Molson Coors Beverage Company

Good day and welcome to the Molson Coors Beverage Company fourth quarter and fiscal year 2021 earnings conference call. You can find the related slides on the investor relations page of the Molson Coors website. Our speakers today are Gavin Hattersley, President and Chief Executive Officer, and Tracy Joubert, Chief Financial Officer. With that, I'll hand it over to Greg Tierney, Vice President of FP&A and Investor Relations.

Thank you, Operator, and hello, everyone. Following prepared remarks today from Gavin and Tracy, we will take your questions. To address as many questions as possible, we ask that you limit yourself to one question. If you have more than one question, we will answer your first question and then ask you to re-enter the queue for any additional or follow-ups. If you have technical questions on the quarter, please pick them up with our IR team in the days and weeks that follow. Today's discussion includes forward-looking statements. Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in our most recent filings with the SEC. We assume no obligation to update forward-looking statements. Gap reconciliations for any non-U.S. gap measures are included in our news release. And also, unless otherwise indicated, all financial results the company discusses are versus the comparable prior year period in U.S. dollars and in constant currency when discussing percentage changes from the prior year period.

With that, over to you, Gavin. Thanks, Greg. 2021 was a turbulent year all around the world for our industry and for our business. The pandemic raged and receded multiple times, but unfortunately it surged in the last six weeks of the year. And with it came government restrictions related to bars and restaurants, most notably in Europe and Canada. That impacted our business, creating a whole host of challenges. And yet, through it all, Molson Co. has made tremendous progress in each of the pillars of our revitalization. Our two biggest brands each grew net sales revenue in the U.S., America's and globally. An incredible feat, given the fact that over the past few years, many folks have been of the belief that this whole segment was on a path of spiraling clients across the U.S. and Canada. We finished the calendar year with a larger global above premium portfolio than ever before, with our hard seltzer portfolio growing at the fastest rate of any major beverage company in the United States. Very strong hard seltzer growth in Canada and standout beer innovations in the UK, as well as in Central and Eastern Europe. We are moving to scale beyond the beer aisle on the back of the fastest growing energy drink in the United States per RRI, and we continue to invest in our future growth all around the world. Folks, in 2021, Molson Coors grew the top line for the first time in a decade. Top line growth is one of the core goals of our revitalization plan, and a result our company has not been able to deliver in a long time. Yes, we slightly missed our guidance on EBITDA as a result of the impact of the Omicron variant surge in the last six weeks of the quarter. But at the same time, we've been very disciplined with cash within the business, improving our leverage ratio faster than we expected, And we chose not to cut the marketing investments that will help ensure the long-term health of our brands and our business. Overall, Molson Co. has finished 2021 as a healthier business than we were at the end of 2019. Now, as you recall in our third quarter call, we said that uncertainty as it pertains to potential surges in the coronavirus and or its variance to varying degrees by market could have an impact on our financial performance. Unfortunately, that is exactly what happened. The on-premise in much of EMEA experienced increased restrictions beginning in the middle of the fourth quarter as the Omicron variant surged. In the UK, the Christmas holiday period is one of the most important sales windows of the whole year, and due to government restrictions for pubs and restaurants and more cautious consumer behaviour, we fell to below 80% of 2019 net sales revenue in September. The UK is our third largest global market by net sales revenue, and the on-premise accounted for 65% of our business there in 2021. So as was well established earlier in the pandemic, when that channel is restricted or shut down, it has a meaningful impact on our business, and we felt that in the fourth quarter. But we know from experience over the past two years of the pandemic that this has been temporary. When the on-premise channel has reopened and when consumers are comfortable reentering bars and restaurants, They came right back. And I'm proud to announce that we were ranked number one in the UK Advantage Group survey. That is an independent industry-wide survey on how the big on-premise national customers across the UK view brand owners. And the results speak volumes about our hard-working team. Additionally, some of our US suppliers had renewed challenges providing materials like bottle crowns at the end of the year, which had knock-on effects on our production. But this has certainly eased in the time since. We've taken matters into our own hands by increasing the number of suppliers we work with to limit these kind of issues going forward. One point I want to make clear, though, is that while pandemic-driven issues with freight availability in the global supply chain continue to challenge us in the fourth quarter, we made significant improvements with our distributed inventory in the US. We closed 2021 with about 700,000 more barrels of distributed inventory than we did in 2020. that progress puts us in a far better inventory position heading into 2022 and in fact our out of stocks for core brands and packs are at their lowest level since before the pandemic today our top line is growing fast for the first time in 10 years our core brands are growing net sales revenue for the first time in years our portfolio is premiumizing to levels never before achieved we are moving to scale beyond beer and our business is making tangible progress towards achieving the goals of our revitalization plan. We are set up for a strong 2022. Now I want to dig in a little deeper, starting with our core brands. For the past few years, you've heard us talk about things like segment share and brand health as leading indicators that Coors Light and Miller Light remain strong foundations of our global business. And today I'm very happy to tell you that each brand grew net sales revenue in the U.S. in 2021. Coors Light by 4.4% and Miller Lite by 7.6%. We also saw double-digit growth in our on-premise placements for Miller Lite versus last year. In Canada, Coors Light also reported revenue growth in the fourth quarter, while Miller Lite revenue was up double digits for the full year, with acceleration in the fourth quarter. Our portfolio continues to premiumize. Our above-premium net sales revenue has grown over 15% in 2021. The biggest driver of that premiumization was our growth in U.S. hard seltzers. Despite ending the year with only one nationally distributed hard seltzer brand, our portfolio grew triple digits over the course of 2021, and we generated the largest growth rate in this space among any of the major beverage suppliers per ROI. Today, we have two of the top five hard seltzer brands in the U.S., with Topo Chico Hard Seltzer and Vizzy, and we see more upside ahead. But the... in hard seltzer franchises, Vizzy is the only one that has existed for multiple years and has never lost hard seltzer share in a quarter. In 2022, that success is continuing with Vizzy growing both industry and hard seltzer share. And while it's still early, we are very optimistic about the national launch of Topo Chico hard seltzer. Topo Chico hard seltzer has jumped to the sixth fastest-turning hard seltzer market nationally, and we believe it can become a top three hard seltzer in the U.S. Per IRI, Topo Chico hard seltzer has improved industry share each week since its national launch. Even in markets where the Topo Chico mineral water is less known, we are seeing strong results. Per IRI, Topo Chico hard seltzer alone has already reached a five-share of hard seltzer in seven new markets since launch. And we're bringing new packs to the brand with bottles, margarita hard seltzer, and ranch water that is already driving results. Our 12-pack of Topo Chica ranch water is not only the fastest-turning ranch water in Texas, it's the fastest-turning in the United States. Our hard seltzer progress extends to Canada, where we achieved a nine-share in hard seltzers in less than nine months. That was driven by both Vizzy and Queer Seltzer, with both brands finishing the year in the top 10 hard sales of brands in Canada. Above premium beer continues to be a growth driver for us as well. In the U.S., Blue Moon Belgian White grew net sales revenue by high single digits in 2021 and saw double-digit growth in the fourth quarter. Peroni earned double-digit growth in 2021, and our U.S. regional craft portfolio once again outpaced the category. And we are gaining total share of the craft segment in Canada as well, led by the strong performance of Brassia de Montreal and Food Diablie. We also continue to premiumise our EMEA and APAC business. Madrid, exceptionally now, has continued to accelerate as the world beer category grows in the UK and in Ireland. As of today, it's now delivering the fourth highest rate of sale of all draft world larders per CGA, And in 2021, Prava became the fastest-growing premium 4% lager per CGA. We are also bringing an exciting new innovation to market in the U.S. through an expanded agreement with the Coca-Cola Company. Simply Spiked Lemonade will be a full-flavor alcohol beverage inspired by the number one overall juice brand, a growing billion-dollar brand, and the second-largest brand in Coke's portfolio. Simply can already be found in one out of every two American households. and the brand continues to grow. So we're very excited about this opportunity to shake up the full-flavor alcohol beverage space as more legal-age consumers look for bolder flavor. In 2021, we put teeth behind our talk of becoming a total beverage company. Our Beyond Beer products are performing very well and helping to fuel our emerging growth business, which contributed approximately $800 million to 2021 net sales revenues. taking ahead of our $1 billion annual revenue target by 2023. Zoho has already proven to be a success, with a lot of opportunities still ahead as we continue to expand distribution. In less than 10 months, it has gone from nonexistent to the fastest-growing energy drink in the U.S. per hour, and it is number two in health energy drink sales in the C-Store channel. Latin America closed out 2021 with stellar performance, generating double-digit growth across this part of the business and record sales in many of the markets in which we operate. And we're backing it all up by investing in our capabilities. There are the physical investments, which are, of course, foundational. New hard seltzer production capabilities will be coming online in the U.S. We will soon turn on a new hard seltzer and spirits production line in Toronto. Our new state-of-the-art brewery is online in Montreal, and we're adding new canning and production capabilities in the UK. And then there are the investments we are making behind our brands. We increased marketing behind our core brands and key innovations, and we've become much more effective with those dollars as we accelerated our digital marketing capabilities. Folks, over the past two years, we have laid the foundation for sustainable, long-term, top- and bottom-line growth of Molson Coors. Today our core power brands are growing dollar sales. Today more of our portfolio is in the above premium space than ever before. Today we are moving to scale beyond the bearer. Today we have stronger capabilities to drive future growth. And because of all of that, because of the foundation we have laid over the past two years, against great odds and in a historically challenging environment, we can give guidance that in 2022 Molson Coors expects to deliver highest top and bottom line growth in over a decade. We will continue to invest in our business to drive towards sustainable long-term top and bottom line growth. Now, to give you greater details on that, I'd like to hand it over to our Chief Financial Officer, Tracey Jabbair. Tracey?