Molson Coors Beverage Company

Good day and welcome to the Molson Coors Beverage Company First Quarter Fiscal Year 2022 Earnings Conference Call. You 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, Tracey Jabbair, Chief Financial Officer, and with that I'll hand it over to Greg Tierney, Vice President of FP&A and Investor Relations.

Thank you, Bricka, and hello, everyone. Following our prepared remarks today from Gavin and Tracy, we will take your questions. In an effort 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 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 new release. 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. So with that, over to you, Gavin.

Thank you, Greg. In the first quarter of 2022, Molson Coors continued to generate positive trends, giving us continued confidence in our ability to meet our full year guidance. We grew the top line by double digits and the bottom line on an underlying basis by triple digits. Top line growth has historically been the challenge for this business, but through our strong execution of the revitalization plan, we have now grown the top line for four consecutive quarters. The top line growth we generated in the last quarter was our largest quarterly top line growth in over a decade. Our core brands continue to outperform their peers. Our global above-premium portfolio continued to grow, again achieving a record portion of our overall portfolio by volume and revenue. To put a finer point on it, in the U.S., the economy segment accounted for more than 100% of our volume decline, following our decision to streamline and strengthen this part of our portfolio. Our expansion beyond the bear aisle continues meaningfully, as ZOA generated its largest sales month ever this March. And we continue to invest in our capabilities, most notably with a project that also increases the profitability of one of our fastest growing beverages, Topo Chico hard seltzer. Collectively, these are the core tenants of the revitalization plan we laid out for you over two years ago. And it is very heartening to see our business generating consistent results in each of these areas. Our core brands globally had another very strong quarter. In Canada, Coors Light grew share of the beer category, and our national champion brands in Emeo and Apex saw significant improvements with the reopening of the on-premise channel. You will recall that pubs in the UK were closed the entire first quarter of 2021. But by the end of the first quarter of 2022, beer sales in pubs were back to 98% of pre-coronavirus levels, and this was particularly beneficial to our Carling brand, the largest beer brand in the UK. As a result, in the first quarter, the EMEA and APAC business unit substantially improved its earnings and nearly doubled its 2021 revenue. In fact, we exceeded our EMEA and APAC first quarter 2019 revenues, which is a fantastic sign and further evidence of the value of increasing marketing spend behind our brands there. In the US, Coors Light and Miller Light continue their strong performance, made possible due to a multi-year approach that is clearly bearing fruit. These two brands compete in the same segment, so for years it seemed virtually impossible to get them both moving in the right direction at the same time. In the late summer and early fall of 2019, under Michelle Saint-Jacques, our chief marketing officer, the marketing team made a post on how they show up in ads. You can see that in the quiz like made to chill campaign and in Miller Lite's work since then.

Quizlight's Made to Chill campaign generated an immediate improvement in brand health in 2019. An ROI on the marketing campaigns for our premium light brands has significantly grown.

Combined, our new approach, better marketing, and increased investment has on-premise over the past few years.

Quizlight went from sales revenue in 2018 to growing by 4% in 2021.

Volume also flat in 2021. Miller Lite went from a half percent down net sales revenue in 2021. And the brand's volume went from down 20.1% to almost nearly flat in 2021. And in the first quarter of 2022, we again grew revenue for both brands and generated their best combined industry share performance in five years. And while our core brands have been building strength over the past two to three years, we have continually . We have now grown our share of net sales revenue and above premium for five straight quarters. And above premium net sales revenue now represents over 26% of our global portfolio on a trailing 12-month basis. acquisition. We again enjoy the largest growth in US seltzers of any major brewer.

That's been fueled in the launch of Topo Chico hard seltzer, which is the fastest growing major seltzer in the country. We only see further upside for this brand as we introduce the new margarita packs.

And with respect to investments in our capabilities, I would note that in the first quarter, we completed a capital project at our Fort Worth brewery. This project allows us to begin to bring the U.S. Topo Chico hot salsa production house, improving our profitability with the brand. Our share of the hot salsa market in Canada continues to be very strong, with impressive performance by both Vizzy and Queer Salsa. We expect to see those results only improve further when we introduce Topo Chico hard seltzer to the Canadian market next month.

But our premiumization is also being driven by growth in both premium beers around the world.

Praha, a relatively newer Pulsner from the start of Prahman, has earned strong results in Central and Eastern Europe and has now launched in Romania. This will be its second largest market to date in the U.K., with distribution in over 6,000 on-premise accounts.

Its strength in the on-premise alone is one of the top 25 U.K.

beers, and in March we launched it in the off-premise. In Canada, Molson Ultra has posted 47% volume growth from 2019 to 2021. And just last month, we launched a new Canada craft business.

Six pines grew five times the growth of the total craft segment in Canada in the first quarter.

In the U.S., both Blue Moon and Peroni saw double-digit net sales revenue growth in the first quarter as they benefited from the on-premise recovery as well as strong results off-premise. And there is more premiumization coming, most notably as we launch Simply Spiked Lemonade in the U.S. next month. We are pleased to bring this highly anticipated product to the growing flavored alcohol beverage space as our next major initiative with Coca-Cola.

drive to scale beyond beer, particularly with Zorro.

The brand continues its strong growth, achieving a record sales month in March. And the data behind those results suggests a very bright future for Zorro. After a year in the market, its retail sales and distribution numbers broke records for a new entrant in the healthy energy drink category. There are, of course, other promising signs in our work to expand beyond beer. Five Trail, our first full-strength bottled spirit, has now expanded to two more states based on the strong results from its initial four markets. The drink tea and coffee category is up 1% in dollar share per IRI in the first quarter. Luck alone is up 17%. Collectively, our emerging growth division remains well on track to achieving and around the world. We continue to turn around our entire business. Our improving results which we are now generating quarter after quarter, give us continued confidence in our ability to meet our full-year guidance.

But it's not necessarily a straight path. Tailwinds for our business in the second half that we believe keep us on track to achieve our full-year guidance.

And Tracy will go over those in more detail.

There are also broader issues and trends in our business. First, we have multiple levels, including pricing, premiumization, our hedging program, and our cost-savings program to mitigate inflationary pressure. They have been huge assets, but inflation is a real and growing challenge, and we anticipate the impact of inflation will worsen over the course of the year.

It's important to note though that we ship our beverages. As we head into the peak selling season, we are in our best US inventory position since before the pandemic.

And we continue to see out of stock levels on our core SKUs at or below pre-pandemic levels.

Second, consumer behavior. For example, volumes were in January as a result of the surge of the Omicron variant. While there has been improvement in pace we would have expected, all that we saw I would point out, though, that Molson Coors industry share trends have continued to improve both in the quarter and into April. In fact, the US saw its best quarterly dollar share trend in over seven years this past quarter. Despite high inflation in our biggest global markets, consumers continue to trade up, not down. This trend is consistent with consumer behavior in the recent economic downturns. However, should that change and should trade down actually occur, our economy portfolio is well positioned to capitalize. The skew rationalization we conducted in the U.S. in 2021 didn't just make our economy portfolio smaller. We made it stronger and more efficient. By focusing on four key brands in four key verticals, instead of managing a long tail of smaller brands, we are able to put more effort and energy behind our biggest brands in the economy space. And finally, the Russian war in Ukraine. We quickly stopped all exports to Russia and paused the licensed production of our other brands there. Collectively, however, the Russian, Ukrainian, and Belarusian markets accounted for a very small portion of our global business. And we have no breweries there. So it has had minimal direct impact on our global business. While our focus has been on arranging safe passage, accommodations, and financial support as it's needed for our Ukraine-based colleagues and for the Ukrainian friends and family of other colleagues in the business. And while we will continue to monitor consumer health in Europe, along with the cost of and access to input materials, we have been able to manage these challenges to date for our business. In summary, it was another positive quarter for Molson Queers, another quarter of successful execution on our revitalization plan, and another quarter of continually improving results for this business. And all of this was achieved in a very challenging macro environment that we are continuing to monitor closely. Folks, we're delivering in ways this business has not done for many years, and our future is bright. Now, to give you more detail on that, I'd like to hand it over to our Chief Financial Officer, Tracey Jube. Tracey?

Thank you, Gavin, and hello, everyone. As Gavin highlighted, while macro trends have been challenging, we had a strong first quarter delivering double-digit top-line and triple-digit underlying bottom-line growth. We achieved our highest quarter and continued to premiumize our product portfolio through the execution of While we, along with the rest of the world, are facing inflationary pressures, our efforts over the last two years have built a strong foundation for future growth and have given us confidence to reaffirm fiscal 2022 guidance for both top and bottom line growth. I'll take you through our quarterly performance and our outlook. Consolidated net sales revenue increased 17.6% with strong growth in both EMEA and APAC and America's business units. On-premise net sales revenue has not yet returned to pre-pandemic levels in all markets, but as on-premise restrictions have eased, we have seen sequential improvement in the on-premise net sales revenue performance with variations by market. Consolidated net sales revenue growth was driven by strong global net pricing, favorable sales mix from portfolio premiumization, positive channel mix as we cycled significant on-premise restrictions in the prior year period, and we also delivered high financial volumes. Consolidated financial volumes increased 5.1%, largely driven by strong brand volume growth in EMEA and APAC, higher contracts and factored volumes, and cycling of lower U.S. distributor inventory levels in the prior year. This was partially offset by decline in America's brand volumes, which was driven by lower U.S. economy brand volumes as a result of our economy skews deprioritization and rationalization program implemented in the second quarter of 2021. Net sales per hectolitre on a brand volume basis increased 10.2% driven by global net pricing growth and positive brand and channel mix with premiumization delivered across both business units. Net sales per hectolitre on a brand volume basis, which is an important metric from which to measure our progress against our revitalization plan, increased 12.2% compared to the first quarter of 2019. Underlying COGS per hectolitre increased 8.6%, driven by cost inflation, including higher input and transportation costs, as well as the mixed impact from premiumisation and factor brands in Europe, partially offset by lower depreciation expense. Underlying MG&A in the quarter increased 15.7%, largely due to our planned increases in marketing investment, which surpassed first quarter 2021 and 2019 levels to provide strong commercial support behind our core brands and new innovations. G&A was up due to higher people-related costs, including increased travel and entertainment. As a result of these factors, as well as lower interest and depreciation, underlying net income before income taxes increased 383.1%. Underlying free cash flow used was $359 million, an increase of cash used of $271 million in the same period last year. This increase in cash used was primarily due to higher capital projects spending partially offset by favorable timing in working capital. capital expenditures paid with $244 million, and focused on expanding our production capacity and capabilities programs, such as our previously announced golden brewery modernization project, and expanding our hard sulfur capacity in Canada and the UK. Now let's look at our results by business units. In America, the on-premise has not returned to pre-pandemic levels, but continues to improve on a sequential quarter basis. In the first quarter, the on-premise channel accounted for approximately 15% of our net sales revenue compared to approximately 18% in the same period in 2019. In the U.S., on-premise net sales revenue was about 87% of 2019 levels. And in Canada, on-premise net sales revenue was about 55% of 2019 levels. Because even though the on-premise restrictions continued to ease, they still impacted results. America's net sales revenue was up 8.5% as net pricing grows across the business units, and positive brand sacks were partly offset by lower volumes. America's financial volumes decreased 0.8%, largely due to 3.1% lower brand volumes, partially offset by cycling lower U.S. distributor inventory levels due to the March 2021 cybersecurity incident and the February 2021 severe Texas storm. In the U.S., net sales revenue grew 8.9%, with domestic shipments down 2%, outpacing brand volume declines of 4.3%. More than 100% of the U.S. brand volume declines were due to lower U.S. economy brand volumes. In the U.S., our economy portfolio was down high teens, while our base portfolio was up mid-teens for the quarter. In Canada, net sales revenue increased 4.1% as brand volume declines of 4.5% due to softer industry performance and more than offset by positive pricing and mixed premiumization. Latin America net sales revenue increased 29.7% on brand volume growth of 13.8%. Net sales per hectolitre on a brand volume basis increased 9.8% with strong net pricing growth and favourable US brand mix. US net sales per hectolitre increased 11.1% driven by net pricing growth as we took pricing earlier than usual this year and positive brand mix led by above premium innovation brands. Net sales per hectolitre on a brand volume basis grew high single digits in Canada due to net pricing increases and positive sales mix, while Latin America increased low double digits due to favourable sales mix. America's cost per hectolitre increased 6.7% due to inflation, including brewing and packaging materials and freight, as well as mixed impacts from premiumisation, partially offset by lower depreciation. Underlying NG&A increased 14.7% as we increased marketing investments behind our core brands and innovations, including the national launch of TOCA Chico Hard Salsa, as well as in local sponsorships and events as pandemic-related restrictions eased versus the same period last year. G&A was up as well due to increased people-related costs and legal and travel and entertainment expenses. America's underlying net income before income taxes increased 9%. Turning to EMEA and APAC, net sales revenue grew 92.3%, driven largely by Western Europe, but we also experienced growth in Central and Eastern Europe. Top line performance also benefited from fewer on-premise restrictions in the UK compared to the full closure in the first quarter of 2021. The UK on-premise channel net sales revenue exceeded pre-pandemic levels in the quarter. EMEA and APAC net sales per hectolitre on a brand volume basis was up 30.1%, driven by positive sales mix with the on-premise reopenings and above premium brands reaching another record high portion of the portfolio, as well as net pricing growth. EMEA and APAC financial volumes increased 29.4% and brand volumes increased 19.8%. The increase was primarily due to higher UK volumes, partially offset by the pounds in Central Europe and our export and license division. Strength in our core brands like Carlin, and new innovations like Madri led to strong double-digit growth in above-premium and premium volumes, partially offset by double-digit declines in the economy. Cogster Hexaliter increased 29.3% due to rising inflationary pressures and increased factored brand sales. MG&A increased 19.4% as we cycled mitigation efforts to lower costs in the prior year with on-premise restrictions and higher marketing investments to support our brands and fuel on-premise strength. And the NAPAC underlying net loss before income tax improved 62.1%. We ended the quarter with net debt of $6.9 billion and a trailing 12-month net debt to underlying EBITDA ratio of 3.28 times compared to 3.14 times as of the end of 2021. With the first quarter typically being a cash use quarter, this leverage ratio was up from the fourth quarter, which is typical between fourth and first quarters. Still, our leverage ratio remains substantially below the end of the first quarter of 2021, when it was 3.74 times. We ended the quarter with $160 million of commercial paper outstanding, leaving us with strong borrowing capacity with $1.34 billion available on our $1.5 billion U.S. revolving credit facility. Now let's discuss our outlook. We are reaffirming our fiscal 2022 guidance, which calls for both top and bottom line growth in 2022, performance we have not seen in over a decade. Before we go through the guidance, I wanted to note that year-over-year growth rates are on a constant currency basis. Also, if on-premise restrictions are increased and or reinstated in some of our larger markets, this could have a significant impact on our financial performance during that period. Additional risk factors include the impacts of rising global inflation beyond that currently anticipated and a prolonged strike at our brewery near Montreal. For 2022, we continue to expect to deliver mid-single-digit net sales revenue growth, high single-digit underlying income-before-income taxes growth, and underlying free cash flow of $1 billion plus or minus 10%. We expect to continue to be impacted by inflationary pressures in areas including materials and transportation costs and expect those pressures to increase for the balance of the year. However, we intend to judiciously pull our multiple levers to help mitigate the impact. As discussed on our fourth quarter call, we announced a 3% to 5% price increase early in 2022, which in the U.S. we took earlier than typical. Also, we have other leaders to help offset inflation, including Mix from premiumization and our cost savings and hedging programs. In these unusually challenging times, we want to provide a bit more color on our quarterly outlook for the rest of the year. As Gavin mentioned, we have several headwinds and tailwinds that will impact our quarterly earnings phasing. As a result, we expect our second quarter underlying income before income taxes to be down between approximately 20% and 30% from the prior year period. We expect stronger relative year-over-year performance in the second half of the year, enabling us to reach our full-year guidance. Now, let me walk through our drivers. First, we are planning a double-digit increase in our year-over-year marketing spend in the second quarter, putting marketing investments well above 2021 levels. Recall in the second quarter of last year, we had lower relative spending when our inventories were low due to the first quarter 2021 cyber security incident and severe Texas storm, and we were still experiencing on-premise restrictions across all of our major geographies. We did not begin upstanding until the second half of last year, investing above 2019 levels. Second, our inventory position in the US heading into peak summer season is the best it's been since before the pandemic, and last year at this time it was the lowest it had been in years. While the fact that we won't be playing catch up this year is certainly a very positive development, it also means we don't expect our US STWs to be as high as they were in the second quarter last year. Third, our ongoing strike at the Longdale Brewery and distribution centres near Montreal will have an impact on our second quarter results. And fourth, year-over-year top-line comparisons will begin to get more difficult in the second quarter relative to the first quarter comparisons, particularly in the UK, where the on-premise began to reopen in April 2021 with pent-up demand. However, these comparisons should ease in the fourth quarter, given the renewed on-premise restrictions in the fourth quarter of 2021, particularly in the UK and Canada. In terms of our other guidance metrics, we continue to expect underlying depreciation and amortization of approximately $750 million, plus or minus 5% reported, net interest expense of $265 million, plus or minus 5%, and an underlying effective tax rate in the range of 22 to 24%. Turning to capital allocation, our priorities remain to invest in our business to drive top line growth and efficiencies, reduce net debt, and to return cash to shareholders. We are maintaining our target net debt to underlying EBITDA ratio of below three times by the end of 2022, as we have a strong desire to maintain and in time upgrade our investment grade rating. We repaid our $500 million 3.5% USD notes upon its maturity on May 1, 2022, using a combination of commercial paper borrowings and cash on hand. Also, during the first quarter, we paid approximately $14 million for 280,000 shares under our share repurchase program, which was approved by the Board of Directors on February 17, 2022. As a reminder, this share repurchase program authorized the company to purchase up to an aggregate of $200 million of our Class B common stock through March the 31st, 2026, with repurchases primarily intended to offset annual employee equity award grants. In closing, we remain confident in our strategy and pleased with our progress. These are dynamic and uncertain times, but what's clear is that we have built our business to manage through challenging times. Our demonstrated operational agility through the pandemic, our dramatic improvements to our financial flexibility, our successful cost savings program that has served to fuel targeted investments to support our core brands and key innovations, have all further strengthened our business as we continue to drive toward our goal of sustainable long-term top and bottom line growth. And with that, we look forward to answering your questions. Operator?

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. We will limit analysts to one question, and then if you could please rejoin the queue. At this time, we'll pause momentarily to assemble our roister. The first question from the phone lines today comes from Kevin Grundy of Jefferies. Your line is open.

Great. Thanks. Good morning, everyone, and congratulations on the strong results and continued progress. Why don't we start with your guidance and just the between volume and net that's changed at all given the

sort of offset maybe with what's clearly a more difficult cost environment. And then within that, particularly Coors Light, Miller Light, and well as some of them, including Topo, which are off to a really strong start. So thanks for that.

Thanks, Kevin, and good morning. Yeah, there's a lot in that question. Trace, why don't you take the guidance question? I'll just cover off on Coors Light and Miller Light. You know, Coors Light continues to perform very strongly throughout all of the Americas. It grew high single digits in the U.S., and, you know, Canada, we grew industry share, and we had strong double-digit growth in LATAM. So what's driving that? I mean, it's got a clear and differentiated positioning within LATAM within the segment, driven by the Made to Chill campaign. We saw an immediate improvement in the brand health after we launched Made to Chill. The campaigns are impactful, and we've seen a clear improvement in RRIs. That's Coors Light. From a Miller Lite perspective, we've seen bright spots so far with high single-digit NSR growth on Miller Lite, and its share continues to improve. In Canada, Miller Lite's growing strong double digits versus last year, and in LATAM, it's growing single digits. It's continuing to push its great taste point of view. And on top of this, we continue to land the brand into what's culturally relevant at the moment. I'd point to our J Balvin partnership and also being the first brand to launch in a bar in the metaverse. So, yeah, it's driving a clear point of difference around great taste, and we're going to continue to capitalize that. I think you mentioned Beyond Beer as well. Well, Zola obviously is the star of the show for us there. As I said in my prepared remarks, we had our best month in the month of March, I think it was. It was our biggest sales month. We're obviously learning as we're going along. We recently pivoted the whole lineup to zero sugar SKUs, which is what the consumer really wants. It's gained share of the energy drink category sequentially in each quarter since we launched it. And it's now the 12th largest energy drink out there. It's picked up an additional spot since the end of 2021. So lots of bright spots. Very happy with how we're doing there. Gardens Trust, do you want to give a little bit of color there?

Yeah, so, hi, Kevin. So, yeah, I'll talk a little bit to the guidance and then, you know, touch on the volume versus revenue question. But as you know, our 2022 guidance calls for mid-single-digit top-line growth and high single-digit underlying net income before income tax growth. What we are seeing is that even though the on-premise has not returned to pre-pandemic levels across all of our markets, we do feel confident in our guidance. In the UK markets, we're more exposed to the on-premise. We've already seen restrictions lifted and our on-premise volumes returned to about 98% of pre-pandemic levels. In other markets such as Central Europe, there was still some uncertainty as the Omicron wave hits a little bit later. We're seeing improvements as well. US, where our on-premise revenues typically represent around 16% of revenues, we continue to see sequential improvements each month, even though trading does remain below the pre-pandemic levels. So, you know, just from the bottom line guidance, as we look at our rising inflationary costs, I mean, we've seen that on certain commodities and packaging materials for sure, and the freight market, you know, still remains quite tight. So, you know, we spoke about pricing, got really strong pricing.

Revitalization is around premiumizing our portfolio, and you see that coming through now.

And then, you know, we've got our hedging and cost savings program, which, you know, will help mitigate some of that inflation. So, you know, as we look at the balance of the year, We do expect to see channel and geographic benefits as we cycle some of the second quarter restrictions that we saw in EMEA and APAC. You know, this will have an overall lower COGS per hectolitre. And then, you know, one other item is just we've seen some benefit from our depreciation expense as we cycle out of the five-year period of asset fair value exercise on the Mila Cruz acquisition. So I know I've put a lot into that, but hopefully it gives you, you know, some color around how we're looking at volume and how we're looking at revenue and certainly guidance, you know, reaffirming the guidance for the full year.

Okay, that's very helpful.

Thank you. We now have a quick question from, I have opened your line now.

Hi, thank you. Two questions for me. So first of all, you're 0.3% on a relatively easier comp of minus 7.3 last year.

From memory, many brands had a already started to be deprioritized in Q1 last year. So could you help us understand what your U.S.

brand volume growth would have been without that component of deprioritization and rationalization that you call out in your release? And then just a second question on your Quebec strike. Am I correct in understanding that the strike is still ongoing? And how soon are you at risk of running through?

Yes, the strike is still ongoing. You know, we're obviously doing what we can to produce and ship our beers within the confines of the law. Our hope is that the union come back to the negotiating table so that we can reach a reasonable agreement for all the parties. At this point in time, obviously there are some out of stocks, but we're continuing to produce and ship in line with our contingency plan. As far as U.S. brand volumes are concerned, look, I mean, We were very clear about the fact that we rationalized our economy portfolio last year and that we would be facing those headwinds for a full 12 months. And if you look at the first quarter, obviously the first month was tough because we had the coronavirus impact, the Omicron variant, which pretty much shut down the on-premise again. And we saw sequential improvements beyond that. But, you know, I just remind you that we're going against the economy skew rationalization and brand elimination. We will start to cycle out of that in the second half of the second quarter and then obviously fully into the second half. A hundred percent of our volume reduction in the U.S.

In fact, more than a hundred percent of our volume reduction in the U.S.

Got it. Thank you very much. Thank you, Nadine. We now have Lauren of Barclays.

Great, thanks. Good morning. Okay, good. So just continuing on the question of America's volume performance, So you've commented on industry dynamics, right, the year starting kind of soft in January related to COVID, but that the trends for February and March were a little bit softer than what you've seen in prior phases post a pandemic surge. So I was curious if, one, you could just talk about what you think is underlying that, if you have any insights, how you're thinking about overall consumer demand in the categories as we move into the key selling season. And then I was intrigued by the fact that you said that premium and above premium volumes were still up in the quarter, even with your comments on February and March being a little bit softer from an industry standpoint. So do you think that – that your brands can actually grow volume in a non-COVID, up-and-down, comp-dynamic environment? Like, are we to a point where Miller Lite, Coors Lite could be in positive volume territory over time?

Yeah, lots to do as well, Lauren, thanks. Sorry. And, yes, 100%. or more than 100% of the loss in the first quarter was driven by the reduction in the economy portfolio. We agree segment share in both premium and above premium. You know, growth in share and premium was driven by Coors Light, Middle Light and Coors Banquet, frankly, and growth in the above premium was driven mostly by ourselves, Topo Chico and Vizzy. And although I'm calling out that economy was obviously a negative, we have started to see positive trends on economy for our portfolio between the fourth quarter of 2021 and the first quarter of, of 2022, and the hope is as we start tackling our focus on the four main brands that we'll see that get more positive. From a consumer health point of view, we can draw a line there to trade down, and honestly, we're just not seeing that. In fact, we're still seeing the opposite. Obviously, we'll continue to monitor it closely, and You know, if we do have a trade down, I think our portfolio is uniquely positioned to benefit from that, given the strength of economy brands that we've got and the current strength of both Miller Lite and Coors Lite.

Okay, great. Thanks so much.

Sure. Thank you, Lauren. The next question comes from Laurent Grandet of Guggenheim. Please go ahead when you're ready.

Hey, good morning, everyone. Do you have some quickly a follow-up from a previous question about your above premium portfolio? So what are you expecting for Simply Spike that is about to be launched? will simply be produced in-house or through contract manufacturing? And what incremental margin should we expect from in-house manufacturing for Topo Chico? Roughly, if you can give us some direction there. And really, if I can ask another one, I mean, on the price-to-acto leisure, your 10.2%,