Molson Coors Beverage Company Q3 FY2024 earnings call

• Core power brands: Collectively in good shape. Coors Banquet has been growing strongly with double-digit volume growth year-to-date. The Molson family of brands in Canada achieved 19 consecutive months of share growth. - Premiumization efforts: EMEA and APAC had over half of their net brand revenue in the above premium segment. Canada's above premium net brand revenue rose nearly 15% in the quarter. Plans for U.S. premiumization include divesting underperforming craft breweries and investing in brands like Peroni. - Business capabilities: Developed deep consumer insights, advanced shopper insights through a C-store innovation pipeline, and possess strong capabilities to support premiumization, innovation, supply chain efficiencies, and commercial effectiveness.

In the third quarter, consolidated net sales revenue decreased by 7.8%, underlying pre-tax income dropped by 8.7%, and underlying earnings per share fell by 6.2%. EMEA, APAC, and Canada performed robustly. In the U.S., it was challenged by the macroeconomic environment with U.S. financial volume down 17.9% and brand volume down 6.2%. Core power brands: Coors Banquet had an 8% increase in brand volume and was the fastest-growing top 15 beer brand in the U.S. year-to-date. In Canada, Coors Lite performed well and gained segment share. In EMEA and APAC, Madri saw net sales revenue grow by over 15% in the quarter.

Adjusted 2024 net sales revenue guidance to a decrease of approximately 1% from the previously expected low single-digit growth. Reaffirmed underlying pre-tax income to grow in the mid-single digits and underlying earnings per share to grow in the mid-single digits, narrowing the range to the higher end. Anticipate $1.2 billion plus or minus 10% in underlying free cash flow. In the fourth quarter, expect STRs to outpace STWs by about 200,000 hectoliters and a remaining headwind of around 500,000 hectoliters to Americas financial volume due to the termination of the Pabst contract brewing.

• The macroeconomic environment had an impact on the U.S. beer industry, affecting U.S. brand volumes. - The impact of contract brewing termination, including volume headwinds in the third quarter and beyond. - Intense competition in certain markets, such as the increasingly competitive U.K. market with high promotional intensity.

Q: Bonnie Herzog with Goldman Sachs inquired about financial volumes in America, the impact of shipment timing versus macro pressures and trends in October.

A: Gavin Hattersley and Tracey Joubert responded, discussing the impact of shipment timing, macro pressures, and that October data showed better industry performance compared to July and August.

Q: Drew Levine with JPMorgan asked about the industry backdrop, consumer perspective, and how fourth quarter performance factors into planning.

A: Gavin Hattersley stated that the industry had value-seeking behavior, July/August showed pressures but September/October improved, and consumers remained value conscious with some channel/pack shifting.

Q: Filippo Falorni with Citi asked about the fall reset and retaining shelf space.

A: Gavin Hattersley said they retained and gained shelf space, with core brands retaining their share.

Q: Bryan Spillane with Bank of America asked about marketing levels.

A: Tracey Joubert said marketing investment was up compared to 2022, would invest in brands, and no significant deficit was expected.

Q: Chris Carey with Wells Fargo Securities asked about the top line, volume, and pricing.

A: Gavin Hattersley said stripping Pabst out, the top line is positive, core brands retained share, pricing was in the historical range, and was confident in the long-term growth algorithm.

Q: Rob Ottenstein with Evercore asked about the pricing and promo environment, specifically regarding Peroni.

A: Gavin Hattersley said there was no promotion on Peroni, and the strategy was onshore production for better supply, pack formats, and margin reinvestment.

Q: Victor Ma on behalf of Rob Moskow asked about Happy Thursday and flavor.

A: Gavin Hattersley said Happy Thursday was in the early stages but was encouraged, and the flavor portfolio had potential.

Q: Eric Serotta with Morgan Stanley asked about Blue Moon, Coors Banquet, and COGS.

A: Gavin Hattersley said Blue Moon was showing stability, Coors Banquet had strong growth, and Tracey Joubert said COGS focused on efficiencies and cost savings.

Q: Peter Grom with UBS asked about 4Q guidance and the category outlook.

A: Gavin Hattersley said 4Q guidance was based on a good grasp of drivers and was confident in the long-term algorithm.

Q: Lauren Lieberman with Barclays asked about EMEA and APAC volume weakness.

A: Gavin Hattersley said the U.K. had soft demand, a competitive environment, but Madri was driving growth.

Q: Michael Lavery with Piper Sandler asked about Zoa.

A: Gavin Hattersley said Zoa had potential in the better-for-you energy space, had strong Amazon performance, and had plans for ownership-driven growth.