Molson Coors Beverage Company Q2 FY2025 earnings call

• The company continued to execute strategic plans amidst a challenging macro environment, but U.S. consumer sentiment remained low, pressuring consumption trends. • Core power brands in the U.S. held their market share, with Coors Banquet being a strong performer. • Premiumization efforts were ongoing, with successes in EMEA/APAC and progress in the U.S. through initiatives like Peroni's growth and Blue Moon non-alc's rapid growth. • The company has a strong balance sheet and robust cash generation, and has executed its share repurchase program ahead of expectations.

In the U.S., core power brands such as Coors Light, Miller Lite, and Coors Banquet retained significant shelf space gains, collectively commanding a 15.2% volume share of the industry in the first half. In Canada, the Molson family of brands posted volume share gains. In EMEA and APAC, the U.K. market was highly competitive, and Central and Eastern Europe was affected by escalating political and economic tensions. Fever-Tree contributed meaningfully as a key driver of positive brand mix in the Americas.

• Net sales revenue is now expected to decline 3% to 4% on a constant currency basis, compared to a previous low single-digit decline. Underlying pretax income is expected to decline 12% to 15% on a constant currency basis, versus a previous low single-digit decline. Underlying earnings per share is expected to decline 7% to 10%, compared to previous low single-digit growth. • Reaffirmed underlying free cash flow guidance of $1.3 billion, plus or minus 10%, as higher cash tax benefits and favorable working capital are expected to offset the decline in underlying pretax income.

• Uncertainty from geopolitical events, global trade, and immigration policies impacting consumer sentiment. • The U.S. beer industry has been softer than expected, affecting volume and performance. • Substantial spike in Midwest Premium pricing, which is difficult to hedge and has impacted costs. • Share performance did not meet expectations.

Q: Unpack the moving pieces of the updated guidance and its impact on the second half and fiscal '26?

A: Industry didn't improve as expected, there was a dramatic spike in Midwest Premium pricing, and share performance fell short of expectations. Believes the industry softness is cyclical, and the company has a strong balance sheet.

Q: Clarify the impact of Midwest Premium and the view on the category being cyclical vs consumption habits?

A: Consumer confidence was hit, cyclical belief, and impacts like GLP-1 and D9 are monitored.

Q: Exit rate for consumption in North America and Europe?

A: No improvement seen in the U.S., Canada is slightly better, while the U.K. and Central and Eastern Europe remain cautious.

Q: Pricing and promotional environment?

A: Strategic approach, pricing in the 1%-2% range, with summer promotional activity easing.

Q: Impact of second half volume guidance on the industry and shelf space?

A: Comps are tough, shelf space changes are not significant in traditional beer, and the brewery footprint has been adjusted.

Q: Market share trends and strategies?

A: Core share has been retained, with strategies like campaigns for brands such as Miller Lite and Coors Banquet.

Q: EPS bridge and missing pieces?

A: Includes marketing timing, foreign exchange, tax, Midwest Premium, category trends, and share expectations.

Q: Details on EMEA and APAC region?

A: The U.K. market is challenging, Central and Eastern Europe is sluggish, but premiumization efforts are ongoing.

Q: Capital allocation and M&A?

A: Adheres to the string of pearls approach, pleased with the acquisition of Fever-Tree.

Q: CEO search process?

A: Process is underway, with the Board focusing on business leadership and cultural fit, considering internal and external candidates.