Molson Coors(TAP)2024-11-07 17:13Financial Data and Key Metrics - Consolidated net sales revenue decreased by 7.8%, underlying pre-tax income decreased by 8.7%, and underlying earnings per share decreased by 6.2% in Q3 [8] - U.S. financial volume declined by 17.9%, and brand volume declined by 6.2% due to macroeconomic pressures [8] - Underlying free cash flow for the first nine months of the year was 717 million returned to shareholders through dividends and share repurchases [16] - The company adjusted its 2024 net sales revenue guidance to a decline of approximately 1%, down from previous low single-digit growth expectations [11] Business Line Performance - Core power brands in the U.S. (Coors Lite, Miller Lite, and Coors Banquet) saw a combined volume share decline of 0.5 points year-over-year, but retained significant share gains compared to 2022 [17] - Coors Banquet grew brand volume by 8% and gained industry share for the 13th consecutive quarter, making it the fastest-growing top 15 beer brand in the U.S. by volume percentage growth [17] - In Canada, Coors Lite gained segment share and remained the number one lite beer in the industry [18] - EMEA and APAC regions saw strong performance, with Ožujsko in Croatia growing volume by 6% and the successful relaunch of Caraiman in Romania, which reached over 250,000 hectoliters since March [19][20] Market Performance - The U.S. market faced challenges due to macroeconomic pressures, leading to value-seeking behavior and channel/pack shifting, particularly during the summer [10] - Canada and EMEA/APAC regions performed strongly, with Canada's top-line growth at 5.7% and EMEA/APAC also growing at 5.7% for the first nine months of 2024 [48][49] - The U.K. market saw soft consumer demand and increased promotional intensity, but Madri continued to drive volume and value growth [110][112] Company Strategy and Industry Competition - The company is focusing on premiumization, with over half of EMEA and APAC net brand revenue coming from above-premium products [21] - Investments in local production for Peroni in the U.S. aim to improve supply consistency and introduce new pack sizes, with plans to scale the brand significantly by 2025 [24][25] - The company increased its ownership stake in Zoa to 51%, aiming to leverage its network for marketing and distribution growth [27][28] - The company is divesting underperforming craft breweries to focus on scalable above-premium opportunities in the U.S. [23] Management Commentary on Operating Environment and Future Outlook - Management acknowledged the impact of macroeconomic pressures on the U.S. beer industry but expressed confidence in the long-term growth potential of the business [9][11] - The company reaffirmed its mid-single-digit growth guidance for underlying pre-tax income and narrowed its EPS guidance to the higher end of the range, supported by cost savings and share repurchases [11][12] - Management highlighted the importance of premiumization, innovation, and supply chain efficiencies in driving long-term profitable growth [32] Other Important Information - The company completed its multi-year Golden Brewery upgrade, providing more flexibility for future investments and cost savings [36] - Moody's upgraded the company's credit rating to BAA1 stable, the highest investment-grade rating in over a dozen years [37] - The company repurchased 7.5 million shares in the first nine months of 2024, utilizing 29% of its $2 billion share repurchase plan [39] Q&A Session Summary Question: Impact of shipment timing and macroeconomic pressures on U.S. financial volumes [52] - The decline in U.S. financial volumes was driven by a 17.9% drop in shipments, a 6.2% decline in brand volume, and a 2.6% impact from Pabst contract brewing [57] - The company expects a remaining headwind of 500,000 hectoliters in Q4 due to the termination of the Pabst contract [42] Question: Consumer behavior and industry trends [59] - The U.S. beer industry saw value-seeking behavior and channel/pack shifting during the summer, but trends improved in September and October [61][62] - Premiumization continues to be a key trend, particularly in the U.S. and Canada [63] Question: Shelf space retention and gains [66] - The company retained the significant shelf space gained in 2023 and achieved additional gains in the fall reset [69][70] Question: Marketing investment levels [71] - Marketing investment was down in Q3 compared to the prior year but is expected to be up for the full year 2024 [72][73] Question: Pricing and promotional environment [84] - Pricing remains in the historical range of 1% to 2%, with no significant changes in promotional activity except for deeper discounting in the above-premium tier [86][87] Question: Performance of Happy Thursday and flavor portfolio [88] - Happy Thursday has shown early positive results, particularly among Gen Z consumers, and the company plans to continue supporting the brand [92][93] Question: Plans for Blue Moon and Coors Banquet [95] - Blue Moon is showing signs of stability, with sequential improvement in total industry dollar share, while Coors Banquet continues to grow strongly [97][100] Question: COGS per hectoliter outlook [95] - The company expects cost savings from supply chain efficiencies and the removal of Pabst contract brewing to positively impact COGS [101][102] Question: Category trends and Q4 outlook [104] - The company has a good handle on Q4 drivers, including pricing and shipment trends, and remains confident in its long-term growth algorithm [105][107] Question: EMEA and APAC volume weakness [109] - Soft consumer demand in the U.K. and increased promotional intensity contributed to volume declines, but Madri continues to perform well [110][112] Question: Zoa's performance and future plans [114] - Zoa is gaining traction as a better-for-you energy drink, with strong performance on Amazon and new distribution opportunities [116][117]