Molson Coors Beverage Company

Vice President, FP&A, and Commercial Finance.

Thank you, Operator, and hello, everyone. Following prepared remarks today, we look forward to 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 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 except as required by applicable law. The definitions of or reconciliations for any non-U.S. GAAP measures are included in our earnings release. 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, Greg. Hello, everybody, and thank you for joining the call. 2024 was another year of progress for Molson Cruise, progress in advancing our strategy and achieving bottom-line growth. A bit of challenging macroeconomic environment, we continue to support the health of our brands globally. We retained a substantial portion of our sizable share gains from 2023 and earned unprecedented levels of shelf space for our core power brands in the U.S. We achieved incredible growth in Canada, broadly across all price segments of our portfolio. We continue to premiumize off a high base in our EMEA and APAC business. We terminated low-margin contract growing agreements and exited smaller, unprofitable businesses, while investing in areas that we expect will drive long-term, sustainable, profitable growth. 2024 was also another year of continued strong cash generation that contributed to earnings power. We delivered more than $1.2 billion in underlying free cash flow, which combined with our healthy balance sheet enabled us to not only invest in our business, but also to return $1 billion in cash to shareholders through a growing dividend and share repurchases. We enter this year confident, issuing 2025 guidance that both reflects the favorable fundamentals of our business and that aligns with our long-term growth algorithm. Now, with that high-level summary, let's get into some of the details. In the fourth quarter, consolidated net sales revenue was down 1.9%. Underlying pre-tax income was down 0.9%. and underlying earnings per share was up 9.2%. In our America's business, Canada continued to perform strongly, while as expected, the U.S. faced a temporary headwind related to the exit of Pabst Contract Britain, which was a headwind of about 450,000 hectoliters. U.S. brand volume was down 3% in the quarter, which improved as compared to the third quarter, as did the industry, with a moderating of the more pronounced value-seeking behavior seen during the summit. These drivers contributed to a 6.7% decline in U.S. financial volume. Related to the deliberate inventory boom in the first half of the year, U.S. shipments trailed brand volumes by approximately 150,000 hectolitres in the quarter, resulting in largely shipping to consumption for the full year as intended. In America, our volumes were impacted by the continued heightened competitive landscape in the U.K., as well as a softer industry in Central and Eastern Europe. However, this was largely offset by strong net sales revenue per hectare growth of 7.8%, driven by favorable sales mix, including continued premiumization and pricing. This, along with favorable net pricing growth in the Americas and mixed benefits from the exit of PAPs, resulted in consolidated net sales revenue per hectare growth of 4.8% for the quarter. For the year, consolidated net sales revenue was down 0.6%, underlying pre-tax income was up 5.6%, and underlying earnings per share was up 9.8%. Results were better than our revised top line guidance of down approximately 1% due to better than expected U.S. industry performance in the fourth quarter. As a reminder, our 2024 top line guidance was revised lower when we reported our third quarter results in early November. due to macro-driven U.S. industry softness in the peak season months of July and August. It's also important to point out that excluding the impact of the wind-down of PEPS contract brewing volume, our implied annual top-line revenue growth was positive and in alignment with our long-term growth algorithm. From a volume perspective, PEPS had a negative three percentage point impact on America's financial volume for the year. Again, while this is a current volume headwind, the reduction of this contract brewing volume is expected to have a positive impact in 2025 and beyond on our brewery network effectiveness, as well as on mix and margin. And in what we expect will provide further benefits, we no longer contract brew for Labatt USA in Canada, with that volume fully exiting our Canadian business as of year-end 2024. Tracy will share more on the impact of that. Consolidated underlying pre-tax income was above the midpoint of our reaffirmed mid-single-digit growth guidance. This was achieved due to the better-than-expected top line as well as measured cost controls without sacrificing the right levels of brand marketing support. In addition to better net sales revenue performance, we significantly exceeded our reaffirmed mid-single-digit underlying earnings per share growth guidance, which we had narrowed to the high end of the range in early November. The beat was largely supported by a lower than expected underlying effect of tax rate due to U.S. geographic sales mix, as well as the better than expected top-down performance in the fourth quarter. Our underlying earnings per share growth was also supported by our share repurchases, which have been tracking at an accelerated pace as we continue to view our valuation as compelling, given our confidence in our business and in our long-term growth algorithm. In fact, For the first five quarters since the share repurchase program was announced, we had already executed approximately 40% under this up to five-year program, which if you straight line that number would have us at only 25%. Our confidence stems from our progress against our strategic priorities. I'll start with our core power brands. Collectively, they remain healthy. In the U.S., Coors Light, Miller Light, and Coors Banquet have continued to retain a substantial portion of our share gains, demonstrating the stickiness of these step-change gains. In the fourth quarter, they retained over 80% of their combined volume share gains on a two-year stack, which is an improvement from both the second and third quarters. Compared to the fourth quarter of 2022, these brands were up 1.7 share points. Coors Banquet continued to perform very well, with brand volume up 16% and growing industry share for the 14th consecutive quarter on top of significant prior year gains. Bankwood was the fastest growing top 15 beer brand in the U.S. in terms of volume percentage growth in 2024. And it's not a small brand. In fact, it's one of our top five brands globally. We see much more opportunity ahead as we invest in building the brand's awareness, its national scale, and loyal consumer base, particularly among new Gen Z and millennial legal drinking age consumers. In Canada, Coors Light remains the number one light beer in the industry and again grew share of segments in the fourth quarter. The Molson family of brands also gained volume share for both the fourth quarter and the year. This performance has helped us to drive 23 consecutive months of share growth, despite the challenging industry backdrop. In EMEA and APEC, a number of our core power brands are leaders in their respective markets. Carling remains a top lager in the UK with strong brand equities. Amid the highly competitive environment, we took a value over volume approach, which weighed on volume performance during the year. And while core brand performance was impacted by the soft industry in the fourth quarter in Central and Eastern Europe, our results were strong for the year. This was driven by Ozusco in Croatia, which increased volume 5%, as well as the extremely successful relaunch of Kaliman in Romania. Kaliman has already reached over 300,000 hexaliters since March. and has been incremental to the overall portfolio in the country. Turning to our premiumization priority for both beer and beyond beer, our above premium portfolio was 27% of total net brand revenue for the year. In Emeo and APEC, where over half of our net brand revenue comes from above premium, our business continued to premiumize. Much of Emeo and APEC's premiumization success has been driven by Madrid. which grew net sales revenue double digits in the year and is the number two largest in the on-premise in the UK in terms of value. Madrid is also exceeding expectations in Bulgaria, following a very successful launch there last year. In the Americas, our above premium share of net brand revenue was 22% for the year. This was supported by Canada, which also continued to premiumize with its above premium net brand revenue up double digits in 2024. This was driven by the success of Miller Lite, which is the fastest growing major beer brand in this market on a percentage basis, as well as by our flavor portfolio. We are growing more share of flavor than any other major brewery in Canada, and Madrid is also performing ahead of expectations in Canada following last year's launch. In the U.S., there is work to do, but we see this as an opportunity, and we have big plans in 2025. After further fine-tuning our portfolio last year, including divesting underperforming craft breweries, our resources are focused on scalable opportunities within our expanding above-premium portfolio brands in both beer and beyond beer. In beer, we are moving in the right direction with the Bloomer and Brand family as we are starting to see signs of stability. In fact, the Bloomer and Brand family held share of industry in both the third and fourth quarters and took share of craft during both periods. This includes positive momentum behind some of our newer innovations, like the repositioned Blue Moon Light, as well as Blue Moon Non-Alk, which has quickly become a top 10 non-alk beer brand. And we have plans to build on these results for the Blue Moon brand family in 2025. And we are betting big on Peroni. As we have discussed, we have onshore production, which offers a number of benefits. It significantly improves consistency and certainty of supply, which has previously been a challenge when we tried to scale the brand. It allows us to introduce different pack sizes, which consumers are asking for. And it also unlocks meaningful cost savings, which we intend to deploy toward increasing distribution and awareness to drive scale and margin for this brand. Our commercial plans kick off in the second quarter. And while it will, of course, take time, Ultimately, we see no reason why Peroni can't rival the size of other major European imports in the U.S. over time. In Beyond Beer, which is a big part of our premiumization plans, non-ALC is a key focus area. It provides us the opportunity to capture more occasions, particularly among younger legal-age Gen Z consumers. So we are investing behind the growing areas in non-ALC where we believe we have a right to win. This too will take some time, but we are making progress. We spoke in detail in our last call-to-call about our increased investment in Zoho to a majority stake, and plans to accelerate the brand are well underway. It's early days of the integration, but in the last four weeks to end the year, Zoho grew in both dollar and unit share in total U.S. food. Taking this increased stake allows us to lead the entirety of the brand's marketing, retail, and direct-to-consumer sales development as we drive brand awareness and distribution, leveraging the strength of our network. And speaking of opportunities to advance our non-LAC plans, we are so pleased to have entered into a strategic partnership agreement with the world's leading supplier of premium carbonated mixes. The partnership agreement gives us the exclusive commercialization rights to the Fevertree brand in the U.S., This is a significant step forward in our strategic ambition to build a total beverage portfolio for a wide range of consumer preferences across both traditional alcohol and non-alcohol occasions. Now, before I pass it to Tracy, I'll conclude by saying that we remain confident we have the right strategy to achieve our long-term growth objectives, and our 2025 guidance is aligned with those objectives. Collectively, our global core power brands are healthy, and we have great commercial plans in 2025 to continue to support them. We are changing the shape of our global portfolio with premiumization successes in EMEA and APEC in Canada, and we have targeted plans for the U.S. Our operations outside of the U.S. are performing well and contributing meaningfully to our growth. Our capabilities across our organization support premiumization and focused innovation, supply chain efficiencies, and commercial effectiveness. which help drive sustained long-term profitable growth. And with our compelling cash generation and a healthy balance sheet, we have substantially improved our financial flexibility, allowing us to continue to invest in our business and return cash to shareholders. So we are pleased with our progress and confident in our ability to achieve our long-term growth algorithm in 2025 and beyond. With that, I will pass it to Tracy.

Thank you, Gavin. we made strong progress in enhancing our profitability and financial flexibility in 2024. We delivered over $1.2 billion in underlying free cash flow in line with our expectations, and it was supported by underlying pre-tax income margin expansion of nearly 80 basis points for the year. This expansion was driven by positive net pricing, mixed impact, moderating inflation, and cost savings, which more than offset volume deleveraged. which had a particularly significant impact in the second half of the year related to U.S. shipment timing. Also contributing to the margin improvement was lower-end G&A, largely due to cycling innovative levels in 2023. G&A declines were mostly related to higher incentive compensation in 2023. Marketing declines were mainly a result of higher investments in the prior year. particularly in the second half of the year when we increased spend by an incremental $100 million, given the accelerated demand in the U.S. But importantly, we continue to support our brands globally, with higher levels of marketing investments for both the quarter and the year as compared to the respective periods in 2022. In addition to investing in our brands and business, we continue to return cash to shareholders. In 2024, we paid $369 million in cash dividends and $643 million to repurchase 10.9 million shares. Since the plan was announced in October 2023, we have repurchased 6.7% of our Class B shares outstanding. It's an up to five-year, $2 billion plan, and as Gavin mentioned, we have utilised approximately 40% in just the first five quarters. We ended the year with a healthy balance sheet, and our net debt to underlying EBITDA ratio was 2.1 times, which is in alignment with our long-term target of under 2.5 times, and we have no debt coming due in 2025. This provides us significant financial flexibility, offering more optionality in the ways that we invest in the business, be it through capital investments that drive productivity improvements or through bolt-on M&A that support our strategic growth objectives. like our recent investment in FeverTree. It also provides us the opportunity to return even more cash to shareholders. And we are pleased to share that today, we announced our quarterly dividend of 47 cents per share to be paid on March the 14th. This is an increase of 6.8% and represents our fourth consecutive year of increases, clearly demonstrating our intention to sustainably increase our dividends. And now I'll conclude with our financial outlook. For 2025, we are issuing guidance that is in line with our long-term growth algorithm. However, the global macro environment is rapidly evolving, resulting in uncertainty around the effects of geopolitical events and global trade policy, including the impacts on consumer trends. As a result, our outlook does not reflect the impacts of these activities or any imposition of import tariffs by the U.S. and potential retaliatory actions by other countries. Also, please remember that net sales revenue and underlying free tax income growth guidance are on a constant currency basis and underlying earnings per share are not. Therefore, continued strength in the US dollar will result in a headwind to our reported results as well as underlying earnings per share growth and in the affected period using the current exchange rate. With that said, let's review our guidance metrics. 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, high single-digit underlying earnings per share growth, underlying free cash flow of $1.3 billion, plus or minus 10%, underlying depreciation and amortization of $675 million, plus or minus 5%, net interest expense of 215 million dollars plus or minus five percent underlying effective tax rate in the range of 22 to 24 percent and capital expenditures incurred of 750 million plus or minus five percent drivers that underpin our guidance include anticipated annual net price increases of one to two percent in north america in line with the average historical range, and for other markets to trend in line with inflation. MIX should be a meaningful growth driver as we advance toward our medium-term goal of reaching about one-third of our global net brand revenue from our above-premium portfolio. We expect this to come from continued premiumization in EMEA, APAC, and Canada, as well as progress in the U.S., where, as Gavin shared, we are starting to see some initial traction with Blue Mute. have big plans for Peroni and are expanding in non-ALC. While Fevertree and the consolidation of Zoa provide incremental benefits to the top line, we will also be cycling revenue from the smaller regional craft breweries we divested in the third quarter and, more significantly, 2024 Pat's and Labatt contract brewing volume, as these contracts terminated at the end of last year. On a combined basis, we expect a related approximate 1.9 million hectolitre headwind to America's financial volume in 2025. We produced about 1.2 million hectolitres of PEPs in the US and 700,000 hectolitres of Labatt braids in Canada in 2024. Given the PEPs volumes wound down sequentially over the course of 2024, the headwind is more pronounced in the first half of the year, particularly in the first quarter. and the 2024 LeBat volumes followed typical seasonal trends. There are several additional shipment phasing considerations. In the first quarter, we are citing particularly strong demand for our core power brands in the U.S. in the prior year period when U.S. brand volumes were up 5.7%. Also, in the first quarter of 2024, we benefited from higher-than-typical inventory bulls given our anticipation of the Fort Worth strike. This contributed to U.S. financial volume increasing 7.6% in the first quarter of 2024, despite the exit of 350,000 hectoliters of PAPS volume. This higher than typical inventory build extended into the second quarter of 2024, and we do not anticipate a similar level of first half inventory build in 2025. Turning to costs, in the first quarter, we anticipate incurring one-time transition and integration fees related to the fever tree partnership, which will be reported in our underlying results. The costs will be determined over the next few months based on discussions which are ongoing. We also expect full year margin expansion coming from a number of drivers. They include mixed benefits from lower contract brewing and increased premiumization, water rating inflation on input costs, and productivity improvements and cost savings. We also expect to continue to put the right commercial pressure behind our brands globally, focusing on retaining existing customers and attracting new ones. Given our deep capabilities and return-oriented strategy, our growth outlook does not require us to make steep changes in our marketing investments. In closing, we are pleased with our progress in 2024. We believe we have the right strategy and with strong brands, a highly cash-generative business model, and a healthy balance sheet, we have the ability to continue to invest in our business to achieve long-term financial growth and our strategic goals, while also returning cash to shareholders through a growing dividend and a meaningful share repurchase program. With that, we would like to open it up to your questions. Operator?

Thank you. We will now begin the question and answer session. If you would like to ask a question today, please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press star and then two to withdraw yourself from the queue. As a reminder, we ask that you please limit yourself to one question per participant. Our first question comes from Chris Carey with Wells Fargo. Please go ahead.

Hi, good morning everyone.

Morning, Chris.

Hey, Gavin. I was wondering if you could comment a bit on what we're seeing in the beer category, specifically year-to-date or whatever near-term time horizon you'd like to use. I think there's been a debate about increased volatility in recent weeks and months. whether that's weather or changing consumer preferences. But I'd love to get your thoughts on some of the near-term evolution of what we're seeing in the data and how you see industry dynamics and perhaps how you're thinking about this in the context of your full-year guidance. And then more of a just sneak-in question, but Tracy, are you factoring any share purchases in the outlook or any context on share buybacks for this year? Thanks so much for those.

Thanks, Chris. Well, I'll let Tracy answer your sneak in question, but I'll deal with the industry first, Chris. Look, I mean, if you look at 2024, there was a lot of noise, right? I mean, we talked about a lot of that over our earnings calls with trading days and holiday timings and turbulent weather and all sorts of things going on. And summer was not particularly good, but we did see we did see progress in Q4. And in fact, I think Q4 ended up being the best quarter of industry performance that we experienced last year. And, you know, Chris, as it relates to, you know, current trading, I would say what we said on the last call, and I think the call before that, right, is, you know, I think being cautious of short-term trends is important, right? Because I think once you get to the full quarter and you remove you know, noise that exists on a week-to-week basis, you get a much better sense of what's happening in the industry. And, you know, even with what you're seeing in the first publicly available data for 2025, it's not terribly dissimilar to what we were experiencing in 2024. You know, again, there is noise around, you know, weather and timing of holidays I would just caution you not to draw assumptions based on a very short period of data. Chris?

Hi, Chris. So just in terms of share repurchases, so look, we do intend to continue to execute our share repurchase program. And a reminder, it includes both a systematic as well as an opportunistic execution component. So that allows us to consistently execute the program, but with also the ability to lean in if our models indicate inappropriate. So based on our $2 billion program, which we announced in October 2023, and as Gavin said, you know, we've already utilized about 40% of it in just the first five quarters, and it is a five-year program. So I think it's clear our commitment to share repurchases, but the execution of the plan can vary, can be driven by a number of factors, including the timing of our capital commitments. So for example, you know, a planned investment in fever tree, you know, could drive that. But, you know, as I said, we are committed to the share repurchase program that we put in place.

Thanks, Chris. Thank you. Our next question comes from Peter Graham with UBS. Please go ahead, Peter.

Thanks, operator. Good morning, everyone. I really wanted to just follow up on Chris's question there, just just some perspective on the top line guidance. You know, I know there are various puts and takes, Tracy, as you alluded to, you know, contract brewing, fever tree, etc. But I guess just how are you actually thinking about underlying category growth across your key geographies? Are you assuming category growth rates improve, you know, as we move into the summer, cycle easier comps? Or are you kind of assuming, you know, the steady state as category growth improves, that would be more of a source of upside?

Thanks, Peter. Look, if you look at our major markets, right, in Canada, we've seen past inflation and interest rates that continue to weigh on the economy. But we have seen interest rate cuts. We've seen inflation start to come down. And, you know, Canada beer industry trends are fairly similar to the U.S. As I said to Chris, we're not seeing anything meaningfully different from the previous trends that we've shared in the US. You know, very conscious consumers are still looking to engage in channel and pack shifting. And at the same time, the industry continues to see premiumization, which plays perfectly into our overall acceleration plan. In the UK, you know, the economy is improving. Inflation is slowing down. It is competitive at the moment. but not a lot different from what we've been seeing through the back end of 2024. And as you rightly point out, we do have puts and takes in our top line guidance, right? The take, as Tracy said, is contract brewing, and the put is FeverTree, for example. But more broadly, the progress that we're making on our overall acceleration plans, whether that's our core brands globally, whether it's the premiumization progress that we're making or whether it's, you know, acceleration in beyond beer. So it's all of those factors taken into account, Peter.

Thank you. Our next question comes from Filippo Filoni with Citi. Please go ahead.

Hi. Good morning, everyone. I wanted to ask on margins. So first on the gross margin line, can you provide some context of the puts and takes in terms of pricing, mixed benefits, and commodity inflation that you expect, that you include in your guidance? And particularly on the commodities, I know you have long-term hedging programs. So just any thoughts on the potential impact of aluminum tariffs and what that could mean for your cogs? Thank you.

I'll let Tracy talk about the margin-free repo, and thanks for the question. From an aluminum point of view, we did make changes to our sourcing strategy over the last few years, and so almost all of our aluminum is currently purchased in the United States for United States consumption, which is obviously our biggest market. But, Trace, do you want to give a more broad

Yeah, sure. So, hi, Philippa. So, in terms of gross margin, look, we don't give specific gross margin guidance, but noticeably, our underlying gross margin percentage did improve in each of the last two years. So, as we look at our 2025 guidance, our long-term growth algorithm does anticipate underlying pre-tax margin expansion, so building on the expansion we saw in 2024. You know, some of the drivers of that, so in 2025, we do expect moderating inflation on input costs. And, you know, to your point, we do have multiple levers that support our growth algorithm. So it includes positive net pricing, you know, that we discussed in our guidance, positive mix from premiumization, as well as the lower contract brewing volumes. which will also drive productivity improvements. And we also, you know, continue to look at cost savings across our entire business. So those are some of the things that I would say, you know, would drive some of the margin expansion.

Thanks, Tracy. Thanks, Philippa.

Our next question comes from Bonnie Herzog with Goldman Sachs. Please go ahead, Bonnie. All right. Thank you. Good morning, everyone.

um i had a question good morning i had a question on your guidance which you mentioned is in line with your long-term algo your guidance implies a fair amount of operating leverage this year and i know you've touched on this but hoping you could unpack this a bit for us you know meaning you should get some leverage from the top line but could you give us a little more color on the drivers of eps growth such as the cost savings and efficiencies you expect to get this year and then you know, maybe how much that could increase next year and beyond. You know, maybe if you don't feel comfortable quantifying, you know, maybe you could rank some of these cost savings, you know, in order of impact, for instance. I think that would be helpful. Thank you.

Thanks, Bonnie. Trish, do you want to take that?

Yeah. So, I mean, a couple of things that I can point to in terms of, you know, the operating leverage improvements in our operating margins so you know number one we've invested over the last couple of years in our capabilities to drive efficiencies and cost savings and a lot of that investment is focused on our brewery so eliminating waste you know driving efficiencies there and certainly taking out the contract brewing will further health in terms of, you know, costs as well as efficiencies in our brewery. So that's, you know, one of the bigger drivers around the costs and efficiencies. The other thing just in terms of, you know, marketing spend, for example, we've spent the last couple of years really driving our return on marketing investments. And, you know, even though we do expect our MGH increase, around, you know, some of the investments that we're making with innovation, you know, fever tree, etc. There's also a number of puts and takes that, you know, that are coming out. So, for example, you know, we divested of our underperforming craft breweries and, you know, we can now redeploy those funds to other brands in 2025. So, we'll continue to look at that. And then, One of the bigger items as well is bringing the Peroni production onshore. And there's meaningful ocean freight savings by doing that. And we've been able to utilize those cost savings to, again, support the marketing investment of that brand. So a number of levers that we can pull and a number of capability investments that we've made over the last couple of years that we'll start seeing coming through now that will certainly help our margin, you know, as we look at continuing to drive efficiencies in the areas that we operate.

Thanks, Tracey. Thanks, Bonnie.

Thank you. The next question comes from Andrea Texera with JP Morgan. Please go ahead.

Hey, good morning. This is Drew Levine. I'm for Andrea. Thank you for taking our question. Gavin, I wanted to ask on the U.S. brand violence, we're down three. I think that came in probably a bit better than the track channel of data would suggest, despite, I think, what has been described by some other peers as maybe a shift towards those channels. So, you know, any color would be helpful on what you're seeing from a consumer perspective. I know you mentioned, you know, some moderation in the value-seeking behavior, but, you know, maybe some perspective on different channels, if on-premises outperforming, maybe untracked channels performing better, so any help there would be great.

Thanks, Drew. You know, I think one point I'd make is I think there was an extra trading day, so that certainly would have helped. From a consumer point of view, we did see them moving away from C-stores earlier in the calendar year in the sort of summertime period, and now we've seen them move back into the C-store channel. We've also seen on-premise continue to slightly outperform, but broadly I would say those are the three key ones. Thanks, Drew.

Thank you. The next question comes from Gerald Pasquarelli with Needham & Company. Please go ahead.

James Meeker, Great thanks very much for the question I just I wanted to go back to the share repurchase commentary. James Meeker, On as we look at the outlook for 2025 the high single digit growth Tracy. James Meeker, Is it fair for us to assume that you may be to think about it in terms of like straight lining the remaining authorization with any potential upside earnings growth being you know you remaining aggressive on buyback but that maybe shouldn't be part of.

you know the the base case scenario just just trying to get a little bit more color there thank you yeah so a couple of things to consider as we as we talk about the you know the high single digits um underlying eps growth i mean some of that yeah certainly is being driven by share repurchases and our guard assumes you know at a minimum repurchases in line with our our 10b51 plan But some other factors that play into our EPS growth is also tax and foreign exchange. So our EPS is not on a constant currency basis. So, you know, Forex could impact that. And then we have reduced our underlying effective tax rate guard for 2025 to 22 to 24%. And that was from the 23 to 25% in 2024. But as I said, you know, we'll continue to look at all of our capital allocation models and make sure that we're returning, you know, the right, we're making the right investment decisions to return to our shareholders. So, yeah, as we said, it could vary, you know, the share repurchase driven by a number of factors, as I said, you know, whether we have planned investments like Fever Tree, for example. So, you know, that may impact the sort of amount we spend. And also, just as a reminder, it's an up to five-year program, and we're only five quarters into this.

Thanks, Gerald.

Next question operator.

The next question. The next question goes to Rob Ottinson of Evercore. Rob, please go ahead. And it looks like Rob has disconnected. He's going on to the next question from Kevin Grundy of BNP Paribas. Kevin, please go ahead.

Great. Thanks. Good morning, everyone. First, quick housekeeping question, then a bigger picture question. Easy for me to say. The housekeeping question for Tracy, it would seem like the guidance would imply that volumes down 1% to 2%. based on your commentary of 1% to 2% price and then some favorable mix. I just wanted to confirm that's your expectation relative to an exit rate that was a bit more challenged than that in the US and Europe. Gavin, the bigger picture question is just the demand outlook looking out now over the longer term. We get a lot of questions from investors on potential impact of younger consumers drinking less frequently, negative impact from GLP-1, the recent advisory from the former Surgeon General. linking alcohol consumption and cancer risk. I was hoping you could comment on these potential headwinds and how they may impact the industry more broadly. So not just beer, but U.S. alcohol more broadly, and then how it may directly impact your strategy as it pertains to your portfolio. Thank you.

Thanks, Kevin. Do you want to just comment on the first one, Tracy? Or I'll take the bigger picture.

Yeah, so hi, Kevin. The drivers for our top line growth in 2025, I mean, of course, we remain focused on our US share performance. The NSR guidance is also dependent on a number of factors, including price and mix. In 2024, we achieved really strong annual top line contribution from both our MIA and APAC business and from Canada. We don't specifically give volume guidance, but just as a reminder, we've got puts and takes there as well. So, you know, we will receive a benefit from bringing Fever Tree. You know, Gavin mentioned Naked Life, et cetera, that we're going to be launching. But a reminder as well, we've taken out 1.9 million hectolitres of contract brewing volume out of our system in 2025. So that'll have an impact on our financial volume as well.

Thanks, Tracey. And look, Gavin, I mean, your questions are very broad, right? So let me try and answer that from a, You referenced the Surgeon General, right? Obviously, there have been several reports from the federal government over the past few months. They've had a variety of viewpoints on the science. And I would point out that we've had a Surgeon General's warning on labels since the 1980s, which includes that alcohol consumption may cause health problems. I think beer has long been the drink of moderation. You know, we offer consumers a range of options, including no and low alcohol beverages. And, you know, we're committed to the transformation of our company into a total beverage company. That's why we changed our name to Molson Quest Beverage Company several years ago. And we've got a long-term strategy of diversifying our portfolio into beyond beer. And non-alcohol is a key part of that diversification. And it supports broader consumer trends, as you mentioned. as you said, around mindful drinking with, with categories like non-alcohol beer and RTDs. And, you know, we've got a three-pronged approach to that. You know, whether it's alcohol replacement, we've got a great portfolio of brands directed at that with, you know, two great above premium non-alcohol beers, Blue Moon, non-alcohol Peroni Zero Zero. We're launching Naked Life, which is, which is a non-alcohol canned cocktail. Then we've got alcohol adjacencies. And that's where, Fever tree is the absolute perfect fit for us because it sits at that intersection between alcohol and non-alcohol. And then we've got the pure place, which is highly incremental for us at an occasion level where fear doesn't necessarily exist. And ZOA is a great example of that. And then, you know, Kevin, we've proven that we can grow in our traditional beer space. I mean, Coors Banquet is a fine example of that, right? It's the number one fastest growing beer brand, beating out Modelo. And, you know, we're gaining distribution, we're gaining occasion, we're gaining consumers, including younger legal drinking age consumers. behind that brand. So, you know, we feel very confident that the portfolio that we are building will meet the demands of our consumers both now and on a go-forward basis. Thanks, Kevin.

Thank you. The next question goes to Brian Spillane of Bank of America. Brian, please go ahead.

Thanks, operator. Good morning, everyone. Maybe Gavin just to pick up on on Kevin Grundy last point, can you just maybe give us a little bit more color on the decision to engage with fever tree. And maybe just like what's, what do you think is is is different right, I mean the you know fever tree and Molson course come together you're going to have this venture. There must be something that's missing now that Molson Coors can add to it. And I'm just kind of curious to know how you think about that and what that may be.

Yeah, great question. Thanks, Brian. Look, I think it's building a great portfolio even further to meet the needs of consumers at various occasions. And as I said, non-alcoholic beverage is key to that strategy. In the US, Fever Tree is actually the world's leading supplier of premium carbonated drinks and mixes. As I said, it sits really nicely at the intersection of beer and non-alcoholic. Its availability is often in stores where beer is actually sold. it's steadily grown its lead as the number one tonic in ginger beer. I think it provides tremendous credibility to our network and broader network that we are serious about non-alc. It's a big business. It's a growing business. What do we bring to it? I mean, we've talked about our core competencies and our capabilities in the past before, Brian, and one of them is we is we have a tremendous network of distributors that deliver to stores which Fevertree has not been delivering to in the past. I mean, I think we service over 500,000 different outlets. And Fevertree gets to tens of thousands of those at the moment. So our broader reach is substantial. We're also going to increase our non-alc resources quite meaningfully in the first part of this year. So it brings critical mass to us from a, you know, a non-alc point of view with ZOA, which we took a majority stake in late last year. And as I said, we've got Naked Life coming and we've got Peabody, which is in our portfolio from last week. So, you know, I think, well, we're very excited about this. It provides real credibility to our system that we are serious about non-ALC and we mean business here.

Thank you. The next question goes to Rob Ottenstein of Evercore. Rob, please go ahead.

Great. Thank you very much. Just a few follow-ups, if I may. Gavin, just sticking on the fever tree agreement, can you give us a rough idea of what the economics look like and how this could potentially impact your income statement three, four, five years out? Just any way for us to kind of model it, any guidelines at all? And then second, I know you mentioned that your guidance doesn't include anything for tariffs, and obviously it's impossible to, right? Because who knows what's going to happen. But again, can you help us try to model that out in terms of Canada? Did you see when Trudeau talked about boycotting American brands, did you see any impact on Coors Light, Miller Lite, your U.S. brands that are in Canada? Are they brewed in Canada or do they come from the U.S.? And what percentage of your sales in Canada come from those brands? And any other tariff-related issues outside of aluminum, which we already talked about, that we should be considering as we, you know, kind of run our sensitivities for 2025? Thank you.

Thanks, Robert. Two big questions. Maybe start with the second one. You know, we import very little product into the U.S. from Canada and Mexico. That's the first point I'd make. Almost all of the brands that we produce that are consumed in the United States from our portfolio are brewed in the United States. The last big one really was that we imported was Peroni. And as you know, and we've talked about in the past, we've bought that in-house and we're really excited about the potential for Peroni as we go forward. Beyond that, there are a few very minor immaterial, from a volume perspective, brands that come across from Canada and Mexico. As it relates to Canada, the vast majority of the brand portfolio is, again, it's produced in Canada for Canadian consumers. We have a large import agreement with them. that comes from Europe, so it wouldn't be impacted by US tariffs. But again, the vast majority, Canadian-proved, Canadian-produced, and I think consumers are aware of that. From an input material point of view, again, Robert, the vast majority of our input materials come from the countries in which they are produced. Obviously not everything, but I spoke about aluminum earlier on being you know, almost entirely sourced in the United States for the United States markets. All of our agricultural input costs, like barley, malt, or hops and so on, all is sourced in the markets in which it's consumed, certainly in our bigger markets. But, you know, as you say, there is uncertainty, but we're in the same boat as most other businesses as it relates to tariffs, with the exception of the fact that we produce all consumed as far as fever tree is is concerned but we don't give that level of detail that you're looking for but obviously we've entered into this relationship because we see real potential with this brand we see growth opportunities from a from a volume perspective off obviously it's a hundred percent incremental to to it to our business but we see growth off their off their base and 2025 is going to be a year of integration and absorbing it, and as I said, you know, we're expanding our resources behind this, which will take place in the earlier part of the year. You know, Tracey did mention that we will have some one-time costs associated with that, and, you know, we're working through to determine what those are. They're not in the hundreds of millions, just to give context, right? They're in the tens of millions, and we'll... we'll resolve that and put a final estimate on it once we've been through all our discussions. But, you know, this is a brand that operates right at the top end of both premiums. So from a revenue per hectometer point of view, it might even be our number one now from a revenue per barrel point of view. You know, as we integrate it and look for further opportunities in terms of you know, cost efficiencies. We will certainly be looking at our supply chain and our supply chain partners as, you know, as we look to drive value out of this relationship. But we really are excited about it, Robert. I think I covered both Robert's questions, Tracy. Yep, thanks, Robert.

Thank you. The next question goes to Kamil Gajarawala of Jefferies. Kamil, please go ahead.

Hey, everybody. Good morning. two things. The first, I guess, along the lines of FeverTree, but not specifically when we think about the Yingling deal, which is a partnership, the various partnerships with Coke, the deal with Zoho that went from partnership to ownership. As we think about all of these things and then FeverTree being the newest one, how do you think about it in the context of M&A? Why is sort of a small stake the right amount with whatever P&L that contributes to your business versus the P&L that goes to the distributors. Why not sort of being more aggressive on M&A, kind of like what you've eventually done on Zoa and have full ownership? And then the second question, which will be a lot more narrow, is quite a bit of strength out of Canada. Can you maybe give us a little bit more on what was behind that? You gave us a bit in the prepared remarks, but would love to learn if this is a something ongoing, something that's sort of building, or if there were just a couple of nice hits last quarter that may not continue. Thanks.

Thanks, Kamil. It's not the latter. It is not just a couple of nice hits. I mean, the performance in Canada has been building over quite some time. For example, we've seen 23 consecutive months of share growth, and that includes growth in peer, it includes growth in RTDs. It's driven by the strength of our brands. It's driven by the strength of the execution of our strategy on those cold beer brands, on premiumization of our portfolio, and of expanding into flavor cobalt. You know, our core power brands, Coors Light and Molson, the trademark, we grew share of segment through the fall. And Miller Light, which sells in the above premium tier, is one of the fastest growing beer brands in the category. And then Madri, which we launched last year, is delivered ahead of our expectations. And in flavor, we're the fastest growing company in the RTD space. Canada's success is broad. It is deep. It's been going for, as I said, quite some time now and You know, it gives us a nice useful blueprint for the U.S. where we've got the opportunity to strengthen our results, particularly in the above premiums space. So performance in Canada has been strong in summary. Fever tree, look, I mean, we're good at partnerships. I think that's one of our core strengths, core competences. We've got partnerships all over the world. As it relates to the specific investment which Tracy alluded to in uses of cash, I mean, it's it fits perfectly into our string of pearls approach, right? I mean, we did talk about pearls getting a little bigger and so our investment in fever tree is a little bit bigger than some of the ones that we've made in the past, but it's still part of the string of pearls approach. Why did we do it? Because we see real potential in fever tree. The United States is their biggest market. It's their biggest growth market. We're representing them here now. So, you know, 100% of the of a performance will be included in our P&L. But at the same time, we wanted to take some advantage of the value which we believe is going to be created at a FeverTree level. And so we're now their second largest shareholder, and we're comfortable with that position. Thanks, Koval.

Thank you. The next question goes to Eric Sirota of Morgan Stanley. Eric, please go ahead.

Great. Good morning. First, Gavin, could you talk a bit about shelf space expectations for your brands in 2025 coming off of the really strong gains that you had for the core brand last year and in 2023? And then, Tracy, just an accounting clarification. So it sounds like you guys are going to be booking just the U.S. partnership revenue from Fever Tree. Is that correct? And will any equity income from your overall ownership in the company come through the equity income line, or is that going to just be held at cost?

Thank you. Thanks, Eric. I would say that shelf resets, I mean, we saw an unprecedented shift in shelf resets back in the spring of 2024. In the fall of 2024, we held those grains, and we even grew them a little. So that means that when you compare us to the 2023 base, we're up significantly. Now, as we head into spring of 2025, generally, Each year, there are minor adjustments to shelf space. Retailers add new items. They delete discontinued and slow-moving ones. It's a little early days yet, and we haven't got all the data in, but for spring of 2025, we expect that to be the case again. Again, while it's early, we expect to hold on to the share gains in the spring once again. We feel really good about the step change that we've seen in sharp resets. And it's certainly been a big contributor to why we've held on to so much of the share gains that we gained with Coors Light, Molart, and Coors Banquet. I mean, in the fourth quarter, that actually accelerated a little bit. I think we said in Q3 it was around 80%. Well, it's actually more than 80% now that we retained in the fourth quarter. And we're very, very pleased about that, obviously, because You know, if you compare it back to 2023, we're about 170 basis points of share higher with those brands than we were before. So, yeah, Tracy, you want to deal with the accounting question?

Yeah. Thanks, Eric. So, look, in terms of how we're going to report Fever Tree in the U.S., so we have a license agreement to distribute their products in the U.S., and we will recognize 100% of the revenue for all of the products sold in the U.S. We'll share jointly in certain costs, which include marketing, so it results in profit sharing at the EBITDA level. And then we'll also pay them via a royalty, which will be included in our COGS. In terms of the investment that we've made in the fever tree business entity, it will be reported on a cost basis, and we'll mark that to market, and we'll exclude it from our underlying results.

Thanks, Eric.

Thank you. The next question goes to Bill Kirk of Roth Capital Partners. Bill, please go ahead.

Good morning, everyone. So Gavin, your largest competitor wants to rebrand the domestic beer segment to, I think, the American beer segment. Do you agree that the industry should stop using that domestic terminology? And if that segment positioning changes, maybe combined with a broader populist movement. Do you think it would help the brands within that segment?

Thanks, Paul, and good morning to you. You know, our brands go back many generations in both Canada and in the United States, and we're obviously very proud of our heritage, and I would suggest that everybody knows about the roots of our great iconic brands today. Our focus is on our acceleration plans and our portfolio. And, you know, as I've said on this call and we said in our opening remarks, our brands are in a great place, particularly our core brands, which have gained substantial shares since 2023 and retained a lot of that. And so that's where our focus is. Thanks, Bill.

Thank you. The next question goes to Lauren Lieberman of Barclays. Lauren, please go ahead.

Lauren Pongan- Great thanks good morning and i'd love to just hear a little bit about your read of the competitive environment in the US, we heard a bit kind of through this earnings season about a step up in promotional activity. Lauren Pongan- Both with premium lights, but also in the above premium space so just curious to what degree you're you're seeing that or not thanks.

James Meeker & Thanks Lauren and good morning to you, you know we haven't seen anything unusual from a promotional. point of view, it's common that there is some level of promotional activity. Most of that takes place in the summer, though, not in Q4 or in Q1. Most of that takes place in Q2, Q3. It's a fairly regular thing. You see different things in different markets. But we haven't seen anything unusual from a promotional point of view. know as we always do we'll we'll take a strategic approach to to evaluating the the overall competitive landscape consumer dynamics and and we'll do what's right for our brands thank you the next question goes to michael lavery of thank you sandler michael please go ahead thank you good morning i just wanted to come back to innovation

and just have seen a lot of the innovation in the space skew towards higher alcohol. Some little bit maybe more exaggerated cases, things like beatbox or buzz balls, but yours simply spiked bold and Blue Moon Extra are moving in that direction with an 8% ABV version. Do you have a sense of just what, if any, impact that has on category volumes? And if that direction of innovation is helping drive weakness? And a little bit just related, can you maybe touch on how that sell-in went? And do you have a sense for how your innovation is landing on the shelf resets? Also, maybe for ZOA as well, did you get ownership in time to move the needle on where that lands on shelf?

Thanks, Michael. Yeah, lots of questions there. Let me just say that, no, I don't see that innovation, both from ourselves and our competitors, is negatively impacting beer as a category. In fact, I think it's positive. I mean, if you look at beer as an overall industry, we did very nicely against spirits. I mean, all of spirits' growth is coming in the RTD space, which is where the beer guys are playing. And so, you know, if you just look at, if you excluded, you know, the prepackaged spirits from spirits performance, it'll be quite negative. So all of the growth in spirits is coming from that, and we and our competitors play quite meaningfully there. As it relates to, you know, higher alcohol, I mean, we did talk about this previously around our our first ever convenience-led innovation pipeline. And we've got three great new launches that are coming that fit that trend of what consumers are looking for in terms of singles and higher ABV. We've got Simply Spike Bold coming, we've got Topo Margarita Max, and we've got Blue Moon Extra. And they're all coming at that sort of 8% level. Another great area of innovation for us is For example, Happy Thursday. I don't know if we've talked about this before, but we did create a Gen Z culture panel last year. And as we looked at that and then with broader consumer insights, this panel has really been helpful in how we innovate for new legal drinking age consumers. And Happy Thursday came right out of that. It also helps us... you know, inform how we market and sell our products, whether it's through e-commerce or who we partner with, like League's Cup and Formula One and where we go from a digital space. So I've probably gone a little broader than your direct question, Michael, but hopefully that's helpful.

Thank you. The last question goes to Robert Moscow of TD Cohen. Robert, please go ahead.

Hi, thanks. You know, there was a pretty significant slowdown in your EMEA APAC region, and you attributed it to heightened competition and just the consumer backdrops. Is there any reason to believe that those divisions can grow as fast as the rest of the company in 2025? Or, you know, do you think we're going to be you know, flattish like we were in fourth quarter for the year.

Thanks, Robert. Look, I mean, certainly consumer demand in the UK was softer in 2024 when you compare it with 2023. We did see some uplift in the summer through the Euro soccers, but, you know, weather obviously offset a lot of that. Christmas season was satisfactory, although we did see consumers, you know, coming in late in the season as opposed to earlier. As it relates to our business specifically, for Carling, which is our biggest brand in the UK and in the EMEA APEC business unit, we took a value over volume approach. We certainly will continue to support the brand strength of that versus our competitors. No doubt we took a value over volume strategy. Madrid, we continue to see drive both volume and value growth across both channels. It's launched very nicely, a new market, Bulgaria. During 2024, we have another market plan for 2025. We've got great brands in EMEA or APEC. We've talked about Ajusco in the past. And, you know, over time, I see no reason why our email and airbag business won't grow quicker than our businesses in North America. Thanks for the question, Robert.

Thank you. We have no further questions. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.