Molson Coors Beverage Company Q2 FY2024 earnings call

• Strong Q2 results with top line held and bottom line grown while cycling tough comps. EMEA & APAC contributed due to favorable net pricing, etc. - U.S. shipment timing: Deliberate increase in inventories ahead of Fort Worth brewery strike led to STWs exceeding STRs in first two quarters, expected to unwind in third and fourth quarters. - Exit of Pabst contract brewing volume reduced second quarter financial volume by 580,000 hectoliters, with first half volume down over 900,000 hectoliters. - Strategic priorities: Core power brands, premiumization for beer and beyond beer, investments in capabilities like supply chain, marketing, and technology. - Modernization projects: Golden, Colorado brewery nearing completion, and U.K. project to increase brewing and packaging capacity. - Returning cash to shareholders: Paid $188 million in dividends, raised dividend, and active in share repurchase program.

Consolidated net sales revenue was down 0.1% in Q2. Underlying pretax income grew 5.2%, and underlying earnings per share grew 7.9%. EMEA & APAC business contributed meaningfully due to favorable net pricing, etc. For the first half of the year, net sales revenue increased by 4.2%, underlying pretax income by 20.4% and underlying earnings per share by 23.8%. In the U.S., Coors Light, Miller Lite and Coors Banquet combined volume share was down 0.5 share point year-over-year but up 2 full share points compared to Q2 2022. Coors Banquet grew brand volume nearly 13% in the first half. In Canada, Coors Light was the number two brand and Molson family of brands gained volume share. In EMEA & APAC, Ožujsko in Croatia gained nearly 2 value share points and Caraiman in Romania launched successfully. Above premium portfolio was over 26% of total net brand revenue for 12 months ended June 30. In Americas, above premium share of net brand revenue was over 21%, up nearly 2 percentage points from 2019. Blue Moon family, Simply Spiked, and Peroni were discussed in terms of performance and plans.

• Reaffirming 2024 guidance: Low single-digit net sales revenue growth, mid-single-digit underlying pretax income and earnings per share growth, underlying free cash flow of $1.2 billion plus or minus 10%. - Shipment timing impact: US shipment ahead in first half, expected to reverse in second half mostly in third quarter. - Pabst contract termination impact: About 2 million hectoliters expected for the year, with over half exiting in third quarter. - Offsets: Roll forward pricing, premiumization, moderating inflation, and cost savings to partially offset volume deleverage. - SG&A expected to be down in second half compared to prior year due to lower market investment and incentive compensation.

• Inflation remains a headwind this year, with cost per hectoliter increasing in Q2 driven by Americas business. - Shipment timing dynamics can impact quarter-to-quarter performance. - Exit of Pabst contract brewing volume is a near-term headwind to total volume and net sales revenue. - Market competition and consumer trends can affect brand performance and innovation success.

Q: Bonnie Herzog from Goldman Sachs asked about guidance deceleration, volume deleverage impact, and marketing spend levels.

A: Tracey Joubert responded on volume deleverage driven by COGS, cost savings to offset, and marketing spend expected lower in back half but still investing.

Q: Drew Levine from JPMorgan asked about US brand volume progression, industry performance, and holiday load-in timing.

A: Gavin Hattersley and Tracey Joubert discussed monthly improvement in June, Q2 continuation of trends, and domestic shipment context.

Q: Bill Kirk from ROTH Capital Partners asked about on-premise strategy, kegs, and draft.

A: Gavin Hattersley said on-premise performing slightly better, kegs important for brand building.

Q: Rob Ottenstein from Evercore asked about premiumization in US, Blue Moon, and Peroni.

A: Gavin Hattersley discussed work needed in US premiumization, efforts for Blue Moon and Peroni.

Q: Chris Carey from Wells Fargo asked about consumer appetite and July performance.

A: Gavin Hattersley talked about industry trends, consumer health in different markets, and not judging quarter on few weeks.

Q: Victor Ma from TD Cowen asked about price/mix in Americas and recession resiliency.

A: Gavin Hattersley said net pricing over half of increase with balance from mix, and beer category resilient.

Q: Bryan Spillane from Bank of America asked about US shelf sets, market share, and depletion.

A: Gavin Hattersley discussed spring reset results, share retention, and supply chain planning.

Q: Unidentified Analyst from UBS asked about price/mix contribution and volumes in Americas.

A: Gavin Hattersley and Tracey Joubert talked about pricing trends, mix from Pabst exit, and shipment reversal in third quarter.

Q: Michael Lavery from Piper Sandler asked about shelf reset tweaks and Romanian brand launch.

A: Gavin Hattersley discussed shelf reset SKU and pack format changes, and Caraiman launch.

Q: Lauren Lieberman from Barclays asked about US industry volume and market share.

A: Gavin Hattersley talked about industry volume trends, share retention of core brands.

Q: Eric Serotta from Morgan Stanley asked about beer vs spirits share and innovation performance.

A: Gavin Hattersley said beer outperforming spirits, and discussed performance of various innovations