Molson Coors Beverage Company

Good day and welcome to the Molson Coors Beverage Company full year and fourth quarter 2019 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star then 2. Participants can find related slides on the Investor Relations page of the Molson Coors website. Our speakers today are Gavin Hattersley, President and Chief Executive Officer, and Tracey Joubert, Chief Financial Officer. Please note this event is being recorded. With that, I'll hand it over to Greg Tierney, Vice President of FP&A and Investor Relations. Please go ahead.

All right, thank you, Andrea, and hello, everybody. So, following prepared remarks from Gavin and Tracey, we will take your questions. Please limit yourself to one question, and if you have more than one question, please ask your most pressing question first and then re-enter the queue for a follow-up. To the extent that you have technical questions on the quarter, we ask that you pick them up with me in the days and weeks to follow. Today's discussion includes forward-looking statements within the meaning of applicable securities laws. Important factors that could cause actual results to differ materially from expectations and projections contained in such statements are disclosed in the company's filings with the SEC. The company does not undertake to update forward-looking statements, whether as a result of new information, future events, or otherwise. Gap reconciliations for any non-U.S. gap measures are included in our news release or otherwise available on the company's website at www.molsoncoors.com. Also, unless otherwise indicated, all financial results the company discusses are versus the comparable prior year period and in U.S. dollars. And with that, over to you, Gavin.

Thanks, Greg. Look, 2019 was a challenging year for Molson Coors Beverage Company. However, despite significant headwinds and continued volume declines, we grew net sales revenue per hectolitre and improved our mix. We delivered strong free cash flow and cost savings. reduced our debt and started making progress towards premiumizing and modernizing our portfolio. We know we still have a lot of work to do. That's why last quarter we announced a plan to get Molson Coors back to consistent top line growth. The plan is designed to streamline the company, allow us to move faster, and to free up resources to invest in our brands and capabilities. And as promised in October, we've wasted no time implementing the plan. Now to remind you, there are five components to the revitalization plan. Investing in our iconic brands, aggressively growing our above premium business in beer and in flavored beverages, growing beyond beer, strengthening our capabilities, and streamlining our company. So let me update you on some of the progress that we're making. We believe in the future of our core brands because they have the power to recruit new legal age drinkers, which is why investing in our core is a key part of our revitalization plan. In the fourth quarter of 2019 in the United States, we released new creative pieces in the Coors Light Made to Chill campaign and the Miller Lite It's Miller Time campaign, and we've already unveiled more spots in 2020 as well. The early results are positive. Additionally, global Coors Light performance was flat, reflecting its best quarter in over three years and showing improvement in each of our segments. Miller Lite grew in all segments, delivering high double digit growth in Canada and had its best quarter in the United States since 2014. As we work to aggressively grow our above premium business, we see progress in our above premium beer and in above premium flavored beverages. Volume and NSR improved to the full year 2019 in above premium with an acceleration in Q4. We will support this acceleration by providing more fuel to our fastest growing brands and new innovations in the above previous space. Last month we launched New Creative for Peroni in the United States, which grew strong double digits in 2019 and presents a real opportunity for us in 2020. Belgian Moon continues to be one of our biggest success stories in Canada, growing strong double digits in both the quarter and the year. and delivering its third consecutive year of growth. At Startup Promen, our Czech lager celebrated its 150th anniversary with volumes up high single digits on the year with strong momentum heading into 2020 as Q4 volume and revenue grew double digits. We have launched two big-bit innovations in the United States already with Blue Moon Light Sky and St. Archer Gold. Light Sky is a low-calorie, low-carb beer brewed with tangerine peel. It's a great product that pushes the Blue Moon brand into incremental occasions and consumers. San Archer Gold is a premium light lager that offers a better tasting alternative to Michelob Ultra as proven by independent expert beer panel. We introduced consumers to San Archer Gold with a broad media campaign that kicked off during the professional football championship game and showcases how the brand is the better tasting light beer. Our Tenth & Blake portfolio again outperformed the US craft market in 2019, growing 16% per AC Nielsen versus a flat craft market. In January we agreed to acquire Atwater Brewery, a regional craft brewery in Michigan. It fills a geographic void, gives us distilled spirits capability and will help position our craft portfolio to continue outperforming the broader craft market. We are investing more in flavoured malt beverages and white spaces that differentiate us and allow us to reach more consumers. Building on our 2019 successes, in the United States we will continue to invest behind Catalan sparkling cocktails, which were a Nielsen top 10 growth brand for 14 consecutive weeks in 2019, and we are expanding La Colombe hot coffee to additional markets. In Canada we will continue to invest in Mad Jack, a popular FMB that was up double digits on the year. And next month we will launch Vizzy in the United States, a hard seltzer that offers differentiated ingredients which will help it carve out a meaningful space in the seltzer category. And lastly we're expanding beyond the beer aisle altogether. This is a big shift, but it presents real growth opportunities. In November we announced an equity deal and long-term partnership with LA Libations, an incubator of better-for-you non-alcoholic beverages. This investment essentially creates a new non-alcohol innovation team for the Molson Coors Beverage Something, something we simply did not have before. Now I want to be clear, we are not looking to compete in the soda aisle with Coca-Cola and Pepsi-Cola. Instead we'll be selective about where we compete, always looking to leverage our unique strengths. And of course, next month, we're taking a definitive step into the wine category with the national launch of MOBO wine spritzers in the United States. The organizational restructuring is well underway, and we are making progress towards our goal of improving efficiency and unlocking an additional $150 million in annual savings. bringing our total expected cost savings to $600 million over the 2020 through 2022 program. We have simplified our structure from four business units and a corporate center to two streamlined units, North America and Europe. In North America, a new organizational design is now set. All teams have been selected and people are transitioning to new office locations. In Europe, we have announced all senior leadership changes and anticipate completing the reorganization by the end of March. As part of our updated structure, we have a new data and analytics team and are expanding and developing new commercial and operational capabilities that will make us smarter and more efficient. We continue to estimate the cost of all these changes will result in total one-time charges in the range of approximately $120 to $180 million. spread over Q4 of last year, 2020 and 2021. Next quarter, we will report our financials under our new operating structure. As you can see, we are moving quickly to implement our plans and we're starting to see glimpses of transformation within our portfolio. Also, the new structure is already providing greater clarity and accountability. Teamwork has improved and the speed of decision-making is substantially quicker. None of this is easy and it won't happen overnight but the tough decisions we've made and the quick actions and investments we are making will ensure the Molson Coors Beverage Company is built to succeed in today's marketplace. Now I'm going to hand over to Tracey for a view of the fourth quarter and full year as well as our outlook. Tracey?