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.