Q1 2021 Molson Coors Beverage Co Earnings Call
And this quarter was not the quarter and we expect it to have.
Net reality was driven by three events cyber security incident that caused the global system outage.
Free Winter storm in Texas that force utility companies to shut of pilots of major businesses, including our Fort worth brewery and government pandemic restrictions that shutdown and the entire on premise channel and the U K and severely restricted much of the on premise and Canada.
You say that all of these events happening in the single quarter is unprecedented would be an understatement.
So while we can't control the way the across the business, we executed well and what was in our control. It's true of how we responded to each of them.
The team quickly implemented contingency plans to boost production and get a co brands back to a stable inventory before memorial day.
And now we are shipping over 1 million barrels of weak and the United States for the first Tom and nearly.
The year.
And most importantly, it's true of how we are executing on our revitalization plan.
During the first quarter Coors light and the <unk> outperformed the combination of Bud light Michelob ultra and use industry share performance versus the prior year. According to IRI.
Our U S above premium portfolio of group brand volumes versus the prior year and continued to gain industry share. According to IRI and we took substantial steps towards our heartfelt per ambition.
Our trust joint ventures, non alcoholic cannabis beverages of holding strong as the number one dollar share splits and the entire Canadian cannabis beverage market.
As expected the availability of our 12 ounce standard cans returned to normal levels and.
And we continued working to protect the environment strategic significance initiatives and the United Kingdom.
So, let's look deeper at each area.
That starts with our core <unk>.
We continued to see improving brand volume trends for Coors light and <unk> and North America over the past quarter Dovetailing with strong performance in 2020.
But the performance is even more impressive when you look at our biggest brands and the biggest family of brands.
Coors light finished the quarter with the strongest category share performance since Q1 of 2017 and Coors banquet posted the best quarterly volume performance of over four years and the United States.
We're building on that strong performance and the Coors family of brands with launch of Coors period in March our first USDA certified organic brand.
And we had a strong Q1 and Panama with over a 50% increase and brand volumes with Coors lots of explosive triple digit growth leading the way.
And when it comes to our plans to aggressively grow our above premium portfolio. As you know we have big ambitions for <unk>. This year and the first quarter was a big one.
And as we sit here today, our share of the U S hard Seltzer segment as the other 50% higher than it was at the beginning of the year.
And a single week TERP of Chico Hartzell sort of jumped to three two share units hard seltzer category, despite any launching and 16 markets and.
And has achieved the 20 share and Texas.
None of it's early days, but that is of spending effect that speaks to the opportunity with the spring.
And it's not alone and our portfolio moving.
He was the IRR top tier industry growth brand and Q1, we are building on that with the brand sick and variety pack, which launched in March and then use the eliminated which launched several weeks later.
They are both performing well and.
And in fact does eliminate as the second fastest turning hard lemonade seltzer in the market.
We made significant headway with our HUD sales is in Canada and in Europe as well.
After just over a monthly market Dizzy and cross sell through of our top five hard seltzer brands with some of the leading Canadian retailers.
And the U K, our new three fold heartfelt the brand has launched while our new brand way in central and Eastern Europe is launching in the coming weeks.
And above premium bids blue Moon and lifestyle of the number one new items and USB and last year is currently the number one share gainer in U S craft beer in 2021 and.
And hopefully as noted the official national debut in the U S and Canada.
And it's our first national IPA and the U S. We believe it will be another driver of growth for our above premium portfolio.
When it comes to our plans to expand beyond beer last year and made a lot of news and as we took on a number of partnerships to build the competitive portfolio. This year, it's all about executing on those plans.
So it gives us the strong entry into the $16 billion of U S energy and performance space and is positioned to take a meaningful share of the category within a matter of months is just now beginning to hit show.
The bar Memorial day, we expect we will have over 80000 points of distribution and by the end of summer net number is expected to climb to nearly 150 <unk>.
Buckler and gives us the number one and above premium player and the RTD coffee space and I am excited to report that we are ahead of plan on all of our distribution targets.
Trust, Canada, Canadian Canada joint venture and Pixar is holding strong as the number one dollar share position with six of the top 10 cannabis beverage Skus and Canada.
And our trust USA joint venture is building on the through the first lineup of hemp derived CBD beverages and Colorado.
And we have now entered the fast growing RTD cocktail space through and exclusive equity and distribution agreement with Super book and above premium Tequila based from Oman.
This entire lineup represents tremendous growth for our business and is helping us drive of our emerging growth division towards the $1 billion revenue business by 2023.
Last but certainly not the least is how we are investing and our capabilities our people and our communities we.
We have long been recognized as a leader for our environmental efforts and several weeks ago, we became the first major UK Brewer.
Alright entirely by renewable energy soon.
And every one of the 1 billion pounds of data, we've produced annually and the U K will be made with 100% renewable energy.
And we didn't stop the urine.
And moving plastic rings from all of our major cracks across the U The U K.
In the use of this month, we announced our investments and true colors and North Carolina based brewery that was founded on the premise that aligning rival gang members under the same roof. The common goal and both mitigate street violence and create economic opportunity.
We are excited to share of our knowledge on brewing brand positioning and supplier relationships and we are excited to be part of the business that is driving positive change and creating economic opportunity.
And I can assure you of the events of this quarter of not lost on any of us.
But as the quarter came to a close there is land on the horizon the <unk>.
And trend gradually begin to open back up and the U K and industry standard can inventory normalized and our weekly shipments and the U S top 1 million barrels for the first and nearly a year.
We are making progress on the things that are within our control and we are delivering against the revitalization plan.
And that is what gives me the confidence to reaffirm our guidance for the full year.
That is what gives me confidence and the current expectation that the board will be and are positioned to reinstate the dividend and the second half of this year.
And that is what gives me confidence that we will achieve long term top line growth and.
That is what tells me the future of Molson Coors is bright.
Tracy.
Thank you Kevin and then the line.
Despite the challenges Kevin mentioned, we are proud of our operational agility and resilience as the of BP managed JD challenges, but still continuing to execute a robust foundation.
And let me take you to put the results and provide an update on our outlook.
Consolidated net sales revenue decreased 11, 1% and constant currency sales the pte, Kelowna financial volume, which declined 12% while brand volume per tonne nine 115.
We delivered net pricing growth in North America, and Europe, as well as positive brand mix and the UAE and we continue to premium of Apple failure.
However, this was more than offset by the and claimants restriction and key to the coronavirus and Danny and the corresponding negative channel mix as well as the unfavorable shipment timing in the U eight related to the cybersecurity incident and it takes the winter storms.
Net sales per hectoliter on a brand volume basis increased one 8% and constant currency as the net costs and glass more than offset the negative mix effect in Canada and Europe.
And the line comps.
EBITDA increased five 6% on the constant currency basis, driven by cost inflation and volume deleverage, partially offset by cost savings.
Bob and cost inflation was higher transportation costs due to the continued talking of the free marketing North America.
As well as high of Candy sourcing costs as we continue to source additional aluminum cans from all over the world to the great. The significance of famous demand for our co brands.
And G&A in the quarter decreased 15, 915 for the constant currency basis, driven by lower marketing spend and discretionary expenses as well as cost savings.
While the timing of our marketing investment was adjusted in EBITDA is impacted by the pandemic, we continue T&D and planned behind our co brands and key innovation.
As a result underlying EBITDA decreased 22% on the call.
Currency basis.
Underlying free cash flow of the use of $271 million per the quarter and increase in cash of $54 million from the prior year period.
Driven by lower underlying EBITDA and unfavorable working capital driven by the timing of payments related to divert volume price.
The non income tax deferrals due to governmental programs related to the coronavirus pandemic and incentive payments.
The offset by lower Capex spend.
Capital expenditures paid of $103 million per the quarter, which will largely focus on our previously announced Golden brewery and modernization projects.
Capital expenditures are low in the quarter compared to the prior year, primarily due to project timing.
Now, let's look at our results by business units.
North America and markets experienced viewing degrees of on premise restrictions.
And the UK, our largest market we saw progress of re openings and while the has been sequentially improvements and the on premise channel we are still not back to pre pandemic levels.
And Canada, we saw significant restrictions and closures, while and Latin America, we saw restrictions easing.
North America net sales revenue was down six 3% and constant currency Q2 financial volume declines of nine 4%, reflecting lower brand volume due to the on premise restrictions and factoring the mark pantry loading in the prior year as well as unfavorable shipment timing in the debate.
And the U S brand volume decreased seven 3% compared to domestic shipment declines of nine 5%.
Driven by the economy and premium segments.
However, our use of <unk> premium brand volume grew versus the prior year and the segment reached a record high portion of our portfolio relative to any prior year first quarter since the creation of the Miller Coors joint venture.
Canada brand volume declined $10 eight the think primarily due to the on premise closures, while Latin America brand volumes grew 10 eight the themes.
Net sales per hectoliter on a brand volume basis increased two 4% and constant currency and.
And the U S net sales per hectoliter on a brand volume basis increased four 1% driven by positive brand mix led by innovation and brand busy chart, the chicken hard seltzer and seller.
And Canada negative channel mix more than all states. The net pricing increases while Latin America net sales per hectoliter on a brand volume basis increased due to positive sales mix.
North America underlying EBITDA decreased 13, 3% and constant currency due to the low end net sales revenue and higher Cogs per hectoliter, partially offset by 14, 4% decrease and in G&A and constant currency.
The increase and Cogs per hectoliter was driven primarily by inflation, including higher transportation and packaging material costs low.
And he and deleverage and mix impacts from premium amortization, partially offset by cost savings.
Okay.
The MD&A decline was mainly due to lower marketing spend and discretionary expenses as well as cost savings.
We increased marketing investment behind co innovation brands, such as Chris felt the busy and clean and lifestyle and the increased media spending behind of chronic.
Co brands Coors light and Miller.
These increases were more than offset by low it's been in areas impacted by the pandemic such as sports and lot of entertainment events.
Europe net sales revenue was down 39, 5% and constant currency driven by volume declines and negative geographic and channel mix due to on premise restrictions net meaning.
Meaningfully in the U K given the on premise locked down for the full quarter.
Europe financial volume decreased 22% and brand volume decreased 17% driven by a significant decline in brand volume in the U K.
However, our thankful and eastern European business as the <unk>, <unk>, well and was able to deliver comparable volume basis of Pryor.
The <unk> period.
Net sales per hectoliter on a brand volume basis declined 10, 4% driven by unfavorable geographic channel and brand mix, particularly from our higher margin on premise focused UK business, partially offset by positive pricing.
Underlying EBITDA was a loss of $38 million compete the loss of $4 1 million and the prior year driven by gross margin impacts of lower volume and unfavorable geographic and channel mix as the result of the pandemic, partially offset by lower in G&A expenses, driven by cost mitigation actions.
Turning to the balance sheet net debt was $7 $7 billion down.
<unk>, one 1 billion from March 30, <unk> 2020.
And we ended the first quarter with a strong borrowing capacity with no outstanding balance on our $1 5 billion U S credit facility as of March 31, 2021.
As for our UK COVID-19 corporate financing facility. It was closed on March the 20, <unk> 2021, and we had no outstanding borrowings at that time.
Turning to our financial outlook, we are reaffirming our 2021 annual guidance provided on February the 11th 2021.
We expect to deliver mid single digit net sales revenue growth on a constant currency basis.
Taking a greater feature bold inventories and expect domestic shipment trains and the UAV.
To begin to exceed brand volume and the second half of the year.
For the year, we maintain our current year goal of shipping to consumption in the UAE.
In the U S. We expect improving on premise trains and the second quarter as we not less essentially full closures in the prior year.
Volume, Canada, we have seen increasing on premise restriction continuing to push of the on premise channel.
And Europe, we've seen a gradual opening of the UK on premise beginning in mid April to actual consumption only and we expect through the phased on premise. We opening later in the second quarter, resulting in year on year improvement base of supply period.
We anticipate underlying EBITDA will be flat compared to 2020 as growth is expected to be of states by Cogs inflationary headwinds, but more significantly from increased investment to deliver against our revitalization plan.
We intend to increase marketing spend to build on the strength of our co brands and support the successful 2020 launches, including cleanly and lacked got busy and Coors Seltzer and new innovation plus side of the Chico hard Seltzer and server.
With this in mind, we expect significant year on year increases and marketing spend of the balance of the year and most notably in the second quarter.
We expect second quarter marketing spend to be higher than the second quarter 2020 level and should approach second quarter 2000, and non fee levels.
We also continue to anticipate underlying depreciation and amortization of $800 million net.
Net interest expense of $270 million, plus or minus 5% and and effective tax rate in the range of 20% to 23%.
It also does reminding that in our 2020 net in 2020 or we can cash flow benefited from the deferral of approximately of $150 million and tax payments from various government sponsored payment deferral programs related to the coronavirus pandemic of which we currently anticipate the majority of <unk> This year.
As they become G.
Our interest in 2020 positioned us with greatly improved financial flexibility Baker, enabling us to execute our capital allocation priorities to investing our business to drive top line growth and efficiencies.
Jon Bates and returned cash to shareholders in 2021.
We plan to continue to prudently invest and brewery modernization and production capacity and capability to support new innovations and growth initiatives.
The improving efficiencies and advance towards our sustainability goals.
Driven by our commitment to maintaining anytime upgrading our investment grade ratings, we expect to continue to pay down debt and reaffirm our target net debt to underlying EBITDA ratio of approximately three to five times by the end of 2021 and below three times by the end of 2022.
And in line with our fourth quarter 2020 earnings comments. We currently anticipate that our board of directors will be and are positioned to reinstate a dividend in the second half of this year.
Now we are pleased with the ability to adapt and overcome the faster incredible challenges, we faced and the fifth quarter of continued progress against our revitalization plan the agility of our organization in the face of challenges and the commitment and resilience of our people give us the confidence we can continue to successfully.
Execute our revitalization plan.
Moving long term sustainable revenue and underlying EBITDA growth and we look forward to updating you on our continued progress.
So with that we look forward to taking your questions David.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Our first question comes from Vivien <unk> with Cowen. Please go ahead.
Hi, Thank you very much.
And Kevin you called out the reopening then the it and the UK and it sounds like Ireland and maintenance of announcements. In addition, this morning about outdoor and Thats certainly encouraging given.
How much exposure you have to the UK market.
We look at the comps of the shape of the year is clearly going to be lumpy, but and all.
Order to it and kind of followed we get that business into growth considering the year over year compares on the whole year basis for COVID-19 do you need for indoor reopening or do you think just outdoor is outwork and hold GAAP and love to get you guys had the positive volume for the year. Thanks.
Good morning, Vivien. Thank you, yes look and as you rightly say the UK did the open.
On April 12, so think of it was for outdoor dining and pubs and restaurants, we've seen about 30% to 40% of the of the of.
Of the establishment of reopen and our volume and those establishments and will fall for U K is up double digits and.
And the sort of first few weeks of of <unk>.
Approved.
I think the mix of script as on May the 17th and those opens the complete the and EMEA of June of 2000.
And we'll there'll be a fully open.
So far just a few weeks into the bear and its actually been pretty pretty positive volume.
Thanks.
David.
Yes.
The next question is from Bill Kirk.
With MK and partners.
Hey, Thanks for taking the question I have a follow up on top of Chico hard Seltzer.
It seems that after the sell in and at the shelves have been a little slow to replenish.
So I guess the question is are you or the contract partners, having any difficulty keeping up with demand and if so how does that impact your decision on how geographically broad to offer the product.
Thanks, Bob Good morning, Yes, Youre right I mean, we had a spectacular launch of observed gotcha.
Okay.
We've got very sorry type of Chico and we got to August of 'twenty share and in the.
And in Texas and.
We've got sort of pretty close to seven share of the overall sales and marketing and its first week.
And of performance and.
And as you rightly point out we've had very strong reorders of October chica.
We're working with Coke to increase our supply of of temperature co and I think it will be it.
There'll be a little constrained.
As we meet the <unk>.
Huge unexpected demand for the.
The brand but.
As the as the the weeks of progress I think youll see progression of the those.
The shelf spaces being filled I think it was the right decision for us to go to.
And the limited number of markets that we that we did and we werent the expanding data and so we're quite comfortable that we can meet the.
The substantial demand that we book that we've had and its existing markets.
Thanks, Kevin.
The next question comes from Lauren Graham Day with Guggenheim. Please go ahead.
Yes so.
A quick one since part of these about the.
Eco phenomenon on the energy.
And just to put up from the from this one I'm not sure I understand.
Our core and key.
Sure.
Because you.
And you don't have enough and the.
Flavoring and the nutrients kind of of the concentrate or.
<unk> is co continuing kind of finding of Capex due to manufacturing activity was all manufacturers from the contract manufacturer. So help me understand here and.
The growth could be scary and including the.
And the capacity.
And my second question is more corporate Tracy.
What makes you believe that the the board would be willing to increase the dividend and second half from the what other kpis anymore.
Now moving forward and by that.
Path and Shenzhen.
Thanks, Laura look it was always our intention with the type of Chica that we would take over the relationship which and supply chain, which kind of.
And had established the ahead of us.
And I enjoy the agreement with growth.
And so we work closely with Coca Cola and the.
The third party contractors.
We've seen and the path that it's our intent to sort of keep that relationship.
At least until the till the end of the year and we certainly have enough of a seltzer.
Capacity and our Fort worth the brewery given the the.
400% increase that we.
<unk> made.
At the end of of last year. So that's the role of total private the original relationship was between Coke and the third party and we just worked closely with Coke and the third party.
Sure.
Yes.
Halloween and.
Existing teams.
Confidence.
And our guidance. So we did reaffirm the guidance SBC.
The actions that we took and 'twenty 'twenty greatly improved our financial flexibility and which Peter and enabled us to execute against our capital allocation priorities.
Including investing behind our brands and our business to grow top line and.
To grow our top line to pay down our day and as we said we paid down $1 $1 billion since March of 2020 and.
And so the.
The next and.
And <unk> to return cash to our shareholders and.
SBC consistent with our Q4 2020 earnings comments, we do currently anticipate that our board will be in a position to reinstate the dividend and the second half of the year and and we are having those discussions with them and as to when and how and we.
We will reinstate that dividend.
Thanks Mark.
The next question is from Andrea <unk> with J P. Morgan. Please go ahead.
Thank you. So I just wanted to follow up the on first on the and G&A of the ability to control and you had an impressive reduction and the leverage of pool for the end of the year. So keep your FX.
FX neutral EBITDA flat, so wondering how and how long and how many levers you can pull in order to fund the additional.
Marketing spend and shoe Nevertheless have from tinnitus reduction.
And.
And basically the everything else I'm, assuming to any and all.
The other synergies that you have been pulling sort of if you can help us kind of bridge that gap I guess, Doug. The question is for Tracy and and also on a follow up for the dividend.
And you said the way we should the thinking is that as you go into the second quarter and you basically go for this plan waiting the board is waiting to see if you don't need to revise anything by the second quarter and all of the two state the dividend is the.
By the way.
And we should be thinking here.
I'll tell you what Andrea I'll take care of the marketing side of your question and then price. If you can handle the G&A and the dividends out of and drives Christian.
Thanks, Tom.
Our revitalization plan one of the core tenants was that we were going to spend more money behind our co brands.
And our above premium brands and also to.
The extend beyond the bureau, with with the with above premium and the first quarter, we actually did increase of Austin behind our innovations and will also increase the spend behind media on our core brands.
In fact, we didn't make any adjustments to our marketing plan and.
Q1 is the result of the sort of a security incident all of the Texas <unk>.
The storm.
And I, we spent what we were planning to states, particularly behind US I'll say the core brands and our innovations we didn't plan to state and a lot of money in Europe because of the on premise classes and and we certainly didnt spend any money as Tracey said in the opening remarks on lot of sports a lot of concepts in the USA and Canada, because they werent.
We do expect the substantial increase in marketing, particularly in Q2.
And I think pretty close of the 2019 levels as we as we fuel the tremendous momentum that we've got behind brands.
Brands like busy type of our Chico's co brands with not a lot of includes lots of and obviously as Europe starts to reopen the mill will be increasing our marketing spend in Europe, and Q2 and beyond as well.
And you want to take G&A, and then the dividend, yes and.
And Greg from the from a G&A point of view and.
Obviously, the offing flag peony.
Can you just not spending behind.
The restrictions and travel.
And at the targeted cost savings for example of the new UK. We the on premise was was locked down and for the entire quarter. The they will obviously savings related to that as well from the G&A point of view.
Just wanted to remind you the X and we do have the cost savings program that we announced last year at $600 million over three years and in 2020, we achieved $270 million of 600, and and we expect to achieve.
And instead of rushing and equal portions of the balance in 2021 and 2022 and.
And so there is the cost savings, which we.
Continuing to correct, the well against and that will provide some relief and.
And and enable us to.
Our net with a revitalization of tenant and invest behind our brands to grow the top line.
As it relates to and the board and as I can.
We all day, we are having.
Invitations with the board the RFC thing exactly when and how we will be and we will be recommending to the board to reinstate the dividend so and of course that much more than that but more to come.
Thank you <unk>.
The next question is from Chris Carey with Wells Fargo Securities. Please go ahead.
Hi, everyone.
Yes.
I guess I'm, just trying to understand a little bit.
How this year is going to play out of just just given what you guys kind of mentioned.
Which I think basically is.
Shipments will.
Exceed depletions and not until the back half of the year. So that's really where the inventory replenishment starts the Q2 more in line and consumption and maybe not getting back all of the volume that you lost during the incidents and Q1 and the quarter and Q2 that is.
And then you have your expectations for <unk>.
Marketing spending issues and G&A as a proxy and <unk>.
Q2, being up year over year and sort of in line with COVID-19 levels or a little bit below I think thats, what I heard and.
And I guess, if I'm, putting all of that together.
The key something like and.
And G&A of plasma of basis points, and North America for example, and EBITDA implied.
Kind of double.
Double digits and the back half of the year to get to the flat EBITDA and and I know and bring a lot of numbers out there, but but the general concept here is that.
Q2.
Slow recovery at the <unk>.
Have the significantly accelerated spend what happens if the recovery is a little bit slower do you pull back on that and then just confirming and this dynamic that it seems like to get to the flat EBITDA, it's really about just delivery and the back half of the year apologies for more of a financial question, but.
Is that kind of makes sense I appreciate any perspective on that thanks.
Thanks, Chris Okay. There is a lot of in that question right. So I mean, obviously.
Not going to give the quarterly guidance the numbers of the guidance with Tracy is giving you the other.
For the full year and wheels and.
And that standard on by themselves.
And from a recovery of point of view.
Yes.
Pretty quickly put a plan in place.
Causing our co brands of.
Coors Light Miller Coors banquet.
Blue Moon, and Miller high life, Keystone, Lachlan and lot of Google's. The summer Shandy. So that's a primary focus of the at the moment, we've discontinued or de prioritize.
Slower moving brands and impacts most of that is and the economy space, but also.
Some solder.
The the.
The plan is designed to make sure that we that we recover our.
Co brands to be in a much better price by Memorial day, and ultimately force.
For Europe.
<unk>.
The self service and the innovation supply frankly wasn't affected by the cyber security incident.
At all.
And I can suppliers returned back to normal producing 12 ounce bottles and the <unk>.
At full capacity.
The I guess to try and get a little bit closer to your to your question, obviously with us really only focusing on the co brands that that will imply that the.
The slower moving and some of the day prioritized brands were the only really be picked up and the second half of the of the year from a from a volume perspective.
From a marketing spend perspective, we've got a lot of momentum behind some of some really exciting innovations, which of which of landed well and will be will be fueling those and.
Coors lots and lots of performance as I said in my opening remarks is the strong campaigns of working and we will be putting the necessary firepower behind those and those two brands that you want to add net interest I think the covenants.
Thanks, Christine and thanks for the perspective, thank you.
The next question is from Steve powers with Deutsche Bank. Please go ahead.
Yes, Thank you and.
I guess can we.
Maybe hone in on the impacts of the February storms and the cyber security event.
And a bit more detail and just how you size those impacts in the first quarter.
And the final analysis.
The amount of those impacts represent effectively lost sales versus volume you expect to recoup over the balance of per year as of the prescribed the response to Chris's question.
And just to understand that dynamic and a bit more detail will be great and maybe as part of that if you could just characterize how things.
U S channel inventory and we're.
The exiting March relative to consumer demand run rates.
And just yes.
And we're trying to really try and figure out what the what the catch up is now that I presume the shifting to full capacity as we sit here end of April. Thank you.
Thanks, Steve.
And could we see.
And towards the end of March we did file an 8-K, which which laid out what we thought was going to be the impact of the cyber security attacks.
Memory serves me correctly, you said one of two 2 million hits revisions.
The shift of of EBITDAR of about 120 to 140 billion.
Our I would tell you that the recovery plan and our supply chain teams and just did a tremendous job and the second of.
And of March.
I would say by the end of March we were a couple of 100000 barrels ahead of where we were expecting to be so I think.
You can assume that the impact was the was a little bit less and what we what we've said and.
And our 8-K and.
As we sit here today I think the 29th of April we've continued to meet the recovery plan and in fact exceeded a little bit so.
The occupant.
Our breweries or were on track with the debt recovery plan.
We have seen sequential improvement in our core brands inventory, but we're not where we want to be just yet.
Expect to be much closer to where we want to be with those brands by.
And by Memorial Day, and then and then fully recover on the co brand towards.
And the sort of decade of.
The of the second quarter and then we can focus in on those brands that we have.
The cost.
Beyond that I think that's about as far as on the go on the on the index Steve.
Okay fair enough.
Maybe I'll just from the February storms was there on the <unk>.
The net impact there or was that more.
Of the way the intra quarter and the real kind of carryover effect of the cyber security events.
And it takes us hurt because the Texas, Brian was closed for almost 11 day.
The shut the power down enough of them.
And.
It obviously has knock on impacts because there are some of our input material suppliers and Texas as well so.
It did have an impact further up the eastern seaboard as well so.
I would say certainly.
The impact and was part of the $1 million to $2 million ex leaders, which which we announced.
And the lion's share was obviously the cybersecurity incident the Fort worth.
Cut down was not immaterial.
Understood. Thank you very much.
The next question comes from Kevin Grundy with Jefferies. Please go ahead.
Great. Thanks, Hello, everyone.
Kevin a few related questions if I could on the market share progress that you called out on Coors light and of course this has been a priority.
And for the company.
The 33 related questions. If I could one of if you could just spend a moment and talking about the strategic shifts around marketing and positioning of the brand given some of the pressures on the light beer segment to what your growth expectations are for light beer broadly sort of coming out of the pandemic here and then lastly, just how you think about maximizing increments of <unk> to the AUM.
<unk> portfolio as you lean in on our multi brand sales strategy given the light viewers of had been a source of demand for sales. There. So any comments there would be helpful. Thank you.
Thanks, Kevin and again, a lot going on and the let me touch on and then maybe try and knock them off so I'll start with your final point, Rod, which is which is actually.
And.
More than half of the of the of the self the growth is actually coming from outside of the per category.
<unk>.
We've tested that number of multiple times over the last year, and it's and it's pretty consistent.
Obviously premium lots of all losing.
And I want to <unk>, but it's true.
Certainty is coming from.
Other places, including Kraft and Ironically.
Condoms less sort of actually premium blocks, which.
It may surprise, you, but it's worth of data sales.
We have seen continued positive trends for Coors light and mono line over the over.
Of the past quarter Dovetailing off of the strong performance, which we had and in <unk>.
2020, and the focus the replacing of the health of our co brands as is paying off and specifically.
And specifically our ambitions to connect with new drinkers, and giving them. The real reason to reach 44, Metalogic Coors light and kind of.
Breakthrough that <unk>.
Advertising clutter and with with fresh creative approaches and we're seeing the benefits of it and for example and co.
Louis line were up significantly increased key brand health metrics that consideration and mark.
The household presence and.
Penetration positive impressions amongst 21 to 34 year olds, which is which is a key target market for us.
So far and 2021 mile Oxy, and increasing both consideration and positive inflation.
And I can go on and put some more detail on how the.
The Coors Light campaign is has turned the corner of since the since the 2019 launch of of May of two major chose branch growth segment share and premium and locks every quarter. Since we had launched we've cut our share of loss from the total category borrowings by more than.
Moving to 2000 and more than 70% of I think it was of course lots of continuing to establish itself as the as the brand consumers buy with the we've made really to chose of the campaign and for Coors light is resonating strongly with our co market, but also our growth targets for.
For example, the law.
Drink and so.
And our revitalization strategy required us to.
And to invest behind our core brands and we do.
Doing exactly that and we are seeing the the benefits of it from a.
From a share point of view I think I gave you some of the stats and our in our opening the opening remarks, I don't know if I mentioned and above premiums also gaining industry share.
The last guy is doing particularly well and and.
I haven't talked much about about busy but.
We think we've got a real winner.
With the Zee is achieved.
And almost a 3% share and 2020 with only one SKU.
And that skewed move foster and Q1 and old Bud light Seltzer variety of picks put together.
We're expanding our footprint with new Pics, we've got sick and variety pack.
Eliminate pack and we've got a third of <unk> launching in summer.
A variety pack number twos already turning faster than a variety of <unk> number one and your ability eliminated is the second fastest turning eliminated seltzer and the market busy actually had a record sales.
Last week.
You gave me a lot of questions and I'll try to give you a lot of launches and give you a little bit of color I hope that helps Kevin.
And that's fantastic so congrats on the quarter and and good luck here.
Okay.
Okay.
The next question comes from Bryan Spillane stolen from Bofa. Please go ahead.
Hey, Thanks, operator, good morning, everyone.
Kevin I had a question about on premise.
And in North America, and I guess more specifically specifically the U S.
And on premise reopens.
And how different do you think it might look going forward given seltzer is the much bigger portion of the category and growing today.
Some accounts may be looking for.
Ways to reduce touches.
And kind of.
On the sanitizing tight.
Or just thinking about sanitation.
So I guess I'm, just trying to think that could on premise potentially look different and the future and it did pre COVID-19 and if so does that create any opportunities for for Molson Coors to gain some share and on premise.
And so I think the answer to both of your questions Brian is the.
Yes during the pandemic.
We certainly saw and increased demand for large trusted brands and.
And that's particularly true and the on premises.
Is your question is starting today and we also sort of the offerings, but it's particularly true and the on premise with.
The on premise the owners are sticking to fewer faster moving brands net obviously benefits brands, Mark Miller Lite and Coors light.
It also helps us from a from a blue Moon.
Point of view as well and <unk>.
And is the largest craft brand as you know and it's disproportionately focused on the on the on premise.
The reopening of the on premise and the move to large trusted brands is helping us, particularly with many of our Coors box and and Blue Moon, and we've seen a tick up.
Couple of points and our in our.
Sure and the in the on premise is the on premises and has reopened.
And you referenced and Celsis on on premise and.
And certainly in packaged form I think that that is absolutely right.
We've actually had triple digit growth and arm.
And our placements this year and in a.
The retailers are reaching out to us asking for type of chico's of as quickly as possible given its spectacular launch and the demand thats been created by this disc.
The distribution of Celsis and velocity for us and the on premise is actually increasing and thats going to give us a real opportunity to do large scale of sampling opportunities, particularly through our through our alliances because we know we've got great tasting products when we get confused.
Two.
Tried and Theyre sold and that also.
Plus the innovation.
And let me let Scott.
We're launching two drove sales was on a on a regional basis through our cross companies and we will see how that plays out but certainly we're seeing.
Big uptick.
Demand for our sales of packaged brands in the in the on premise.
And if I got all of that Brian.
Yes, no that's great. That's helpful perspective, thanks, Kevin.
Thanks.
The next question is from Ron Rob The Aten Stein with Evercore. Please go ahead, great great. Firstly, just a quick follow up and then the main question. So just wondering kind of where where you are.
In terms of the current run rate and the U S on Str's.
And there are kind of run and download double digit and the scanner data, but obviously the on premise is offsetting that so just trying.
Trying to get a sense of where the business actually is that that would be helpful and.
And then my main question really is on the hard Seltzer is Gavin.
It sounds like Youre doing better than expected with topo Chico better than expected with busy.
Do you have maybe increased confidence that youll get to that double digit share of the category.
By the end of the year.
And then you also referenced some work that youre doing on the international side.
With hard Seltzer is how I mean, how do you see those European markets developing for hard Seltzer is do you think there is a chance it can be as big as it is and the U S or is it very different given the different consumer. Thank you.
Thanks, Rob Okay, Let me take the the first question first.
Look as you know.
We don't normally give these updates to the more but I think given the cyber security incident of or make an exception and give us give you some some flavor for how april's.
Type of goal.
And you referenced scanner data and I mean, obviously that needs context for us I mean, the four week data.
The scanner data is including the master of loading that we had in Europe and the off premise from March of.
Of last of last year, and so it doesn't take into account any shifting to the into the on premise.
And over the last four weeks, our sales to retailers in the United States are up mid single digits, Rob sort of quite different to what youre seeing in the spirit of data <unk>.
Shipping over 1 million barrels of weekly and the USA as I said in my in my prepared remarks and.
And the UK volumes of.
Of double digits, despite the uneven as I say, it's $30 to 40% of of.
And on premise being opened and.
Are the four for outdoor diamond.
Your second question around around Celsis.
Hitting towards our goal of double digits, 10% by the by the end of the year.
Yes.
Youre right I mean, we had a spectacular launch of type of Chico and the.
Very limited markets and.
And Richard Sidney.
And 16.
The markets I think we've got of care when I guess.
And it will continue to fuel the potential of the office of the Brandon.
And based on the reaction and the 16 market. So I think it's got strong national potential and we will look to roll that out.
And to future markets when we when we're confident that we can meet the.
Unexpectedly very high demand that we had and the rollout markets.
Derived from Brazil, I think we believe we have a real winner with the.
The zero hour and repeat the states just gave I think it was two two Brian.
Kevin.
I think particularly exciting for US is the fact that busy eliminated as of the second forces tuning.
And given that it's still sort of as I said, we had a record sales week four.
For the last year.
The police the performance of singular SKU last year, we already launched in April and we had the inventory challenges while we're meeting.
All of the demand for <unk> now that we've got the.
And the capacity up and running and Fort worth.
Fort worth breweries.
If that means that we're more confident to get to our 10% of TARP.
And we certainly think because of the brands in.
And the Seltzer space.
To do that and now we need to execute.
I think the early data and the in the European market.
The sell through is going to is going to be good I'm not sure yet that I am ready to tell you that it's going to be as good and as it is and the United States. We don't have any data to support that.
Certainly three folds has landed well in the and the United Kingdom, and and why is already in a couple of markets in central and Eastern Europe, and we'll be rolling it out more fully towards the.
And in this month.
So I hope that helps Europe.
Great. Thank you Kevin.
The next question is from Bonnie Herzog with Goldman Sachs. Please go ahead.
Thank you Hello, everyone.
I just wanted to quickly circle back to the cost pressures you're facing this year I know you guys touched on this day and then maybe you can just give us a little more color on how you expect this will evolve through the balance of where and what are some of the key levers that you have to mitigate some of these pressures.
And maybe touch on a little bit further on and it kind of hedging you have in place and.
And then I loved the here, how you're thinking about pricing and the potential leather and to offset some of these cost pressures.
And that Bonnie so I'll take the and the cost of Christian.
And.
The underlying Cogs in the quarter increased five 6% and 470 basis points of the.
And <unk> inflation with just under half of that relates the key and the transportation side.
And and.
I think everyone knows the Frank Marketers really talk me and you spoke about this and Q4 and we said we expected to continue to be and talking in Q1.
At the start showing improvements in January and the beginning of February but the net change that all of the winter storms and that caused major disruptions G&A and Thai of transportation networks.
And we expect to continue to see that talking and the freight market and then as it relates to us and.
And Ken from four continents of the ultra XD attitude to that inflation.
And in terms of labor.
And to mitigate that and.
I did mention our cost savings program.
So we didn't have the $270 million of the 600 million and in 2020, we expect to deliver the balance of that.
In 2021, and 2022 vaccine and equal portions and we doing so far we tracking well to achieve those savings and the majority of those cost savings all focused on Cogs, sorry, and.
The addition to the cost savings program and as you mentioned, the we have and.
Really the robot teaching programs, we hedge all of our commodities.
So we can I don't want to get into the detail of of.
We hate the.
Hitting programs.
And brought back then and that.
And will help to mitigate some of the inflationary pressure.
And that's the Austin.
And it took place and then think of stress on the revenue side.
Plenty of look in terms of price and we don't give forward pricing guidance.
Rather than using pricing to offset.
The product Cogs, we've got hedging programs in place, which Tracy mentioned and we have the cost savings programs in place as well and.
Did you mentioned and the fact that our guidance does actually include any costs.
And the cost pressures, which we may have reflected that into the guidance, which Tracey gave earlier on.
Thanks, Bonnie Thank you helpful.
The next question is from Sean King with UBS. Please go ahead.
Great. Thanks for the question.
The broader question about.
Distributor of receptivity and the beyond beer moves that you're making like how has that impacted the year relationships with distributors and then the second question on top of that would just be any update you can provide on the progress with the <unk> JV.
Thanks, Sean.
Yes look and my excitement on Xyrem and got ahead of me when I was answering the telco chica equation earlier earlier on.
The zone has been extraordinarily well received by retailers.
And by distributors alike and.
We've got a very strong partner.
And the Dwayne Johnson and he is not just the celebrity partnership do you see is actually and the owner of the business together with us.
And frankly every time, you put something out and Instagram and reaches 231 million followers in the.
And of Nanosecond.
The the truth of it.
Of how innovation lens is what are the distributors order and we just had our order windows for the 31st order and close I think of us.
The last part of the macro for and the orders are strong and that shows you how the distributors feel about it the retailers are particularly excited about it is as well so.
And we're just getting into the market with it with it now so I don't want to get ahead of myself, but where it has been and the market with some of the vitamin stores and GNC and online.
It's been the.
The results of our tremendous.
Short story and very excited about zone.
On a from a retailer and.
And the supplier and consumer point of view lots of alone we've already hit our distribution targets, we had distribution targets with the with a partner lack of loans.
The states for the full year, and we are and where we're in.
In April and we've and we've hit them so.
As an illustration of how the distributors of executed in there and the C stores and the and the <unk>.
James.
The short answer is.
Very good Shawn.
From an England point of view and <unk>.
And this amount of work has gone into getting the according to launch and the full of.
Of this year and and takes us they've made.
The tremendous progress joined range of hiring.
And first setting up the distributor relationships and awarding the the brand to the to the various distributors and Texas and gaining commitments spoken to the change.
I would say.
We're exactly where we thought we'd be we're seeing the joint venture.
Great. Thank you very much all the best.
Sure.
The next question is from Neil <unk> with Credit Suisse. Please go ahead.
Hello, everybody and thanks for taking the question a question on sales and guidance, perhaps together and then sauces and profitability and.
Your guide for mid single digits for the full year.
Incorporating from the contribution for seltzer sort of lot of positive comments, but how.
And how big do you expect it to be the big enough and sort of point of the five points.
Is it three if you could maybe just give some context on how youre thinking about it there and then how should we think about profits and the impact on profits.
From many of these products and as you mentioned zone.
And obviously, there's more than one on are there and what's top of Chico here.
And the Coke and rolling it out can you just maybe give us the context on the beef the.
The revenue contribution.
Different from the profit contribution thank you.
And I'm not going to break down the.
The breakdown the sort of brand contribution.
And you saw I'll give you two points there.
One is the.
Our celsis and.
Almost all of the value of innovation operates and the above premium space.
And from and the Super premium space and some of our innovation ex the operator, even above the super premium space.
A lot of profit to go around for both of ourselves for our suppliers for distributors and.
And for retail is all above premium brands and they're all going to contribute to the to the bottom line of it over time.
And as far as contribution today and as always concern.
And essentially we had we had one brand and the market for eight months of the year last year with with the Zee and.
I think we exited the last.
The exit of the year close to a full share of of Celsis.
We're closer to the savings share now than we were at a four share.
And we've got the plans and we got the marketing muscle to put behind our sources for the balance of the year on and we're going to be repetitive and full you on all the.
The excitement around around busy and both the type of Chico proof points, just launched into the into the market.
These brands are coming off of the offer.
The low base from a contribution point of view in 2022 of our business.
And so we would expect them to be of much more meaningful contribution to our business in 2021 and I hope that's helpful color Mark.
Got it thank you.
The next question is from Lauren Lieberman with Barclays. Please go ahead.
Sorry of I'll keep it tight and Mike.
The question was just on cyber security and just thinking about it.
Go forward costs.
Investments you might need to make to kind of shore up.
Systems I know.
The company has been through several years of very very high.
Tie ins and so just thinking about the degree to which maybe there's been some underinvestment and.
And there is a need to kind of catch up and and the degree to what's the kind of already factored into this year or next year and thought process on the spend thanks.
And so just in Kansas the Binney.
Part of the cyber incident and in Q1, we and as the city not earnings release, we did incur and net expense of $2 million and.
And as it related to.
The various consultants and experts that help to us and are helping us with the investigation I actually don't want to talk too much about it because it's still is an open investigation and around around the incidents, but just in terms of the basements and.
We have seen significant amount of capex upgrading our systems and in North America, and we've spoken about QE and for a number of years of PP&E systems and at the stage and we are also upgrading and at systems. The full Canada will be actually taking the Canadian systems and putting it on <unk>.
UA system.
So and you know more than more than net debt and.
Lauren.
And really don't want to give because it isn't.
Jason just in terms of of Q2, though as it relates specifically to the incidents and we did do you anticipate from food and minimal really immaterial cost.
And as the as we could've put it put the debate.
Okay. That's great. Thanks, Thanks, so much.
Thanks Mark.
This concludes our question and answer session I would like to turn the conference back over to Gavin Hattersley for any closing remarks.
Thanks Debbie.
Thanks, everybody for participating in our call and there may be additional technical questions that you have and please feel free to follow up with a low of.
Investor Relations team and.
And we look forward to talking with many of you as the as the year progresses.
With that thanks, everybody for participating in today's call and have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.