Molson Coors Beverage Company (TAP) Earnings

Management highlights

### Horizon 2030 Strategy Early Progress - The strategy, launched in Q1 2026, focuses on reinforcing core brand relevance, scaling premium and Beyond Beer growth, and driving operational efficiency. - Management emphasizes compounding incremental gains across the portfolio rather than relying on large single transformative moves, with early progress already being made against strategic priorities. ### Portfolio Strategy and Execution - Core brands: Continued investment in occasion-based marketing, new campaigns, and partnerships to strengthen the positioning of large scale core franchises; Coors Banquet's consistent, identity-driven marketing has delivered sustained share growth. - Value segment: Targeted modest investment to capture consumer demand for affordable, flavor-forward options, with data-driven innovation driving recent share improvements. - Premiumization and portfolio transformation: Continues to scale above-premium brands and expand Beyond Beer to diversify the company's beverage offerings. M&A is used as a force multiplier for transformation, with the Potomac Brands/Monaco Cocktails acquisition cited as a successful example that fills a gap in the fast-growing RTD spirits segment while delivering immediate growth and profitability. - Localized operating model: The updated operating model empowers local market teams to deploy resources for targeted high-impact opportunities. Examples include incremental on-premise World Cup activations in host U.S. cities and the viral "Restock the Scots" Miller Lite campaign, which drove incremental results outside of national media spend. ### Cost and Supply Chain Initiatives - The company is on track to deliver the previously announced $450 million three-year cost savings program, with restructuring actions (including the planned closure of a small UK brewery) already initiated in EMEA and APAC to unlock regional efficiencies. - $650 million in global capital expenditure is allocated to modernizing and expanding supply chain capabilities, including upgrades to the Rocky Mountain Metal Company can plant, to strengthen aluminum sourcing resilience and create long-term operational efficiencies. ### Capital Allocation - The company maintains a balanced capital framework, prioritizing reinvestment in organic and inorganic growth, while returning cash to shareholders and reducing debt, with quarter-to-quarter flexibility based on opportunities. - In Q2, management completed debt refinancing at attractive rates, extending debt maturities and reaching a net debt to underlying EBITDA ratio of 2.53x, near the long-term target of under 2.5x by the end of 2026. - The company paid $90 million in dividends and repurchased 1 million shares for $42 million in Q2, with $2.35 billion remaining in the share repurchase authorization; management views the current share price as a compelling long-term value.

Guidance

Management reaffirmed its full fiscal year 2026 guidance, maintaining all prior core projections despite Q2 macro and cost headwinds: - Full year U.S. beer industry volume is still expected to outperform 2025's 5% decline, even after Q2's 4.2% contraction; barring further escalation of geopolitical conflict, industry improvement over 2025 levels remains the core assumption. - U.S. shipments are projected to slightly outpace brand volume growth in the second half of 2026, with Q2's weakness primarily attributed to timing and inventory alignment rather than a structural shift in demand. The full year guidance includes nine months of NSR and profit contribution from the newly acquired Monaco Cocktails portfolio. - Annual U.S. price increases of 1-2% remain in line with guidance, consistent with Q2 performance and historical averages, with ongoing mix benefits from premiumization across all regions. - COGS is expected to remain pressured by rising commodity costs in the second half of 2026: full year Midwest Premium aluminum cost inflation is now projected to exceed $130 million (up from the prior initial guidance of at least $125 million), with hedge coverage partially mitigating the headwind. Elevated fuel and freight costs are also expected to remain through year end. - MG&A expenses are projected to decline year-over-year in the second half of 2026, as cost savings initiatives offset targeted investments in high-return growth opportunities, with spending redirected to the highest impact commercial and brand initiatives. - Management confirmed that the three-year $450 million cost savings program remains on track to offset a portion of ongoing inflationary pressures, with additional commercial and operational actions being evaluated for EMEA and APAC to address regional headwinds.

Segment performance

Consolidated net sales revenue decreased 3.6% (constant currency) year-over-year, underlying pre-tax income fell 27.8%, and underlying diluted earnings per share decreased 22.9%. 1. North America (United States): The U.S. beer industry contracted 4.2% in Q2, with Molson Coors domestic shipments declining 7.3%, in line with management expectations of a 6-9% drop. Core brands showed mixed results: Coors Banquet grew share and volume across all U.S. regions driven by targeted marketing campaigns; Coors Light and Miller Light underperformed, with ongoing work to amplify their brand identities. Value brands improved share trends, led by the successful limited launch of Keystone Light Apple (with demand outpacing production, prompting a fall relaunch) and improved performance for Miller High Life; fan-favorite Keystone Ice is also being brought back. Above premium brands had mixed results: Peroni grew double-digit brand volumes, while the broader Blue Moon franchise remained under pressure; Blue Moon non-alc and Peroni 00 both grew volume. Beyond Beer: Topo Chico Hard Seltzer, Monaco Cocktails, and Fever Tree grew net sales revenue (NSR), offset by weakness in Simply Spiked. Monaco Cocktails' post-acquisition performance is tracking slightly ahead of expectations, with 80% of sales concentrated in five U.S. states, primarily through the convenience channel. Fever Tree delivered its highest U.S. quarterly sales since the partnership began, and is on track to contribute 1-2% of total NSR, alongside Monaco. 2. Canada: Coors Light maintained its position as Canada's number one light beer, performing in line with the overall industry. Miller Lite continued its growth momentum as an above premium offering, and Coors Slushy maintained strong momentum in the RTD segment. 3. EMEA and APAC: Overall brand volume declined 3.4% year-over-year, pressured by soft consumer demand from geopolitical uncertainty, heightened competitive promotional activity around the World Cup, and unfavorable channel mix that pressured bottom-line results. Core brand Carling (UK) faced heightened competition, prompting rapid corrective market actions; Ozujsko retained its leading position in Croatia supported by World Cup sponsorship. Above premium segment overall brand volumes grew, driven by Staropramen, Miller, and Blue Moon, while Madrid brand performance was pressured by promotional activity. Beyond Beer: Hydra continued to benefit from growing consumer interest in functional beverages.

Risks & headwinds

- Geopolitical uncertainty from the Iran conflict has led to unanticipated energy and inflation shocks, which drove a sharp decline in consumer confidence and spending in Q2, particularly impacting lower-income consumers and off-premise consumption in food and grocery channels. - Sustained elevated Midwest Premium aluminum prices and broader commodity cost volatility have created larger-than-expected COGS inflation, with the aluminum market being illiquid, non-transparent, and expensive to fully hedge, leaving residual cost exposure. - Competitive pressure has increased industry-wide promotional activity, particularly in EMEA/APAC and around the World Cup, which has pressured bottom-line results and share performance in multiple core markets. - Macroeconomic volatility driven by shifting fuel prices and consumer sentiment has created high variability in industry demand quarter-to-quarter, making forecasting accuracy difficult. - Tightening freight markets have led to unexpected increases in transportation and logistics costs, adding incremental inflationary pressure in the second half of 2026. - Current share performance across core segments does not yet meet management's internal expectations, requiring continued execution and corrective actions to drive improvement.

Analyst Q&A

• Q: Can you provide more detail on World Cup's impact on category growth, and what market share performance do you expect for the rest of 2026? /

  A: The Q2 beer category contracted 4.2% year-over-year, and the World Cup did not move the needle on overall national category performance. It did deliver strong on-premise results in host cities, where Molson Coors' activations successfully drove brand engagement. Management maintains that the full 2026 U.S. beer category will still perform better than 2025's 5% decline, though volatility will continue. Molson Coors gained modest share in Q2 versus Q1, with strong progress in the value segment and for the Coors trademark, and management expects continued gradual share improvement through the second half. (347 characters)

• Q: What is the breakdown of Q2's category slowdown between temporary macro factors (higher gas prices, weather) and structural shifts, and should we expect Q2's weakness to continue through the second half? /

  A: The Q2 slowdown was largely driven by temporary macro impacts: higher gas prices suppressed off-premise consumer spending after a stronger Q1, though convenience and dollar channels remained resilient. A structural shift towards premiumization remains intact, with above premium brands continuing to grow and the on-premise segment outperforming off-premise. The category will remain volatile in the second half but will still outperform 2025, and Molson Coors' diversified portfolio across price points is well-positioned to continue gradual share gains. (393 characters)

• Q: Management is executing cost cuts and share buybacks, but should you be increasing brand investment more to drive volume growth across underperforming and high-potential brands? /

  A: Top-line and brand growth is management's top priority, and the company has sufficient cash generation to invest in brand growth, pursue M&A, and return cash to shareholders simultaneously. Investment is being prioritized for core brands (including large sports and experiential marketing), targeted value segment innovation, and scaling high-potential above premium and Beyond Beer brands like Peroni and Monaco. Cost discipline is a necessary complement to investment in a high-inflation environment, not a tradeoff against top-line growth. (401 characters)

• Q: Can you update on Monaco Cocktails integration progress and your expansion plans for the brand, which is currently concentrated in 5 U.S. states? /

  A: Monaco's integration is progressing well, with top and bottom line performance tracking slightly ahead of acquisition expectations. The majority of volume is indeed concentrated in 5 states, and the first priority is to retain and grow the existing business in these core markets, keeping Monaco's original successful go-to-market strategy while transitioning distribution to Molson Coors' network. Expansion to a national footprint will proceed in a measured, disciplined way, focused first on channel expansion in existing markets before moving to new geographies, leveraging Molson Coors' infrastructure to scale the brand gradually. (418 characters)

• Q: For EMEA and APAC, how much of the expected second half improvement comes from controlled cost savings versus expected demand improvements, and what is your confidence level in the demand outlook? /

  A: Commercial actions to drive top-line improvement are already in motion, including product innovation for core and above premium brands, and corrective actions to strengthen Carling's market position in the UK. Cost restructuring and efficiency initiatives are also already underway and under management's full control. The UK's key holiday trading season in Q4 also provides a natural timing tailwind for second half results. While H1 performance was weaker than expected, management has high confidence in the executed actions to deliver improvement through the second half. (382 characters)