Molson Coors Beverage Company Q1 FY2024 earnings call

Management Statement and Operational Highlights:

• Acceleration Plan: Focus on growing core brands. Launched new campaigns for Coors Light (Choose To), Miller Lite (All Stars), and others. Coors Light was top dollar share gainer YTD in on-premise per Nielsen.
• High-End Portfolio Progress: Madri expanded to Canada and had strong momentum in the U.K. Simply Spiked and Happy Thursday showed positive growth. Blue Moon saw positive traction with new packaging and campaign.
• Investments: Golden Brewery nearing completion, $100M investment plan for U.K. operations to ensure world-class production.

Segment Performance:

• Core Brands: Collected strong performance in Q1. Coors Light had double-digit brand volume growth in the U.S., Miller Lite saw high single-digit growth. Coors Banquet grew volume by 23% in Q1 and gained nearly 0.25 point of industry dollar share. Ozujsko in Croatia had double-digit brand volume growth and 54% value share of the core segment. In Canada, Miller Lite was the fastest growing above premium beer nationally, growing brand volume over 40% YTD through February. In the U.K., Carling's partnership with FA Cup started showing results.
• High-End Brands: Madri Excepcional continued substantial growth in the U.K., with on-trade value sales up nearly 50% and off-trade up over 40%. Simply Spiked had U.S. brand volume growth of nearly 35% in Q1. Blue Moon saw positive traction with new packaging and campaign. Happy Thursday, launched in April, had positive consumer response.
• Regional: Americas (U.S. and Canada) drove growth. U.S. domestic shipments benefited from strong demand and shipment timing. Canada's Molson trademark outperformed the industry. EMEA and APAC had mixed results, with Central and Eastern Europe showing improvement as inflation eased, but U.K. off-premise faced challenges.

Guidance:

• Reaffirmed 2024 guidance. Expect low single-digit net sales revenue growth on constant currency basis. Mid-single-digit underlying pretax income and EPS growth. Underlying free cash flow of $1.2 billion ±10%.
• Factors influencing guidance: U.S. brand volumes expected to exceed shipment volumes in remaining 9 months, Pabst contract termination to be a 1.6 million hectoliter headwind, expected pricing in U.S. and Canada between 1%-2%, premiumization support from above premium portfolio, and moderating inflationary pressure impacting cost of goods sold per hectoliter.

Risks:

• Industry Volatility: U.S. beer category faced challenges with volatility, Easter mismatches, and cautious consumer behavior due to inflation and interest rates.
• Supply Chain: Fort Worth brewery strike impacted operations, but contingency plan helped, though inventory levels and shipment timing needed monitoring.

Q: Were Q1 results better than expected and how does industry softness impact positioning?

A: Gavin Hattersley said Q1 results were better than expected due to stronger shipments than planned, aided by contingency plan for Fort Worth strike. Industry softness is due to weather, Easter mismatches, and cautious consumer behavior, but the company remains confident in achieving guidance.

Q: What's the outlook on U.S. beer category volume and shelf space gains?

A: Gavin Hattersley stated it's too early to conclude on U.S. beer category volume trends, but shelf space gains for core brands (13% more for Coors Light and Miller Lite, nearly 20% for Coors Banquet) are expected to manifest as retailers complete shelf resets from April to July.

Q: How does the Fort Worth strike impact future modeling?

A: Tracey Joubert said costs related to the contingency plan have not been material and are not expected to be material for the balance of the year based on current projections.