Gavin Hattersley, and discusses changes in the year's market conditions, noting a slower U.S. market and promotional activities in Europe, while seeking clarification on the guidance for improved organic sales in the latter half of the year.

Gavin Hattersley addresses a question from Bryan about anticipated improvements in organic sales later in the year. He explains that while some factors like shipment timing due to a strike at Fort Worth and one-time costs from Fever-Tree were expected, unexpected macroeconomic challenges have affected consumer confidence and demand, leading to industry declines. Hattersley notes that last year's summer economic pressures led to consumer value-seeking behavior, impacting category performance, but the situation improved by the year's end. He anticipates that the industry's performance will improve from current trends and that the pricing environment will align with a 1% to 2% historical range.

In the paragraph, the discussion focuses on the company's performance and strategic outlook. The speaker notes that many of their plans and activities, such as those involving Peroni and Fever-Tree, are set to take effect in the second quarter and are expected to be beneficial. Bonnie Herzog from Goldman Sachs questions Gavin Hattersley about the company's guidance given the weaker results in the first quarter. She inquires about the company's market share retention, which Hattersley confirms has remained robust, maintaining almost all the market share gained in the previous year. He attributes this stability to the strength of their core brands, including Coors Light, Miller Lite, and Coors Banquet.

The paragraph discusses the company's successful efforts in gaining and retaining shelf space, particularly emphasizing the strong performance of Coors Banquet. Despite a small share loss in Q3 of the previous year, there has been sequential improvement in market share each quarter, with a noticeable gain in the first quarter of the current year. However, there were some setbacks in mid-March due to a packaging change for the Blue Moon brand and a decline in the Simply brand share because of timing differences in product innovation releases. The overall industry has shown slight improvement, and the company does not anticipate a continued decline at the previous rate.

The paragraph is part of a discussion about industry expectations for the remainder of the year and the potential impact of tariffs. Gavin Hattersley notes that the industry had a slow start in the first quarter, and while there isn't a public forecast for the rest of the year, they anticipate conditions will improve compared to the initial downturn. Filippo Falorni inquires about the impact of tariffs, and Hattersley defers to Tracey Joubert to address that aspect. There is an acknowledgment of consumer confidence issues and macroeconomic challenges, though these are expected to be cyclical and eventually resolve.

The paragraph discusses the company's input costs and how they are impacted by imports and tariffs. It mentions that only a small portion of the U.S. portfolio is imported (Molson and Sol from Canada and Mexico, and the majority of Fever-Tree from Europe), but they have the option to onshore these brands. Peroni used to be a significant import, but it is now primarily produced in the U.S., reducing tariff exposure. Most direct materials are sourced domestically, thus minimizing the impact of tariffs on input costs. The company has an extensive hedging program for commodities, although the Midwest premium is difficult to hedge due to pricing transparency issues. Overall, the company does not expect significant impacts from tariffs on their input costs. Lastly, the operator prompted a question from Chris Carey of Wells Fargo, inquiring about cost, inflation, and gross margin, noting minor favorability in cost inflation for the current quarter and questioning potential future changes.

The paragraph discusses two main topics: leadership transition and cost of goods sold (COGS) at Molson Coors. Gavin Hattersley addresses the leadership transition process, explaining that the board is considering both internal and external candidates, prioritizing business and leadership experience, and cultural fit to align with the company's long-term strategy. He emphasizes maintaining the current strategy while recognizing that a new CEO will bring their own influence. Tracey Joubert then talks about the COGS outlook, explaining that they anticipate an increase in COGS per hectoliter for 2025 due to inflation, consistent with previous guidance.

The paragraph discusses the impact of investments and strategies on a business's cost of goods sold (COGS) line, highlighting that these efforts have helped reduce the influence of inflation on their Q1 financial results, largely through cost savings. De-leverage due to exiting a contract brewing arrangement and shifts in sales and volume metrics also affected COGS. The company utilizes an extensive hedging program to manage price volatility, though the Midwest premium remains unpredictable. In response to Peter Grom's questions, Gavin Hattersley attributes recent industry softness to macroeconomic factors, without providing specific category growth targets or predictions for improvement in the near future.

The paragraph discusses the company's approach to navigating current market challenges, particularly their actions to maintain profitability amidst macro trends and industry cycles without providing a public forecast. In a Q&A segment, Gavin Hattersley addresses heightened competition in the EMEA and APAC regions, specifically noting a decline in the U.K. market due to increased promotional activities. The company is focusing on a value-over-volume strategy, leveraging their Carling brand's association with soccer, and highlighting the success of their innovation, Madrí, in boosting both volume and value growth.

The paragraph discusses the brand's expansion and growth strategies in Central and Eastern Europe, despite challenges in the beer industry due to declining consumer confidence and global tensions. The company is optimistic about growth and is investing heavily in national power brands, supporting recent launches in the premium space, and expanding beyond beer with products like Apple, Pippin, and Wild Cider in several markets. The paragraph also includes a transition to an analyst's question about the company's future market outlook and pricing strategy, with a mention of the hope for a toast at a future event.

The paragraph discusses the performance and share retention of Molson Coors' core brands, particularly Miller Lite, Coors Light, and Coors Banquet. Coors Banquet has notably increased its market share beyond levels achieved in Q2 2023, while Miller Lite and Coors Light have maintained most of their gains. Miller Lite's market share grew from around 6.1-6.2% in Q1 2023 to about 6.9%, holding at 6.8%. Blue Moon remains a key focus in the above-premium category, with the brand gaining share in the craft space during the third and fourth quarters and continuing that trend into January and February. Overall, the company is pleased with the retention and improvement of these brands.

The paragraph discusses the company's performance challenges in March, impacting Q1 due to a strategic pack adjustment, which was expected to temporarily affect performance but aligns with consumer preferences and offers supply chain and cost benefits. The Blue Moon brand has seen positive momentum with new innovations, like Blue Moon non-alcoholic products, which increased by almost 90% in Q1, and a new 8% ABV product targeted at convenience stores. The company expects to gain distribution during spring resets and plans significant marketing spend from April to December. Additionally, the paragraph includes a question from Kaumil Gajrawala of Jefferies about pricing strategies amidst potential increased promotional activity in the broader market, to which Gavin Hattersley responds.

The paragraph is part of a discussion from an earnings call. It mentions that consumer behavior is driving value, but nothing unusual is expected from a promotional perspective despite heightened competition in summer. Projects not crucial for cost savings or growth are being postponed to prioritize essential ones, particularly related to health and safety. Lauren Lieberman from Barclays inquires about adjustments in capital expenditures, and Tracey Joubert responds that they're postponing non-critical projects. Michael Lavery from Piper Sandler asks about America's price mix, noting it’s slightly below expectations despite having a mix benefit due to less contract brewing.

The discussion centers around the financial impacts of Fever-Tree's costs and the transition to a new distributor. Gavin Hattersley explains that these incremental costs are reflected in the MG&A line, not the top line, but the credits received over the next three years will come through net sales revenue due to technical accounting practices. There has been a 4.8% increase in net sales revenue per hectoliter in North America, driven largely by a positive product mix, including the introduction of Fever-Tree into the portfolio. This beneficial mix effect is expected to persist throughout the year. Additionally, Kevin Grundy congratulates the company on reducing debt leverage and asks about capital deployment plans, noting the company's stock underperformance despite financial improvements.

The paragraph features Gavin Hattersley discussing the financial strength and strategic direction of Molson Coors. He expresses pride in the company's strong balance sheet, low debt ratio, and robust cash generation, which he believes are underappreciated by the market. Hattersley highlights the company's ability to retain market share and the ongoing success of its core brands, particularly Coors Banquet. Additionally, he emphasizes the effectiveness of their "String of Pearls" approach to mergers and acquisitions, noting that with their strong financial position, Molson Coors can now pursue larger opportunities, exemplified by their investment in Fever-Tree.

The paragraph discusses a company's positive partnership with Fever-Tree, highlighting its alignment with their portfolio and enthusiastic reception from distributors. Although early in the partnership, initial results are promising and ahead of the business case. The speaker, Gavin, also emphasizes the strength of the company's cash generation and balance sheet. In response to Eric Serotta's question, Gavin expresses satisfaction with the company's core brands while noting the need for improvement in the premium space. He addresses the outlook for midterm growth across different segments, mentioning that while the growth rate for imported beers may slow due to their larger base, there is significant potential in domestic super-premium and premium light categories.

The paragraph discusses the plans and outlook of a company, focusing on its goal to achieve a third of net sales revenue from the above-premium market segment. The company is optimistic about new product launches and its existing brands like Peroni, Blue Moon, and Miller Lite, contributing to this goal. The first quarter was unexpectedly tough, but there are early signs of improvement in April. Tracey Joubert, responding to a question from Robert Moskow, clarifies that while they don't provide specific quarterly guidance, they acknowledge the softer first quarter and expect moderate net price increases going forward, with recovery anticipated in shipment volumes.

The paragraph discusses the company's expectations for performance, indicating alignment of STRs and STWs mostly in Q3, with Q2 performance anticipated to mirror Q1 due to the end of a contract brewing arrangement. It highlights that top line growth will be driven by premiumization, innovation, and partnerships like Fever-Tree, despite some impact from divesting smaller regional craft breweries in Q3. The main focus is on the drivers of the first half versus the second half of the year's top line performance. The paragraph concludes by indicating the end of the call, with no further questions.

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