Molson Coors Beverage Company

taking 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 reach out to our IR team. Also, I encourage you to review our earnings release and earnings slides, which are posted to the IR section of our website, and provide detailed financial and operational metrics. 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 except as required by applicable law. Reconciliations for any non-U.S. GAAP measures are included in our earnings relief. Unless otherwise indicated, all financial results we discuss are versus the comparable prior year period and are in U.S. dollars. With the exception of earnings per share, All financial metrics are in constant currency when referencing percentage changes from the prior year period. Also, share data references are sourced from Circana in the U.S. and from Beer Canada in Canada, unless otherwise indicated. Further, in our remarks today, we will reference underlying pre-tax income, which equates to underlying income before income taxes, and underlying earnings per share, which equates to underlying diluted earnings per share, as defined in our earnings release. With that, over to you, Gavin.

Thank you, Tracy. Good morning, everybody, and thank you for joining the call. We are pleased with our results this quarter, which played out largely as we had expected. We acknowledge that there are a few near-term timing dynamics impacting our quarter-to-quarter performance this year. In today's call, we will unpack these, as well as the drivers of the second half of the year, to demonstrate why we are maintaining our guidance for the full year 2024. In the second quarter, we essentially held our top line and grew our bottom line while tackling a very difficult year-over-year comparison. If you recall, the second quarter of 2023 was our strongest second quarter net sales revenue since the 2005 Molson and Coors merger. Consolidated net sales revenue was down 0.1%. Underlying pre-tax income grew 5.2%. and underlying earnings per share grew 7.9%, while we continued to invest behind our brands globally heading into peak season. We also accelerated the pace of share repurchases for the quarter, given compelling valuation as we see it, amid the strong performance of the business and our confidence in our long-term algorithms. Contributing meaningfully to our results was our EMEA and APAC business due to favorable net pricing, premiumization, and brand volume growth. For the first half of the year, we increased net sales revenue by 4.2%, underlying pre-tax income by 20.4%, and underlying earnings per share by 23.8%. While this is a very strong performance year over year, there are a few timing factors that will impact us in the third and fourth quarters, which is why we are maintaining our guidance for the full year. These timing factors will result in an unwind in the back half of the year, and the resulting temporary trends are not reflective in any way of our confidence in our acceleration plan and growth initiatives. The most important timing factor to understand regarding our performance in the first and second halves of the year is US shipment timing. We made the deliberate decision to increase our US inventories in anticipation of and during the strike at our Fort Worth brewery, which ran 14 weeks during February through May. We did this to ensure we had healthy inventories during the peak summer season. As a result, excluding contract volumes, SDWs exceeded STRs by about 750,000 hectolitres in the first quarter and by about 350,000 hectolitres in the second quarter. And we continue to expect this will essentially fully unwind the third and fourth quarters with more weighting to the third quarter. Another factor impacting our results is the continued exit of PEP's contract brewing volume as we approach the termination of the agreement at year end. This reduced second quarter financial volume by 580,000 hectolitres, with declines accelerating from the first quarter. It reduced our first half financial volume by over 900,000 hectolitres, which represents a decline in PEP's contract volume of over 50% from the first half of 2023. To put a finer point on it, PAFs had a negative 3.2 percentage point impact on both our second quarter and first half of America's financial volume on a year-over-year basis. And while PAFs is a near-term headwind to total volume and net sales revenue, the mixed benefits related to its exit, along with favorable global net pricing and premiumization in Numeo and APAC, drove an increase in consolidated net sales revenue per hectolitre of 4.2% for both the quarter and for the first half. Turning to cash flow, we generated $505 million in underlying free cash flow for the first half of the year, while investing meaningfully in our business. And we returned $564 million in cash to shareholders through both our dividends and share repurchase program. Tracy will cover more on our capital allocation and outlook drivers, but to sum it up, Given our strong performance for the first half of the year, we remain on track to deliver a 2024 guidance. This guidance calls for top and bottom line growth for the third straight year, something that has not been done in over a decade. Now, let me take you through our strategic priorities, starting with our core power brands. In the U.S., Coors Light, Miller Light and Coors Banquet's second quarter combined volume share is down a half share point of industry versus a year ago when we saw our peak share gains. However, these brands remain up two full share points compared to the second quarter of 2022. This means that we retained approximately 80% of our peak share gains on our core power brands. Coors Banquet in particular is performing extremely well. We have deliberately built on this 150-year-old brand over the last several years, building on its loyal consumer base and attracting new Gen Z and millennial legal drinking age consumers. And the results have been impressive. Coors Banquet grew brand volume nearly 13% in the first half of the year and gained dollar share at the fastest rate among the top 15 brands in the beer category. And we see great potential ahead as we continue to close distribution gaps and increase brand awareness. In Canada, Coors Light continues to be the number two brand in the country and the Molson family of brands gained volume share in both the three months and year to date ended May. In fact, in Ontario, Coors Light and Molson Canadian continued to be the number one and number two brand respectively in both the three months and year to date ended May. In EMEA and APEC, strong results in Central and Eastern Europe have been supported by OJUSCO in Croatia, which has gained nearly two value share points of the core segment year-to-date in June, as well as the extremely successful launch of a new core power brand, CARIMON, in Romania, reaching about 150,000 hectolitres since March. And Carling's brand equity continued to benefit from its partnership with the FA Cup. Turning to our premiumization priority for both beer and beyond beer, our above premium portfolio was over 26% of total net brand revenue for the 12 months ended June 30th. Our premiumization progress is at different stages across our markets, and we have had success in EMEA and APAC, Canada, and Latin America. In EMEA and APAC, our above premium share of net brand revenue continues to be over 50%, up nearly 10 percentage points from the full year 2019. This improvement is primarily due to the very successful launch of M3, which continued to grow revenue double digits in the second quarter. And it is the number three lager in the on-premise in the UK in terms of value. In the Americas, our above premium share of net brand revenue was over 21% for the 12 months into June 30th. which is up nearly two percentage points from the full year 2019. This was supported by Canada, where our above premium share of net brand revenue has also grown, driven by the success of Miller Lite, Coors Seltzer, and Vizzy. Also contributing to the mix is Latin America, where more than three-quarters of our net brand revenue is above premium. In the U.S., our net brand revenue share from above premium has improved compared to 2019. but our above premium trends have been more challenged recently, and we have work to do here. Now, this is largely due to the strong performance of our core power brands in 2023, but we believe we can build from here, and we have focused plans around our key above premium brands and innovations to do just that. This starts with a Blue Moon family performance, and we feel good about our new campaign and packaging, our repositioning of Blue Moon Light, as well as our line extensions into non-alcohol. It's early, but we believe we are moving in the right direction. We are committed to continue to innovate and scale in Beyond Beer, which for us is all about above premium. Flavor is a key focus area because it's big and it's growing. Given the flavor consumer evolves and shifts quickly, flavor innovation is key to keeping pace with their demands. We believe we have impactful brands with potential in the space. For example, we have built Simply Spiked into a $100 million brand in just two years, illustrating the power of the Molson Coors platform as a launchpad for innovation and growing brands. And while we have seen some suffering on our original packs as we launched into new flavors, with the Simply brand in one out of every two households in the US, we believe the Simply Spiked brand family has more runway. And we have exciting plans for Peroni. By onshoring production in the US, we believe we can better ensure consistency of supply and ultimately drive scale and margin for this high-potential brand. Before I pass it to Tracy, I'll conclude by saying that we are confident we have the right strategy to achieve our long-term growth objectives, and we are very pleased with our progress against our strategy. We are a much different company today than we were four years ago, and we are most certainly stronger than we were just 16 months ago. With that, I will pass it to Tracy.

Thank you, Gavin. We reported another strong quarter of financial performance and continue to expect we will achieve our goal of growing the top and bottom line for the third year in a row. As Gavin mentioned, with our strong free cash flow generation, we continue to invest strategically in our business and also return cash to shareholders. Since October 2019, when we launched the initial phase of a new strategy, we have invested substantially in our capabilities, from supply chain to marketing to technology and tools that advance our insights and analytics. These investments have driven substantial cost savings, which help to offset inflationary pressures and support long-term, sustainable, profitable growth. In recent years, this has included adding flavor production and coast packing capabilities, expanding and diversifying our supply base, building a slim-can capacity in our can plant, and replacing several breweries with state-of-the-art facilities in Canada. In the first half of this year, a big focus has been our multi-year, multi-hundred-million-dollar modernization of our Golden Colorado Brewery, which is nearing completion. This project at our largest US brewery, which broke ground in the fall of 2020, is completely overhauling the brewery's infrastructure and is expected to result in more efficient fermenting, aging, and filtration facilities, as well as a state-of-the-art upgrade to the cellars. When it is fully operational in a few weeks' time, we will have a more efficient brewery that produces less waste. We also commenced a new multi-year project in the UK to increase our brewing and packaging capacity, which is necessary in part due to the continued growth of Madrid. And it is these investments, along with our extensive hedging program, that have helped us to offset inflation, particularly during the significant inflationary period we have experienced in recent years. And while inflation has moderated, as expected, it remains the headwind this year. In the second quarter, our COGS per hectolitre increased 2.9%, which was driven by the America's business, which was up 4.1%. This was largely due to ongoing inflationary pressure, as well as volume deleverage, in part due to the reduced tax contract brewing volume in the America's business. Turning to marketing capabilities, we overhauled our marketing strategy several years ago. making us more nimble and efficient as we have continued to invest behind our brand. By improving our ability to analyze and evaluate the effectiveness of marketing investments, we are able to assess our campaigns in almost real time. And we built our own in-house agency, enabling us to meaningfully shift our percentage of spend to more working versus non-working marketing dollars. It's our deep marketing capabilities that have enabled us to meaningfully improve our return on marketing investment since 2019 and supports why our long-term growth algorithm does not concentrate step changes in marketing spend. As for returning cash to shareholders, in the first half of this year, we paid $188 million in cash dividends. And in February, we raised the dividend for the third consecutive year. a cumulative 29.4% increase. As such, we are generating a dividend yield of 3.2% as of August 1st. Also, we are active in executing against our up to five-year $2 billion share repurchase program that we announced last October. We continue to view our stock as a compelling investment opportunity amid the strong performance of the business and our confidence in our long-term growth algorithms. and utilizing a sustained and opportunistic approach, we repurchased 4.6 million shares for a total cost of $260.7 million in the quarter. Since inception of the plan, we have already repurchased 8.8 million shares, or 4.4% of our Class B shares outstanding since September 30th, 2023, for a total cost of $521.1 million. That means we have completed approximately 26% of the plan in just the first three quarters. And the reason we have been able to deploy our capital in these ways is because our balance sheet is strong and healthy. Healthier than it has been since before the 2016 milliquids acquisition. We ended the quarter with a leverage ratio of 2.13 times, which remained in line with our long-term target range of less than two and a half times. In May, we issued an eight-year €800 million note at the fixed rate of 3.8% and used the proceeds to pay down our €800 million note upon its maturity in July. And now I'd like to conclude with our financial outlook. We are reaffirming our 2024 guidance. As a reminder, the key metrics call for low single-digit net sales revenue growth on a constant currency basis, mid-single-digit underlying pre-tax income growth on a constant currency basis, mid-single-digit underlying earnings per share growth, and underlying free cash flow of $1.2 billion plus or minus 10%. While this guidance implies slower trends for the second half of the year, it's important to remember that this is driven by shipment timing this year, and it does not alter our confidence in our long-term growth expectations. As Gavin discussed, In the US, excluding contract volume, we deliberately shipped ahead of demand by about 1.1 million hectolitres in the first half of the year. This compares to the first half of 2023 when our STWs were behind our STRs by about 400,000 hectolitres. And since we currently plan to shift to consumption for the year, we expect this to reverse in the second half, mostly in the third quarter. At the same time, our contract with PEPs continues to wind down. Recall that we expected the impact for the year from the PEPs contract termination to be approximately 2 million hectolitres, or about 3% of America's financial volume. There is about 1 million hectolitres remaining that will come out of that system in the second half of the year, with over half of that expected to exit in the third quarter. These U.S. shipment plans are expected to result in volume deleverage in the second half of the year. And recall that we had a volume leverage benefit on a consolidated basis of about 60 basis points in a comparable period in 2023. For some perspective, on a consolidated basis, we estimate that our fixed cost in 2024 will comprise approximately 20% of our total cost. However, the anticipated benefits of roll-forward pricing taken in the first quarter, premiumization of our portfolio, moderating inflation, and cost savings should partially offset the impact of volume deleverage. And we expect MG&A for the second half to be down compared to the prior year period as we tackle the second half of 2023 when we had high marketing investment to support the momentum in our brand, as well as higher incentive compensation. As we look to the longer term, we remain confident in our growth algorithm as we have multiple levers to achieve it. From our robust revenue management platform, to our premiumization and innovation plans, to our continued investment to drive efficiencies and cost savings, these levers help us to navigate various market circumstances. In closing, we had another strong financial quarter and remain committed to our short and long-term financial and strategic goals. And with that, we'd like to open it up to your questions, operator.

Thank you. If you'd like to ask a question today, please do so now by pressing Start, followed by the number 1 on your telephone keypad. If you change your mind and would like to be removed from the queue, please press Start, followed by 2. When preparing to ask your question, please ensure that your device and your microphone are unmuted locally. Our first question comes from Bonnie Herzog with Goldman Sachs. Bonnie, please go ahead.

Lisa Chavez, All right, thank you good morning everyone um I guess, I had a question on your guidance which you did maintain. Lisa Chavez, You know, in terms of full year and all metrics which you know certainly implies that deceleration, the second half, as you highlighted so. Lisa Chavez, Maybe you could unpack this a little bit more for us, for instance, you know how should we think about the volume to leverage impact in the back half and you know. possibly provide a little more color on any offset you have to mitigate the impact on margins. I think you've touched on this. And then in terms of marketing spend levels, Tracy, I think you just mentioned that you expect, you know, spending levels to be lower in the second half versus the first half. So just hoping for a little more color on your strategy with that and, you know, really how we should think about your spending levels moving forward. You know, as I think about, you know, your ability to, to continue to hold on to some of these share gains since 2022. Thank you.

Good morning, Bonnie. Thanks for the question. So as we look at the volume deleverage for the back half of the year, From a COGS point of view, we do expect higher COGS in 2024 versus 2023, and our second half to be higher than our first half. And really, this is all driven by the deleverage as well as mix. So we spoke about the deleverage impact from our shipment timing as well as the exit of past. But also, as we premiumize our portfolio, that does add COGS, although it is margin accretive. We have said that we expect to see continued inflation, although it is moderating. And some of the things that is driving the inflation is we do have material conversion costs, which generally are linked to inflation indices, and they do tend to lag. In addition, we've spoken about our hedging program. Generally, our hedges are longer term. So, you know, anything up to three years. And so we do have some hedges that we put in place in 22 and 23, which, you know, will roll off this year and next year. In terms of helping to moderate some of the COGS inflation increases that we've seen, we have got cost savings. We've invested in our breweries to drive efficiencies and cost savings, so that is going to help us offset In terms of margin, with the contract brewing volume coming out, remember that is at a very low margin for us, so that's certainly going to help margins. Even though it does have a volume leverage impact, it does take a lot of complexity out of our breweries, especially during the peak summer seasons where we need the capacity. And, you know, taking out some of that volume will not only just impact efficiencies, but, you know, can lead to reduced waste. So, you know, that'll drive our COGS down as well. In terms of the marketing, so we do expect our MG&A to be lower in the back half of the year versus the first half of the year. And if you recall, in the second half of 2023, we spent an incremental $100 million in marketing, really to drive the strong momentum in our brands. And this is evenly split between Q2 and Q3. Now, typically, we spend more marketing dollars in the summer, so you can expect lower year-over-year spend, particularly in Q4. But just remember, we do expect 2024 marketing to be up meaningfully from 2022. So, you know, there's no pullback on marketing. We'll continue to invest behind our brands and, you know, make sure that we've got the right fuel to drive the momentum. Thanks, Bonnie.

The next question comes from Andrea Texera with JPMorgan. Andrea, please go ahead.

Drew Levine- hey good morning, this is true living on for Andrea thanks for taking our questions so Gavin you've talked previously about April may being relatively soft. Drew Levine- For the beer industry, can you just talk maybe on the monthly progression on brand volumes. Drew Levine- In the US through the quarter, did you see improvement in June and perhaps how performance has been in July. Drew Levine- It seems like it's been a little choppy about the weather's been a bit better. And in that context, how you're thinking about the industry performance for the rest of the year? And then just secondly, maybe, Tracy, on the brand volume performance for the U.S. quarter, any way to contextualize the holiday load and timing impact? Thank you.

Thanks, June. Good morning. Thanks for the question. You know, there obviously, as you rightly say, there was a fair amount of noise in the second quarter. You know, there was holiday timing, a bit of turbulent weather in the first part. So, you know, certainly April and May were tougher. And we did see some improvement in June. Collectively, when you look at the second quarter in totality, particularly if you're just out for the timing of the July, the fourth holiday, you know, it's just a continuation of what we've been seeing for a while. for a while, right? And from a consumer point of view, not trading down between or up between brands, but more pack shifting within the brand portfolio to singles or to larger pack sizes. I think as we look going forward, and I think if Q2 taught us anything, it's that you can't make a prediction on a quarter based on a on a few weeks of data. So let's see how quarter three turns out. But certainly Q2 is a continuation of what we've been seeing for a while. Tracey, the second part of the question?

Yeah. I mean, just in terms of contextualizing. So if we exclude our contracts doing volumes, we deliberately shift ahead of demand. in the first half of the year. So that was about 1.1 million hectolitres that we shipped ahead of demand. And if you compare that to the first half of 2023, we actually shipped behind our demand by about 400,000 hectolitres. So that just gives you some context in terms of our domestic shipments. And then if we add the PEPs shipment in there, so we had approximately 2 million hectolitres this year of PEPs coming out of our system. We have about a million hectolitres remaining for the back half of the year, most of that coming out of Q3.

Thanks, Drew.

Our next question comes from Bill Kirk with Ross Capital Partners. Bill, please go ahead.

Hi, I wanted to ask about on-premise strategy, in particular kegs and draft within that strategy. So how have the two channels differed for you in the U.S., on-premise versus off-premise? And what is the role of kegs in on-premise strategy? It seems like a lot of the vertical prefers cases over kegs when dealing with the on-premise. So curious what your draft strategy is going forward.

Thanks, Paul. Good morning to you. Look, I mean, from our perspective, the data that we see from internal estimates, the on-premise in the US, which I assume your question is directed at, is performing slightly better than the off-premise in the quarter. And given how important it is to building brands, it's an area we focus on meaningfully, right, whether it's our core brands of Miller Lite and Coors Lite or whether it's Blue Moon, right? And kegs is an important part of that strategy. Now, where changes occur on-premise, sometimes it's between keg sizes, but kegs is and will remain an important part of our on-premise strategy and an important part of how we continue to build our brands. Thanks, Bill.

The next question comes from Rob Ottenstein with Evercool. Rob, please go ahead.

Hey, Gavin. You guys have done a really nice job, obviously, with Banquet and Coors Light and Miller Lite. But I think probably you're a bit disappointed with Blue Moon, Peroni, and some of those above premium initiatives. Can you talk to us maybe a little bit about what's working, what's not working in terms of driving the high end of the business and maybe what you might do differently going forward to rebalance the portfolio for growth going forward? Thanks.

Thanks, Robert, and good morning to you. And yes, I'll take the compliments on the core brands, and we, of course, agree with you. I think our team have done a really nice job marketing and executing our core brands, and we're seeing the benefits of that. You rightly point out that we've got work to do in the premiumization space in the US. I would say that our premiumization progress outside of the US has been very strong. It's growing strongly in In Canada, we're over half in our EMEA APAC business, and 75% of our volume in Latin America is in the above premiums as well. But you're right, we've got work to do in the US. We recognize that, and Blue Moon is our biggest above premium brand. It's a big, important brand for us and for our distributors and our retailers, and we're committed to turning that brand around. That's why we've launched the new packaging. It's why we've got a new campaign. We've got new innovation there with BlueMoon non-alc, and we've repositioned BlueMoon Lite this year. The early signs on BlueMoon Lite are very promising, and we've seen very promising initial traction on BlueMoon non-alc as well. know completely committed to reinvigorating uh this this this brand and we think the changes that we've that we've made in the first part of this year are a really important step um in in that direction as far as peroni is concerned i mean we believe that peroni could be a big brand um and we've we've obviously made some changes uh to that which which we've we've made very clear about, right, is we are shifting to domestic production of Peroni in the U.S. And, you know, that does three things for us. The biggest challenge that we've had with Peroni has been consistent supply. And by bringing it onshore and putting it into our supply chain network, which is operating really well and effectively at the moment, it's going to allow us to give us, you know, really consistent supply of fresh Peroni to our to our distributors and obviously our retailers. So we think that's really important. It also gives us the opportunity to increase the different pack formats that we have available in the U.S., which we haven't had with Peroni, and that's going to allow us to much better compete in the U.S. And then, of course, it gives us more margin, right, because we're eliminating a very long part of of the supply chain, and that's going to allow us to reinvest behind the brand from a marketing and execution point of view. So we think it's got a long runway. Its awareness is still fairly low, and its distribution is low. So I like our plan. We've started it. It's just kicked off, and our expectations for Peroni are high. Thanks for that, Robert.

Our next question comes from Chris Carey with Wells Fargo. Chris, please go ahead.

Hi, good morning, everyone. Hi, Chris. Gavin, you had spoken to trends, kind of tracking your expectations at the overall category level or something of the sort. And I wonder, as the world, as Wall Street is a bit more concerned about the consumer, are you starting to see any sequential changes in the consumer appetite for your categories? Does that help or hurt your business on a relative basis? And I wonder if you could just comment on, you know, perhaps what you're seeing in July when it comes to overall consumer engagement, you know, with the category of brands. So thanks for your perspective there.

Thanks, Chris. Look, I mean, from an industry point of view, I won't rehash my remarks on the second quarter other than to say, you know, we had noise, you know, before. different weeks perform differently. But collectively, when you got to the end of the second quarter, not terribly dissimilar to what we've been experiencing over the last few years. From a consumer health point of view, just run around our markets for a second and start in the smallest. our Central and Eastern Europe market. We've been talking about how the consumer there has been challenged for some time. And we're starting to see that change. There's the reduction in CPI. It's putting less pressure on the consumer's disposable income level. And that started to translate to an increase in market demand in the first half. So we'll watch that carefully, but promising signs there. And in the UK, the consumers remained resilient. i think the weather in in in june in the uk has been well um documented by by all of our competitors but the economy certainly is improving with with inflation uh slowing down and wages are continuing to rise so we'll watch carefully how that translates into consumer demand um in in canada the the industry is performing fairly similarly to the to the us right um um Overall consumer spending was a little lower in the second quarter. Inflation continued its downward trajectory. Frankly, our performance in Canada is very, very pleasing, right? And it's all the work that we've done over the last few years to execute the revitalization strategy in Canada with our core brands. And we're seeing the benefit of that as we're gaining market share at a good clip. And in the US, as I said, we're not seeing anything terribly different from what we've previously seen. Value-conscious consumers are continuing to engage in channel and pack shifting, but not brand shifting from a value perspective. We've kind of noted that trend before. You know, I think to address your July question, I think, as I said, you know, if the second quarter taught us anything, it's not to judge a quarter on a few weeks' trends. And so let's see how Q3 plays out, and then we'll have a good idea whether it's a continuation of the trend we've been experiencing or not.

Our next question comes from Robert Mustay with TD Cohen. Please go ahead.

Hi, good morning. This is Victor Ma on for Rob Moscow. Thanks for the question. So 4.1% price mix in America seems kind of high. Can you maybe help dimensionalize how much of that was from pricing, how much from organic positive mix, and how much from mixed benefits from Pabst? And can you also maybe comment on how prepared the company is for an area where you do have like a slight recession in the U.S. and just the resilience resiliency of the beer category within total alcohol. Thanks.

Thanks, Victor, and good morning to you. Look, from a pricing point of view, I assume your question is directed at the US. On that pricing increase comprised just a little over half of the increase with the balance coming from mix, whether that was brand packed mix or or perhaps cutting out. My comment on net pricing was for the consolidated results. It pretty much holds true for our Americas as well. Net price was a little over half of the game with the REX coming from mixed benefits, either from a PEPS point of view or a brand point of view. Thanks, Victor.

I have a question. My question is related to the U.S., Gavin, and I guess kind of twofold. One is, you know, at the start of this year, there was a lot of uh you know anticipation around shelf sets and you know more shelf shelf uh space gains and so if you can kind of give us um a little bit of insight in terms of you know how that's turned out is it has it helped i guess in terms of of market share um and you know are you do you think that the the space you've gained uh can be held and then i could just squeeze also into that um You know, as you kind of look at the depletion in the U.S. for the first half, is it more or less in line with your expectations? I guess I understand that the market share for certain seems like it is, but just kind of curious if, you know, just in overall volume, if that's come in, you know, relative to what you were expecting at the start of the year.

Thanks, Brian. Great question. Look, from a spring reset point of view, I think we said we expected about a 13% share of space increase for our core brands in the large format stores. And that's what we got, you know, premium. And so premium being, you know, middle light, course light, imports. were certainly the biggest winners as far as the space allocation point of view. And I guess Kraft and SELSA continued, I guess, to feel the biggest pinch in space. As it relates to going forward, we were, as I said, the clear winner based on what we've seen. And from a fall perspective, Last year, we did see an unprecedented, unusually high percentage of retailers that executed some of their resets. This year, we don't expect that based on the data that we're seeing. There may be some minor tweaks up or down, but we certainly don't expect anything meaningful. And if you go to when most of the resets are normally done, which is spring, again, we saw an unprecedented shift in how the brands were showing up at retail. And, you know, generally for as long as I can remember, there were only really minor adjustments to shelf space, mostly focused on, you know, ads of new items or deletes of brands that needed to be discontinued or it was simply just not performing from a velocity point of view. And again, based on the on the data we see and our success in holding the large majority of our core share gains that we gained against, frankly, the toughest comps we're going to experience the whole year, Brian. I mean, as you remember, the second quarter was really, really tough from a comp point of view because our share spiked quite dramatically and then it came down and settled. You know, we've cycled our toughest comp, we've retained 80% of the share gains, and it only gets easier from here on out. And so again, our expectation from a shelf space point of view is retailers will go back to that tweaking and minor adjustments process, which they've done over the years. And so again, we're not expecting a meaningful change there. From a depletions point of view, and shipments, it's how we plan shipments, right, is we were aware that we could have, you know, potential work stoppage at our Fort Worth brewery. We wanted to make sure that we could meet the higher share levels which we were experiencing and make sure we didn't have any out of stocks. And I think the supply chain team did a really good job of that. So that was planned, this cycle. Different to different previous years, right, where there was probably more of a balance between first and second half. But no, that was planned and we've reaped the benefit of that, right, with out-of-stock being very, very low and our supply and inventory levels and our distributor right where we need them to be. So, you know, in a good place. And I mean, some of that's obviously reflected in the fact that we ended up as as the number one supplier on the Tamron survey, all of these things play into that, how we came to life on the shelf resets, how we've done the supply, and how they're feeling about our brands and execution. So, yeah, thanks, Brian.

The next question comes from Peter Graham with UBS. Please go ahead, Peter.

Hey, good morning, everyone. This is actually Brian on for Peter Graham. Thanks for taking the question.

Hey, can you guys hear me? Yep, we can hear you. Glad and clear. Thanks.

Hey, guys. Sorry about that. Just two quick housekeeping questions for me. First one, I actually wanted to follow up on Victor's question. Not trying to get too into the weeds on the price mix piece, but In the Americas, that 4.1% being roughly split between rate pricing and mix, is it fair to think that this contribution should be largely similar looking into 3Q and into the back half, particularly as it seems like you've got even more contract brewing volume coming out in 3Q? And then just quickly on volumes in the Americas, it sounds like the gap between financial volume and brand volume is wider in 3Q versus 4Q. Just wanted to make sure that I'm thinking about that right. Thanks, guys.

Thanks, Brian. Tristan, Nick wouldn't mind taking the second part of the question. The first part, look, I mean, from a pricing point of view, Brian, I think we've been saying for quite some time now that we believe pricing is going to sort of land in that historical 1% to 2% increase level. And that's where it's holding. holding it at the moment. And so that will translate into the full year. And from a mixed point of view, you're right. I mean, we do have a lot more PAPs volume to come out, which will be mixed favorable. So, you know, not intending to give any guidance from that perspective, but those are just the inputs which go into it. The trends are not going to change dramatically from a PAPs point of view and from a frontline pricing point of view. Chris, I think the other question was shipments.

From a financial volume point of view, so as I said, we shipped ahead of demand about 1.1 million hectolitres in the first half of the year. And we do expect that to reverse in the second half of the year, most of that coming out of Q3. And then from a PAPS exit point of view, again, about another million hectolitres of PAPS volume remaining. And we expect over half of that to reverse or exit in the third quarter of the back half.

So to summarise, Brian, yes, most of it will take place in Q3.

Our next question comes from . Please go ahead.

Thank you. Good morning. Two quick ones. Just a follow-up on the shelf reset question. I know some of the consumer pack shifts that we've seen is a little bit more recent and perhaps difficult to have been planning for. in the resets, were you able to tweak the sets at all to adjust for how consumers are going to more single cans or bigger packs? And is it potentially a better set given that you had some chance to reshuffle there a little bit? And then just second on the Romanian, the new brand launch there, maybe what was some of the thinking of a brand new brand? Obviously you saw Madrid go really well when, when, You know, that's new to the world as well. Was that some of the, I guess, inspiration, or was it just that there wasn't something else in the portfolio that fit what you were trying to do? Just how do you think about that launch there?

Thanks, Michael. Look, from a shelf reset point of view, we certainly got a lot more SKUs, pack formats into both C-stores and into grocery and large formats. So, I'm not going to say that we got all of the current consumer trends in, but we certainly made a dent on that. And certainly given the extra space that we've got, our ability to hold from a large pack point of view and a small pack point of view is much stronger than it was before. To put it another way, we have We have much less out of stocks because of that, because of the holding power that we've gained in store. I think you were referencing Carimane there in Romania. That's a brand we've had around for a while and without... peeling back the onion as to how innovation works. When I said it had been around for a while, we'd used it a while before and so the innovation team found a gap in the marketplace and we launched it and it's proving to be not very cannibalistic to our existing portfolio and adding really nice incrementality to the overall core portfolio. you know, a mark they had in the past and we brought back to life so far very successfully. But, you know, just a few months, but 150,000 hectolitres in just a few months is, you know, meaningful volume in a market that size.

Our next question comes from Lauren Lieberman with Barclays. Lauren, please go ahead.

Great, thanks. Good morning. It's funny when you try to get it. this a different way in terms of the industry backdrop in the US, because I understand you said it pretty clearly all year, intentional overship and make sure you weren't in an out of supply situation and so on. But the data that we all receive shows, and this is like Nielsen slash Sarkana, right, shows industry volume down about 3% year to date. So I know that's not inclusive, that's not the full market. So I was curious maybe what your read is on industry volume in the u.s year to date and how you're thinking about that for the full year so it's kind of part one and the second is um great to get also you know your read on your your full set of data in terms of the market share um being down 50 basis points i just wanted to confirm kind of expectation would still be to ground to sort of a second half of 23 type level for share and what you're able to retain if that's still a good way of thinking about it thanks

Thanks for the question, Lauren. I'll take the second part first. In terms of share, our core power brands, which is Coors Light, Middle Light, Coors Banquet, we grew two and a half points of case share in the second quarter of last year. It was our highest share gain that we experienced in the last year. And we've retained 80% of that. And so compared to the second quarter of 2022, our total portfolio is up over 1.7 points of volume share. And obviously, we're very pleased with that. And in particular, given that we're going up against the peak share growth. And as I said, it only gets, in inverted commas, easier from here because the share came down and settled. We've done that through the shelf resets, which I just spoke about. So increased distribution, we've got increased display, we've got increased feature, we've got really relevant marketing campaigns like our Miller Lite All-Stars campaign that we've got, our Queers Like Leagues Cup, which is attracting new Hispanic drinkers into our portfolio. We're obviously planning to execute and retain as much of that share as we possibly can, given that we're now out of the toughest share comps. From an industry point of view, look, I think my comments that I made earlier are what we believe, right? Is that a lot of noise in Q2 in some weeks, but overall, it sort of balanced out of where we were expecting where it's been for the last couple of years. And from a shipment point of view, that was a very deliberate strategy. We didn't overship. We shipped what we wanted to ship in the first half so that we didn't have any inventory challenges going forward.

Our next question comes from Eric with Morgan Stanley. Eric, please go ahead.

Morning, thanks for the question. First, maybe you could come back to share of throat. Spirits has obviously been struggling in the US for, you know, over a year at this point. As you look forward and in light of the macro environment, how are you thinking about share of throat and spirits versus uh versus beer do you think beer could continue to um sort of outperform spirits at least in the short term and then um maybe come back and talk a little bit about uh performance of your recent innovation from the past few years it looks like simply um it was slowed quite a bit some of the earlier packages seem to be struggling a bit That was a very nice contributor over the past few years. So how are you thinking about innovation contribution?

Thanks for those questions, Eric. You know, taking your first one, look, I think beer in the classic sense of beer remains down, but it has sequentially improved dollar share of total alcohol. So definitely seeing an improvement in classic beer. If you add you know, the RTD spirits into that which beer suppliers put in, then yes, you know, total overall beer is gaining share against spirits. So definitely tracking in the right direction from an overall total alcohol point of view. If you look at our innovations, let's start with Simply. I think let's just stand back for a second. We're pleased with the fact that we've built a brand that is over $100 million from nothing in just two years. We're pleased with that performance. Consumers, though, as we've learned in this space, and that's why we focus on the flavor category in totality, they do have a little bit of a treasure hunt mentality. So, you know, keeping innovation, flavor innovation in particular, is really important to keep pace with this flavor consumer. And, you know, given that Simply is in one out of every two households in the United States, our focus right now is continuing to drive trial because when consumers try this brand, they love it. And so trial is important. Strong marketing and sales programming is important for us. And, you know, I'd point out that the brand is performing really, really well in Canada. You know, we've achieved over a 10 share of the flavor RTD category up there, and that's in large part driven by Simply Spiked. If you look at the other innovation, I talked briefly about Kariman, you know, it's performing well early days. Madrid is the superstar of our innovation. It's a top 10 brand. We've recently launched it in Canada and Bulgaria. It's early days, obviously, but we're very encouraged by the results that we're seeing in those two markets. And it continues to grow in double digits despite the competition that's come in the United Kingdom. So feeling good about that. We've launched from an innovation point of view, Happy Thursday, which is tapping into a new consumer. We think we're first to market there. And again, early days, but from a flavor point of view and what the consumer is looking for from a bubble-free perspective, encouraged by the start. And then, you know, another brand that we've grown from nothing is Zoa. You know, again, I think that one's we've had around for, for about three years. And obviously, this is a completely new space that we've got into. So lots of learnings for us in the beginning. But we now think we've got a fantastic liquid. We've got a great brand. We've got packaging that works really well. And we've got a very powerful, in more ways than one, spokesperson who's driving this brand forward. It's a top 10 brand in Amazon. It's attracting new drinkers into the energy category space, and we think it's got a right to win in certain distribution channels, and that's what we're going after. So, you know, collectively, I'm pleased with the progress that we're making on innovation, and we've built some real powerhouse brands in a very short space of time, and now our job is to accelerate that performance. So thanks for that question, Eric.

Thank you. We have no further questions, and so this concludes our call. Thank you everyone for joining us today. You may now disconnect your lines.