Molson Coors Beverage Company

Good day and welcome to the Molson Coors Beverage Company first quarter fiscal year 2023 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, and Tracy Joubert, Chief Financial Officer. With that, I'll hand it over to Greg Tierney, Vice President of FP&A Commercial Finance and Investor Relations. Please go ahead.

Thank you, Operator, and hello everyone. Following 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 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 forecasts. 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. 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. Also, U.S. share data references are sourced from Circana, formerly called IRI. And further, in our remarks today, we will reference underlying pre-tax income which equates to underlying income before income taxes on the condensed consolidated statements of operations. With that, over to you, Gavin.

Thanks, Greg, and thank you all for joining us this morning. When we reported our 2022 results, I said our ability to grow the top and bottom line was neither an anomaly nor an accident. It's the result of sticking relentlessly to a clear strategy. I also said our North Star is to deliver sustainable long-term top and bottom line growth. And while we remain cautious about the consumer outlook over the course of 2023, so far this year, we have continued to deliver. In the first quarter, we grew the top line by high single digits, and we nearly doubled our bottom line. These are clearly strong results following a strong 2022 as well. But I would caution you not to simply apply this growth rate to the entirety of 2023. Certainly, the fundamental strength of our business was the driver in our performance. But we also benefited from the lapping of Omicron related restrictions in some of our markets and particularly strong pricing in all of our major markets compared to the prior year period. These drivers were expected. As a result, we are maintaining our full year guidance and Tracy will go into more detail on that shortly. Importantly, the fundamentals of our business are strong. We're growing revenue in both business units and across our iconic brands. And our above-premium innovation across the Americas and the Maya and APAC is truly changing the shape of our portfolio. So we see reasons for continued caution in the broader consumer landscape. As you are all aware, the consumer packaged goods industry remains impacted by rising interest rates and global inflation, both of which persisted into the first quarter. And while we are still not experiencing meaningful trade-down in our U.S. business, we have seen consumers shifting away from mid-sized packs towards singles and larger packs. In February, I mentioned we had seen a price-sensitive subset of consumers shifting to smaller pack sizes, in particular to single serves. Those trends remained in the first quarter. But we are also seeing a shift into larger packs among consumers with higher household income levels. This, combined with channel shifting behavior among these same consumers, suggests an increased focus on finding the best value, even if it requires shopping at multiple stores. Trends notwithstanding, our brands proved incredibly resilient this quarter, starting with our premium light brands in the United States. Collectively in the US, Coors Light and Miller Light grew revenue by double digits in the quarter and held total industry dollar share. And Miller Light was a top 10 growth brand in the quarter. These brands benefited immensely from our first Super Bowl campaign in more than 30 years. During the run-up to the Super Bowl in February, Miller Lite and Coors Lite both saw a positive volume trend change versus the prior 13 weeks. Coors Lite grew displays leading up to the Super Bowl and was a top three brand for all display activity in February due to the strength of our plans and execution. Outside the US, our iconic brands in Canada and in Europe remain strong as well. In Canada, Molson Canadian grew brand volume and is growing share again in 2023 after returning to share growth in 2022. Quizlight also grew brand volume in Canada. In the UK, Carling remains the number one beer bar volume across the industry, with distribution and velocity significantly ahead of competition in the core segments. More broadly, we grew total financial volume in EMEA and APAC in the first quarter, and our above-premium portfolio in the UK has been a major growth driver. Madri Exceptional continued to grow share during the first quarter. Madri is now larger than Budweiser in the UK, and recently it moved ahead of Stella Artois in the on-trade, where it is now the number six beer. We continue to see tremendous potential for this brand as we head into the summer months. In the US, Peroni grew brand volume in the quarter, And in February, we introduced Peroni 0.0 in select US regions with a new marketing campaign and a global partnership with the Aston Martin Formula One team. Just as our portfolio performed strongly in the first quarter across above premium beer, the same is true for our brands across above premium flavor and beyond beer. We have previously referenced these as distinct spaces in our portfolio. But given the recent evolution in our America's operating structure, and to better align with broader industry definitions, we will now speak to Beyond Beer inclusive of all non-beer brands, meaning FABs, hard seltzers, first-rate products, and non-alcohols. Starting with FABs in the U.S., Simply Spiked is now a top 10 brand in the segment. It was also a top five industry growth brand in the quarter, and just last month, we introduced Simply Spiked Peach. On its own, Simply Spike Lemonade ended 2022 as the number two new item in the total category. We brought Simply Spike to Canada in the first quarter, and there is significant runway as we continue to innovate under this brand. And also in Canada, we are the only large brewer growing share in hard seltzer. In the US, despite striking last year's national launch, Topo Chico hard seltzer grew brand volume in March. In ready-to-drink cocktails, We've just released Topo Chico Spirited across more than 20 U.S. markets. And recently, we announced our plans to continue building our presence in Beyond Beer with the launch of Peace Hard Tea in select markets later this year. Another new branch of our successful relationship with the Coca-Cola company. As we continue to premiumize our portfolio, we remain focused on growing Zoa as well. After doubling its volume in 2022, we are excited about the opportunity for Zoa in 2023 with our new and vibrant packaging. And finally, in full-strength bottled spirits, we are continuing to expand to whiskey with Five Trail and our new Bauman 1873 bourbon. Those brands will be in a total of 25 markets this year, and just last week, Five Trail was awarded two gold medals at the Denver International Spirits Competition. Our progress in Beyond Beer is just one marker of our commitment to total beverage, and it's also a reflection of our successful approach to innovation. But none of this would be possible without continued investments in our capabilities. We've made progress here, and just this month, our new flavor packing capabilities will be going online at our Fort Worth brewery. These enhancements involve the $65 million investment in the facility, where we now produce the majority of our flavor innovation brands in-house. Just as we're modernizing our production capabilities, we've modernized our structure as well. In February, we established a new commercial structure in the Americas and elevated Michel Saint-Jacques to Chief Commercial Officer. This new structure is designed to unlock the next phase of growth across our brands, geographies, and capabilities. First, our US sales and marketing teams will now be working even more closely together with one set of guiding commercial principles. We will also place more emphasis on key growth areas like innovation, beyond beer, and digital capabilities. And finally, all of these changes will enable us to make even faster decisions and better ensure our investments match our ambitions across the full commercial landscape. From the changes we are making within our own team to the progress we are seeing across our global portfolio, the trajectory of our business is becoming clear, no matter how uncertain the environment around us might be. And the message I want to leave you with today is one of consistency and stability. The results we saw in the first quarter underscore the strong foundation we have built to continue to drive consistent top and bottom line growth. And achieving our eighth consecutive quarter of revenue growth proves this out. The emphasis we put on our core brands across global markets shows they can stabilize and grow consistently. The strength of our innovation shows we can premiumize our portfolio consistently. And even in parts of our business that are completely new, we are showing consistent progress and an ability to reach new consumers. There's power in consistency. And in our case, there's power in a portfolio that is strategically built to offer consumers a range of winning brands across price tiers and preferences. And now to give you more detail on the financials and outlook, I'll hand it over to our Chief Financial Officer, Tracy Jabir. Tracy?