Molson Coors Beverage Company

Good day and welcome to the Molson Coors Beverage Company second quarter fiscal year 2023 earnings conference call. You can find related sites 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. With that, I'll hand it over to Greg Tierney, Vice President of FP&A, Commercial Finance and Investor Relations.

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 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. GAAP reconciliations for any non-U.S. GAAP 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 CERCANA. 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, Craig, and thank you all for joining today's call. Molson Coors just finished the single best quarter of reported net sales revenue since the merger of Molson and Coors in 2005. That achievement is not only a measure of those three months, It's a measure of the past three years. It's about the work we've done to strengthen our business, which puts us in a position to attract consumers when they began looking for alternatives. That's what allowed us to deliver these results today. Now, to try and remove any skepticism that you may have, I want to show you one chart in our slides that summarizes exactly what I'm talking about. Up until three years ago, our biggest brand in our biggest market was losing dollar share quarter after quarter and year after year. Shortly after we launched our revitalization plan, we changed our marketing approach on Quizlight and launched the Made to Chill campaign, and the brand's results began to improve. In the first quarter of this year, Quizlight revenue was up high single digits. In the second quarter, Quizlight grew more industry dollar share than any other beer brand. And it grew industry dollar share faster than Medela Especial and Corona Extra combined. The overlay Miller Lite's performance, it looks remarkably similar. And the reason for that is simple. Three years ago, we generated cost savings and have been reinvesting them back into our brands and back into our business. Three years ago, we completely changed our approach to marketing and media, which unlocked growth for our biggest brands. Over the past three years, we have improved our supply chain. We've diversified our network of material supplies and our shipping methods. We've adjusted our brewery and packaging operations. We've streamlined our ordering systems for customers, and we've invested in our facilities. Collectively, we believe this has made us much more nimble and much more prepared to meet elevated demand. Over the past three years, Our strategy has made our brands demonstrably stronger in 2023 than they were in 2019. So while we didn't plan on our largest competitor's largest brand declining volume by nearly 30% during the quarter, if this had happened in 2019, we would surely not have seen the sales benefit that we did in 2023 or even been able to meet the demand. Now, a lot has been said about the U.S. bear industry trends over the past few months. But I thought it would be helpful to provide a deeper level of detail than what you've seen in track channel data and give more insights about what we believe the current trends mean for the future. First, Molson Coors is number one in retail displayed dollar gains year to date. This is the easiest way for retailers to adjust space on short notice. So we see it as a strong early indicator of shelf-set sentiment. And it's also worth remembering that our largest brands had already experienced a display lift in the first quarter due to our Super Bowl retail execution. We also know a number of retailers have moved their shelf reset timing from the spring to the fall, which we expect will make some portion of the current trend structural. For the retailers who stayed with spring resets, those conversations are well underway. Currently, nearly 20 of our top retailers are updating their planograms to drive more space for our brands and keep them in stock based on the latest demand. Continuing with retail, we are seeing particularly strong growth in the convenience channel, with both volume sales and dollar sales up double digits in the quarter. In the United States, convenience is the number one channel where we have historically under-indexed. So to capitalize on this momentum, we are planning to increase our investment behind C-store shopper marketing in the second half of the year. In the on-premise, Molson Co. has gained over 12,000 new tap handles in the second quarter alone, and we grew sales at double the rate of the category on leading e-commerce platforms. We're proud of this execution, and we're equally proud of the work our supply chain team has done over the past several years to ready us for this quarter, when in May and June our U.S. breweries had their highest levels of production since 2019. And lastly, it's important to note that the competitive pricing moves around Memorial Day and the Fourth of July did not appear to have a negative impact on our brands as our share gains continued. Given their relative size, Coors Light and Miller Light in the United States naturally had an outsized impact on our second quarter results. To put the growth of these brands into perspective, Coors Light and Miller Light combined were 50% bigger than Bud Light by total industry dollars and 30% bigger than Modelo Especial in the second quarter. And to put that further in perspective, in the second quarter of last year, Bud Light was bigger than Coors Light and Miller Light combined. But the momentum we're seeing isn't confined to a specific brand, segment, channel, or geography. Globally, we grew the top line by double digits. and the bottom line by more than 50% in the second quarter. We grew volume and share in the United States. We grew volume and share in Canada. We grew volume and share in the United Kingdom. And our top three brands globally, Coors Light, Miller Light, and Miller High Life, are all growing volume globally. In the U.S., we were the top dollar share gainer nationally, with Coors Light, Simply Spiked, and Miller Light representing three of the top five franchises in the quarter. Every single one of our top five US brands grew dollar share in the quarter as well. Coors Banquet gained share of the US beer industry for the eighth consecutive quarter, an impressive feat for a 150-year-old brand of its size. Our economy brands grew dollar share of industry, including volume growth for High Life and Keystone. We also gained the second most dollar and volume share in total flavor in the second quarter. We now have the number three and number five hard seltzer brands in the United States, and Simply Pete's was the best performing new product in the quarter by a dollar share. In energy drinks, Zoho is continuing its upward trajectory. Since the end of the first quarter, more than 11,000 additional retail outlets have placed the brand's new 12-ounce cans. We believe Zoho has a bright future, and just last month announced a new marketing campaign featuring some of the country's most prominent college athletes as brand ambassadors. All of the points I just shared led to our best quarterly US brand volume trend since the Miller Coors joint venture in 2008. It led to revenue growth in every channel, in every segment, and in every region. And in Canada, the story is similar. We saw double-digit brand volume growth in the quarter, led by Coors Light and the Molson brand franchise, which also grew share of the industry. These trends were actually well on their way even before the start of the second quarter. At the end of March, Coors Light became the number one light beer and number two overall beer in the country, surpassing Bud Light. While the hard seltzer segment in Canada was down in the second quarter, Molson Coors was the only large brewer to hold share of the segment. In EMEA and APAC, I'll start with our performance in the UK, where we grew volume, share, and revenue, and our on-premise share performance hit its highest levels in over a decade. Madrid delivered triple-digit volume growth and is now the fourth largest above-premium brand in our global portfolio. Based on track data in the UK, Madrid is now a top-five brand for on-premise value sales. What this brand has achieved in three years is incredible. Back by Madrid and Kurs, more than half of our total EMEA and APAC revenue as of the second quarter was generated by brand volumes from the above premium segment. And Asusco, our second largest brand in the region, surpassed the 50 share of segments in the Croatian market and is benefiting from new enhancements we've made to our canning lines in the region. So we had an incredible second quarter, the best in years by many counts. And while our two biggest brands in our biggest market played a large role, you can see that our entire business contributed meaningfully. We're proving this business can grow the top and bottom line sustainably. We're proving we have the resilience and wherewithal to navigate macro challenges affecting our industry and the world. And we believe we're proving that when we stick to a clear strategy over the long term, results will continue to follow. That's what we've done for the past three years. It's why we are where we are today. It's what we expect will drive sustainable growth for our business moving forward, and it's why we're confident in raising our guidance for the remainder of the year. Now, before I pass it over to Tracy for more detail, I wanted to share that on October the 3rd, we will be hosting a Strategy Day in New York City. More details are to come, but we look forward to providing a longer-term view of our strategy and outlook at that time. Tracy?