Q1 2021 Molson Coors Beverage Co Earnings Call
So per ambition.
Our trust joint ventures, non alcoholic cannabis beverages of holding strong as the number one dollar share spuds in the entire Canadian cannabis beverage market.
As expected the availability of our 12 ounce standard cans returned to normal levels.
And we continued working to protect the environment strategic Mifid and the initiatives in the United Kingdom.
So let's look deeper in each area.
That starts with our core we will continue to see improving brand volume trends, the Coors light and by the large in North America over the past quarter Dovetailing of strong performance in 2020.
But the performance is even more impressive when you look at our biggest brands and our biggest family of brands.
<unk> finished the quarter with the strongest category share performance since Q1 of 2017.
Coors banquet posted the best quarterly volume performance of over four years in the United States.
We're building on that strong performance in the Coors family of brands with launch of Coors period in March our first USDA certified organic brand.
And we had a strong Q1 in Panama with over a 50% increase in brand volume with Coors Light's explosive triple digit growth leading the way.
Now 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 of single week TERP of Chico Hartzell. So the jump two of three to share with you. It's hard seltzer category. Despite the any launching in 16 markets and has achieved the 20 share in Texas.
Now I know, it's early days, but that is of spending fact that speaks to the opportunity with this brand.
And is not alone in our portfolio moving.
He was the IRR top 10 U S industry growth brand in Q1, we are building on that with the brands second variety pack, which launched in March and then use the Z eliminate which launched several weeks later.
They are both performing well.
And in fact, the eliminated is 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 of <unk> Seltzer of top five of hard Seltzer brands. The some of the leading Canadian retailers.
In the UK, 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.
In above premium bids blue moon lifestyle of the number one new item and USB of last year is currently the number one share gainer in U S profit there in 2021.
And hope fairly has made its official national debut in the U S and Canada.
So our first national IPA in 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, we made a lot of news as we took 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 the matter of months is just now beginning to hit show the.
The bar Memorial Day, we expect total will have over 80000 points of distribution and by the end of summer debt number is expected to climb to nearly 150 <unk>.
<unk> gives us the number one above premium player in 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 cannabis joint venture with Axa is holding strong as the number one dollar share position with six of the top 10 cannabis beverage skus and cash.
Canada and.
And our trust USA joint venture is building on the through the first lineup of hemp derived CBD beverages in Colorado.
And we have now entered the fast growing RTD cocktail space through an exclusive equity distribution agreement with Super book and above premium Tequila based from Omar.
This entire lineup represents tremendous growth for our business and is helping us drive of our emerging cross division towards the $1 billion revenue business by 2023.
Last but certainly not the least is how we are investing in non capabilities, our people and our communities we.
We have long been recognized as the leader for our environmental efforts and several weeks ago, we became the first major UK book.
Alright entirely by renewable energy.
Soon every one of the 1 billion parts of data we've produced annually in the U K will be made with 100% renewable energy.
And we didn't stop day youre, removing plastic rings from all of our major cracks across the U The U K.
In the use of this month, we announced our investment in true colors in North Carolina based brewery that was founded on the premise that aligning rival gang members under the same roof. The common goal to both mitigate street violence and create economic opportunity.
We are excited to share our knowledge of growing brand positioning and supplier relationships and we are excited to be part of the business that is driving positive change and creating economic opportunity.
Now 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 on trend gradually begin to open back up in the U K the industry standard current inventory normalized and our weekly shipments in the U S top 1 million barrels for the first three nearly a year.
We are making progress on the things that are within our control and we are delivering against our revitalization plan.
And that is what gives me the confidence to reaffirm our guidance for the full year.
That is what gives me confidence in the current expectation that the board will be in a position to reinstate the dividend in the second half of this year.
That is what gives me confidence that we'll achieve long term top line growth.
Net is what tells me the future of Molson Coors is price.
Tracy.
Thank you, Kevin and Hello, everyone.
The challenges Kevin mentioned, we are proud of the operational agility and resilience as the <unk>.
The many JD challenges, but still continuing to execute a robust foundation.
Now let me take you through our quarterly results and provide an update on our outlook.
Consolidated net sales revenue decreased 11, 1% in constant currency since the Pte Qdoba financial volume, which the times 12, 13 or brand volume declined nine 1%.
We delivered net processing glass in North America, and Europe, as well as positive brand mix in the UK as we continue to premium of Apple failure.
However, this was more than offset by the on premise restrictions due to the coronavirus pandemic and the corresponding negative channel mix as well as the unfavorable shipment timing in the U S related to the cybersecurity incident and it takes the winter storms.
Net sales per hectoliter on a brand volume basis increased one 8% in constant currency.
The net cost of glass more than offset the negative mix effect in Canada and Europe.
Underlying cogs per hectoliter increased five 6% on the constant currency basis, driven by cost inflation and volume deleverage, partially offset by cost savings.
So adding cost inflation was higher transportation costs due to the continued talking of the freight market in North America.
As well as higher sourcing costs as we continue to source additional aluminum cans from all over the world to date the significance of famous demand for our core brands.
In G&A in the quarter decreased 15, 9% on 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 EBIT impacted by the pandemic, we continue to invest as planned behind our core brands and key innovation.
As the results underlying EBITDA decreased 22% on the con.
Currency basis.
Underlying free cash flow of the use of $271 million per the quarter, an increase in cash of $54 million from the five year period, driven by lower underlying EBITDA and unfavorable working capital driven by the timing of payments related to low volume high.
Non income tax the sales due to governmental programs related to the coronavirus pandemic and incentive payments, partially offset by lower capex spend.
Capital expenditures paid $103 million for the quarter, which will largely focus on our previously announced Golden brewery modernization projects.
Capital expenditures of allowing the quarter compared to the prior year, primarily due to project timing.
Now, let's look at our results by business units.
North America markets experienced viewing degrees of on premise restrictions.
Of the UE, our largest market, we felt the aggressive re openings and while the has been sequential improvement in the on premise channel. We are still not back to pre pandemic levels.
In Canada, we saw significant restrictions and closures while in Latin America, we saw restriction easing.
North America net sales revenue was down six 3% in constant currency Q2 financial volume declines of nine 4%, reflecting lower brand volume due to the on premise restrictions and starting the March pantry loading in the prior year as well as unfavorable shipment timing in the UAE.
In the U S brand volume decreased seven 3% compared to domestic shipment declines of nine 5%.
Given 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 third quarter since the creation of the Miller Coors joint venture.
10 of the brand volumes. The current 10, 8% primarily due to the on premise closures, while Latin America brand volume grew 10 eight the themes.
Net sales per hectoliter on a brand volume basis increased two 4% in constant currency.
In the U S net sales per hectoliter on a brand volume basis increased four 1% driven by positive brand mix led by innovation brands busy chart, the Chico hard seltzer and seller.
In Canada negative channel mix more than offset 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 $18 three the think in constant currency due to the low end net sales revenue and higher Cogs per hectoliter, partially offset by 14, 4% decrease in G&A in constant currency.
The increase in Cogs per hectoliter was driven primarily by inflation, including higher transportation and packaging material costs.
Volume deleverage and mix impacts from premium amortization, partially offset by cost savings.
The MD&A decline was mainly due to lower marketing spend and discretionary expenses as well as cost savings.
We increased marketing investment behind core innovation brands, such as clear itself, the busy and Blue Moon light Sky and the increased media spending behind our core brands Coors light and Miller.
These increases were more than offset by lower spend in areas impacted by the pandemic, such as sports and live entertainment events.
Europe net sales revenue was down 39, 5% in constant currency, driven by volume declines and negative geographic and channel mix due to on premise restrictions net 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.
However, as painful and eastern European business has performed well and was able to deliver comparable volume basis.
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 in the prior year driven by gross margin impact of lower volume and unfavorable geographic and channel mix as the result of the pandemic, partially offset by lower SG&A expenses driven by cost mitigation actions.
Turning to the balance sheet date was $7 $7 billion down $1 1 billion from March 30, <unk> 2020.
And we ended the first quarter with the strong borrowing capacity with no outstanding balance on our one 5 billion U S credit facility as of March 31, 2021.
As for our UK COVID-19 corporate financing facility. It was closed on loss of the 2000 through 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 the away.
A great city to build inventories and expect domestic shipments sales in the UAE.
To begin to exceed brand volume in 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 trends in the second quarter as we not less essentially full closures in the prior year.
Volume, Canada, we are seeing increasing on premise restriction continuing to pressure the on premise channel.
In 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 offset by cost inflationary headwinds, but more significantly from increased investment to deliver against our revitalization plan.
We intend to increase marketing theme to bolt on the strength of our core brands and support our successful 2020 launches, including Blue Moon light Sky, Dizzy and Coors, Seltzer and new innovations like the Chico hard Seltzer and server.
With the demand, we expect significant year on year increases the 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 levels and to approach second quarter 2000, and non fee levels.
We also continue to anticipate the underlying depreciation and amortization of $800 million.
Net interest expense of $270 million, plus or minus 5% and an effective tax rate in the range of 20% to 23%.
It also of days reminding that in our 2020 net in 2020 of our working capital benefited from the deferral of approximately $150 million in tax payment from various government sponsored payment deferral programs related to the coronavirus pandemic of which we currently anticipate the majority of the PPA.
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 invest in our business to drive top line growth and efficiencies pay down debt and return cash to shareholders in 2021.
We plan to continue to prudently invest in brewery modernization and production capacity and capability to support new innovation and growth initiatives.
Pre the efficiencies and advance towards our sustainability goals.
Driven by our commitment to maintaining anytime upgrading line based on 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 in a position to reinstate a dividend in the second half of this year.
Now we are pleased with the ability to adapt and overcome the phosphate incredible challenges we faced in the first quarter.
Our 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.
Can continue to successfully execute our revitalization plan driving 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.
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.
Gavin you called out the reopening of the U K it sounds like.
Ireland and maintenance of announcements.
In addition, this morning about outdoor so thats certainly encouraging given how.
How much exposure you have to the.
The UK market.
We look at the comps of the shape of the year is clearly going to be lumpy, but.
Order to the 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 of outdoor can hold GAAP love to get your guys to positive volumes for the year. Thanks.
Good morning, Vivien. Thank you, yes look as you rightly say the UK did the open.
On April 12, so think of it was for outdoor dining at pubs and restaurants, we've seen about 30% to 40% of the of the.
Of the establishment of reopen and our volume in those establishments as it will fall from U K is up double digits.
And the sort of first few weeks of of.
April.
I think the mix of script as on May the 17th indoors opens the complete the enemy of June 22nd will there'll be a fully open.
So far just a few weeks into the burden of it's actually been pretty pretty positive.
Thanks.
David.
Yes.
The next question is from Bill Kirk.
M K M partners.
Hey, Thanks for taking the question.
I have a follow up on top of Chico hard seltzer.
Seems that after the sell in that the shelves have been a little slow to replenish.
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, Paul Good morning, Yes, you are right I mean, we had a spectacular launch of observed gotcha.
Right.
We've got the type of Chico's, we got the August of 'twenty share and in.
In the in Texas and.
Got it pretty close to seven share of the overall sell to the market and its in its first week.
Of performance.
As you rightly point out with a very strong reorders of October Chica, where.
Working with Coke to increase our supply of.
Of temperature and I think it will be.
There'll be a little constrained.
As we meet the <unk>.
Huge unexpected demand for debt.
The brand but.
The as the the weeks per groups I think youll see progression of the those.
The shelf spaces being filled the requires the right decision for us to go to.
The limited number of markets debt.
<unk> that we did and we won't be expanding debt until we are quite comfortable that we can meet the.
The substantial demand that we book that we've had in its existing markets.
Thanks, Kevin.
The next question comes from Lauren Graham Day with Guggenheim. Please go ahead.
Yes so.
A quick one to swap fees of about the book of Chico phenomenon.
Just to put up from the from this one I'm not sure I understand.
Our core cash.
Here.
Because you don't have enough of your.
Flavoring and the nutrients kind of of the concentrates or.
<unk> is continuing to kind of finding capacity to manufacture if activity was all manufacturers from the contract manufacturer. So the strength here.
The rule could be starting in the <unk>.
Considering the.
The GAAP SCP.
And my second question is more for <unk>.
What makes you believe that the the board would be willing to increase the dividend second half from the one.
Other <unk> anymore.
Now moving for pathogen free.
Thanks, Laura look it was always our intention with the type of Chica that we would take over the relationship which in supply chain, which total current ahead.
Had established the ahead of us.
Enjoy the agreement with the color and so we work closely with Coca Cola and the.
The third party contractors.
We've seen in the past that it's our intent to sort of keep that relationship.
At least until the till the end of the year I mean, we certainly have enough of a seltzer.
The capacity in our Fort worth the brewery given the the <unk>.
400% increase that we that we made towards the end of last year. So that's the role total part of the original relationship was between Coke and the third party and we just worked closely with Coke and the third party.
Yes.
During the third and fitting teams of <unk>.
Our confidence around our guidance.
Should we assume the guidance SBC.
The actions that we took in 2020 greatly improved our financial flexibility.
And which better enabled us to execute against our capital allocation priorities.
<unk> investing behind our brands and our business to grow top line and.
To grow our top line to pay down our debt and as we said we paid down $1 $1 billion since March of 2020.
And so the.
And Eva is to return cash to our shareholders and.
The SEC consistent with our Q4 2020 earnings coming we do currently anticipate that our board will be in a position to reinstate the dividend in the second half of the year.
And we are having those discussions with them.
When and how and.
We will reinstate that dividend.
Thanks, Laura.
Thank you.
The next question is from Andrea <unk> with J P. Morgan. Please go ahead.
Thank you. So just wanted to follow up the on first on the 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 neutral EBITDA flat, so wondering how how long and how many levers you can pull in order to fund the additional <unk>.
Marketing spend and shoe Nevertheless have from June of this reduction in.
And basically the everything else I'm, assuming to any and all the.
The other synergies that you have been pooling. So if you can help us kind of bridge that gap I guess asked a question for Tracey and then also on a follow up for the dividend.
Is that the way we should be 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 discipline of is that the way.
We should be thinking here.
I'll tell you what Andrea I'll take care of the marketing side of your question on in price. If you can handle the G&A in the on the dividend sort of address Christian.
Thanks, Tom.
The revitalization plan one of its core tenants was that we were going to spend more money behind our core brands.
Honda our above premium brands and also too.
Extend beyond the bureau, with with the with the above premium in the first quarter, we actually did increase of Austin behind our innovations and we also increased the spend.
<unk> media on our core brands.
In fact, we didn't make any adjustments to our marketing plan in Q1 as the result of the sort of a security incident all of the Texas fix of storm.
We spent what we were planning to spend particularly behind as I say, the core brands and our innovations.
The plan to spend a lot of money in Europe because of the on premise classes.
We certainly didn't spend the money as Tracey said in the opening remarks on large sports a lot of concepts in the USA, Canada, because they werent.
We do expect the substantial increase in marketing, particularly in Q2 the.
Trading pretty close of the 2019 levels as we as we fuel the tremendous momentum that we've got behind.
Like busy telco Chico co brands of Mono line includes lots of and obviously as Europe starts to reopen the mills will be increasing our marketing spend in Europe in Q2 and beyond as well first of all.
G&A in the dividend yes.
Greg from from.
The G&A point of view.
Obviously, the off things like peony.
You're just not spending behind with the restrictions in travel.
And the other targeted cost savings for example of the new UK. We the on premise was was locked down for the entire quarter. The they will obviously savings related to that as well from the G&A point of view I also want to remind you the X and we do have the cost savings program that we announced last year.
600 million over the three here.
In 2020, we achieved $270 million of the 600 and and we expect to achieve.
And instead of rushing in equal portions of the balance in 2021, and 2022 and so the.
Is the cost savings, which we continue.
Continuing to track very well against debt will provide some relief.
And enable us to cash.
Our net with a revitalization of Anand and invest behind our brands to grow the top line.
As it relates to the board and as I think we all day, we are having conversations with the board of the RFP thing exactly when and how we will be and we will be recommending to the board to reinstate the dividend.
And of course that much more than net 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 just just given what you guys kind of mentioned.
Which I think basically as shipments will exceed.
The depletion, but not until the back half of the year, So that's really where the inventory.
On the shred it starts in Q2 more in line of consumption, So maybe not.
Getting back all of the volume that you lost during the incidents in Q1 in the quarter.
In Q2 that is.
And then you have.
Expectations for.
Marketing spending.
And G&A as a proxy.
Q2, being up year over year and sort of in line with COVID-19 levels or a little bit below I think that's the way I heard it.
And I guess, if I'm, putting all of that together.
Something like <unk>.
G&A of 500 basis points of North America for example in EBITDA implied.
Kind of double digits in the back half of the year to get to the flat EBITDA and I know I'm, putting a lot of numbers out there, but with the general concept here is that.
Q2, a slow recovery at the.
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 this dynamic that it seems like to get to the flat EBITDA. It's really about just delivery in the back half of the year apologies for more of a financial question, but.
Yes.
Is that kind of makes sense.
Appreciate it a perspective on that.
Thanks, Chris Okay. These are low.
And the accretion right. So I mean, obviously, we're not going to give the quarterly guidance the numbers of the guidance of Tracy is giving you the other.
For the full year of Mills, and the Olympics that Standalone by.
By themselves.
From a recovery of point of view.
Pretty quickly put a plan in place we're prioritizing our core brands of.
Coors Light Miller Coors banquet.
Blue Moon, and Miller high life, Keystone, Lachlan and lot of Google's Summer Shandy. So that's a primary focus of the at the moment, we've discontinued or de prioritize the slower moving brands in the impacts most of that is in the economy space, but also.
Some solder.
Now the.
The plan is designed to make sure that we that we recover.
Our core brands to be at a much better place by Memorial day.
Ultimately force.
For Europe.
The self service and the innovation supply frankly, it wasn't affected by the cyber security incident.
At all.
Ken suppliers of return back to normal.
The 12 ounce bottles in the plant at.
The 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 core brands that debt will imply the.
The slower moving and some of the day prioritized brands were the only really be picked up in 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 from some really exciting innovations, which of which have landed well and we'll be we'll be filling those in.
Coors lots of Millilux performance as I said in my opening remarks is strong the campaigns of working and we will be putting the necessary firepower behind those those two brands would you want to add with interest no I think the covenants.
Thanks, Chris Thanks, Thanks for the perspective, thank you.
The next question is from Steve powers with Deutsche Bank. Please go ahead.
Yes. Thank you.
I guess can we.
Maybe hone in on the impacts of the February storms in the cyber security of that.
And a bit more detail on how you size those impacts in the first quarter.
In the final analysis.
Of the amount of those impacts represent effectively lost sales versus volume you expect to recoup over the balance of the year I think you've described the response to Chris's question.
Just understanding that dynamic of 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 exiting March relative to consumer demand run rates.
Yes.
We're trying to really kind of figure out of it.
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.
Did we see.
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 attack of.
Memory serves me correctly, you said one of 222 million hits revisions shift.
The shift of EBITDAR of about $120 million to $140 million.
I would tell you that the recovery plan our supply chain team just did a tremendous job in the bank.
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 than what we what we'd say the now.
Our 8-K and as we sit here today I think it's 29 as of April we've continued to meet the recovery plan and in fact exceeded the little bit so.
Austin.
Our breweries or were on track with debt 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 wanted to be with those brands bar.
By Memorial Day, and then.
The fully recovered on the co brand towards.
The sort of back end of.
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 one of material net impact there or was that more.
The delay intra quarter and the real kind of carryover effect of the cyber security events.
It takes us hurt because the Texas brewery was closed for almost 11 day.
The shut the power down on us.
And.
It obviously has knock on impacts because there are some of our input materials suppliers in 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 2 million liters, which we announced the.
Of the lion's share it was obviously the cyber security incident, the Fort worth.
Shutdown 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 for the company.
So 33 related questions. If I could one of if you could just spend a moment 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.
As to the overall portfolio as you lean in on our multi brand Seltzer strategy given the light beers have had been a source of demand for self source of your comments there would be helpful. Thank you.
Thanks, Kevin Mackay of lot going on the let me touch on then the return Luckily more Australia of final point, Rod, which is which is actually.
<unk>.
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 are losing.
<unk> two <unk>, but it's true.
Certainly is coming from.
Other places, including Kraft and Ironically.
Condoms less sort of actually premium line, which.
It may surprise, you, but it's what the data sales.
We have seen continued positive trends for Coors light and mono line over the over the past quarter Dovetailing off of the strong performance, which we had in <unk>.
2020, and the focus of the replacing of the health of our core brands is as part of it all specifically our ambitions to connect with new drinkers and giving them. The real reason to reach full force Metalogic Coors light gray kind of breakthrough that <unk>.
Advertising.
With the with fresh creative approaches and we're seeing the benefits of it for example.
Coors light were up significantly increase the key brand health metrics that consideration of Mark.
The household.
Penetration positive impressions amongst 21 to 34 year olds, which is which is a key target market for us.
So far in 2021 will not see an increase in both consideration and positive impression.
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 made to make the choice brands growing segment share and premium the locks every quarter. Since we had debt launched we've cut our share of loss from the total category borrowing from.
More of them.
Moving 2000 of more than 70% of I think it was of course lots of continuing to establish itself as the as the brand consumers buy when they when they are ready to chose of the campaign for Coors light is resonating strongly with our core market, but also our gross profits.
For example, the.
Of the Latino drink.
Our revitalization strategy required us to.
In the.
Behind our core brands and we're doing exactly that and we are seeing the the benefits of it from.
From a share point of view I think I gave you some of the stats in our in our opening opening remarks, I don't know if I mentioned that above premiums also gaining industry share.
The agreement, Alaska is doing particularly well.
I haven't talked much about about busy but.
We think we've got a real winner.
With the <unk> achieved.
The 3% share in 2020 with only one SKU.
Our net Skus moved faster in Q1 of all Bud light Seltzer variety of picks put together.
We're expanding our footprint with new pics, we put a chicken variety pack.
The eliminate pack and we've got a third the various launching in summer.
A variety pack number twos already turning faster than a variety of <unk> number one and the ability eliminated is the second fastest turning eliminated.
Elsewhere in the market, where they actually had a record sales.
<unk>.
Last week.
You gave me a lot of questions I'll try to give you a lot of answers from getting a little bit of color I hope that helps Kevin Kevin that's fantastic. So congrats on the quarter and then good luck here.
Okay.
The next question comes from Bryan Spillane stolen from the OE. Please go ahead.
Hey, Thanks, operator, good morning, everyone.
Gavin I had a question about on premise.
In North America, and I guess more specifically specifically the U S.
And on premise reopens.
How different do you think it might look going forward given seltzer is a much bigger portion of the category and growing today.
Some accounts may be looking for.
Ways to add reduce touches.
Kind of.
Sanitizing tight.
Thought or just thinking about the sanitation.
So I guess I'm, just kind of think that could on premise potentially look different in the future than it did pre COVID-19 and if so does that create any opportunities for four.
Most of the cores to the gain some share in on premise.
So I think the answer to the base of your questions Brian is the.
Yes during the pandemic, we certainly saw an increased demand for large trusted brands.
That's particularly true in the on premises.
Is your question is direct to that we also sort of the offerings, but its particularly true in the on premise with.
The on premise the owners are sticking to fewer faster moving brands net obviously benefits brands lack of another lots of Coors light.
It also helps us from a from a blue Moon.
Point of view as well.
And is the largest craft brand as you none of 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 one of our current blocks and Blue Moon and we've seen the pick up couple.
Couple of points.
The in the.
The on premise is the on premises is reopened.
You referenced then celsis on on premise.
Certainly in packaged form I think that debt is absolutely right I mean, we are in.
We've actually had triple digit growth.
In our placements this year.
<unk> is the reaching out to us asking for type of Chico as quickly as possible given its spectacular launch the demand thats been created by debt.
On the distribution of Celsis velocity for us in the.
Non premises is actually increasing and it is going to give us a real opportunity to do large scale of sampling opportunities, particularly through our through our lines. Because we know we've got great tasting products when we get confused too.
<unk>.
Driving the soles that also.
Plus too.
I should like limited lot Scott.
The launching two drugs sales was on a on a regional basis through our cross the companies, we'll see how that plays out but certainly we're seeing.
Big uptick.
The demand for our sales of packaged brands in the in the on premise RFID.
I hope 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 in the U S on Str's.
There are kind of running down low double digit in 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 then my main question really is on the hard Seltzer is Gavin.
It sounds like you're doing better than expected with topo Chico better than expected with Dizzy.
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 market's developing for hard Seltzer is do you think there's a chance it can be as big as it is in 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 anymore, but I think given the cyber security incident of or make an exception of that give you give you some flavor for how april's.
Type of goal.
You referenced scanner data, obviously debt needs context, Raj I mean, the four week data.
The scanner data is including the massive loading that we had in the <unk> in the off premise from March of.
Of last of last year, and so it doesn't take into account of any shift into 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 so quite different to what youre seeing in the scanner data, we're shipping over 1 million barrels of weak in the USA as I said in my prepared remarks.
The UK volumes.
Of double digits. Despite study as I've said, 30% to 40% of.
On the premise being opened.
Are the four.
Outdoor diamond.
Your second question around around Celsis.
Sure.
Hitting towards the goal of double digits or 10% by the by the end of the year.
Youre right I mean, we had a spectacular launch of type of Chico in the.
Very limited markets.
And Richard J D study in.
<unk>.
Markets I think we've got of care when Asia.
It will continue to fuel the potential of this of this of the Brandon.
Based on the reaction in the 16 markets. So I think it's got strong national potential.
We will look to roll that out too.
The two future markets when we when we're confident that we can meet the.
Unexpectedly very high demand that we had in the rollout markets.
Derived from Brazil, I think we believe we have a real winner with the.
Our non repeat the steps I just gave I think it was two two Brian.
Kevin.
I think particularly exciting for us is the effect of busy eliminating the second forces tuning.
Moving on it's still serve as I said, we had a record sales week.
The fourth.
For the last year.
The police the performance of a singular skew 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.
The capacity up and running.
With the.
Fort worth breweries.
If that means that we're more confident to get to our 10% target. We certainly think we've got the brands.
In the Celsis price.
To do that and now we need to execute.
I think the early data in 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 in the us.
As it is in the United States, we don't have any data to support that but.
Certainly three folds has landed well in the in the United Kingdom 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.
In this month.
So I hope that helps Rob.
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 could just give us a little more color on how you expect this will evolve through the balance were and really 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 any kind of hedging you have in place.
And then I'd love to hear how you're thinking about pricing as the potential lever to offset some of the cost pressures.
The Bonnie so I'll take the and the costs of Christian.
And.
The underlying Cogs in the quarter increased $5 six the themes and 470 basis points of the.
Was inflation with just under half of that related to the transportation side.
And I think everyone knows the Frank marketers really talk we spoke about this in 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 changed at all of the winter storms and that caused major disruptions to the entire transportation network.
And we expect to continue to see the stocking in the freight market.
As it relates to us.
The sourcing cans from four continents that they will also actually added to that inflation.
And in terms of labor.
The to mitigate that.
I did mention our cost savings program.
So we didn't have the 270 million of of the $600 million in 2020, we expect to deliver the balance of that.
In 2021, and 2022 vesting in 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.
In addition to the cost savings program and as you mentioned we have.
Really the rollback teaching programs, we hedge all of our commodities.
So we can't I don't want to get into the detail of of.
We hate the hedging programs.
Robust and debt.
Will help to mitigate some of the inflationary pressure.
That's the oxy.
So the took place on the and then thanks guys from the revenue side.
Part of you look in terms of price and we don't give forward pricing guidance.
Rather than using pricing to offset.
The product progress, we've got hedging programs in place, which Tracy mentioned and we have the cost savings programs in place as well.
Did you mentioned the fact that our guidance does actually included in cost.
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 yes.
Yes.
The broader question about <unk>.
Distributor of receptivity to some of the <unk>.
Non 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 of any update you can provide on the progress with the England JV.
Thanks, Sean.
Yes look the my excitement on zone got ahead of me when I was answering the total chica equation earlier earlier on.
The zone has been extraordinarily well received by retailers.
And by distributors of lock in.
We've got a very strong partner.
Dwayne Johnson he is not just the celebrity partnership do you see is actually and the owner of the business together with us.
Frankly every time, you put something out of an Instagram reaches 231 million followers.
In the nanosecond.
The the <unk>.
Taste of of how innovation lens is what are the distributors order I mean, we just had our order windows for the 31st order.
So think of us.
The last night about non performed the orders are strong and that shows you how the distributors feel about it the retailers are particularly excited about it as.
As well so.
We're just getting into the market with it now so I don't want to get ahead of myself, but where it has been in the market with some of the vitamin stores and GNC and online.
It's been the.
The results of our tremendous.
Short story very excited about zone.
On a from a retailer in the.
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 like loans.
Sales for the full year and we're in we are in April of <unk>.
He'd been in debt.
Debt is an illustration of how the distributors of executed in there in the C stores and the and the.
James.
Short answer is very good shown from of England point of view.
Tremendous amount of work has gone into getting that ready to launch in the fall of <unk>.
Of this year and in Texas They have made.
The tremendous progress the joined range of hiring.
Setting up the distributor relationships and awarding the the brand to the to the various distributors in Texas from gaining commitments spoken to the change.
I would say.
We're exactly where we thought we'd be we're seeing the joint venture.
Alright, Thank you very much all the best ex.
Sure.
The next question is from Kamil <unk> with credit Suisse. Please go ahead.
Hello, everybody. Thanks for taking the question a question on sales guidance, perhaps together and then sources of profitability in <unk>.
Your guide for the mid single digits for the full year.
Of incorporating from the contribution for seltzer sort of a lot of positive comments, but how.
How big do you expect it to be the big enough to sort of point of the five points.
Is it three if you could maybe just give some context on how you are thinking about it there and then how should we think about profits and the impact on profit.
From many of these products as you mentioned.
Obviously, there's more than one on or there was a jump of Chico here on the.
You can of Coke and rolling it out can you just maybe give us a context on the basis of revenue.
Contribution.
Different from the profit contribution thank you.
Well look cargo.
Im not going to break down the <unk>.
Breakdown the.
All of the brand contribution.
Any sore I'll give you two points.
One is the.
Our celsis and.
Almost all of the value of innovation operates in the above premium space.
And from in the Super premium space in some of our innovation ex the operator, even above the super premium space. There's a lot of profit to go around for both of ourselves for our suppliers or distributors.
And for retail these are all above premium brands and they are all going to contribute to the to the bottom line of it over time so.
As far as contribution today and as always concern.
Essentially we had we had one brand in the market for eight months of the year last year with with the busy and I think we exited the last.
Exited the year of close to a full share of.
Of Celsis.
We're closer to seven share now than we were at a four share.
We've got the plans we've got the the marketing muscle to put behind our sources for the balance of the year of not going to be repetitive and full you on all of the.
The excitement around around busy and both the type of Chico proof points, just launched into the into the market. So these brands are coming off of the offer.
Fairly low base from a contribution point of view in 2022 of our business and so we would expect it to be of much more meaningful contribution to our business in 2021 and I hope the.
That's helpful total.
Got it thank you.
The next question is from Lauren Lieberman with Barclays. Please go ahead.
Hi, sorry of I'll keep it tight.
My question was just on cyber security and just thinking about go forward costs and investments you might need to make to kind of shore up.
The systems I know.
The company has been through several years of very very high.
Hi times instead of just thinking about the degree to which maybe there's been some underinvestment.
And as I need the kind of catch up and the degree of what's that's kind of already factored into this year or next year, you had thought process on the spend thanks.
Just in terms of the then.
Can you talk of the cyber incident in Q1 and as the city not earnings release, we did incur a net expense of $2 million.
And as it relates to the T V.
Various consultants and experts debt that helped us.
And are helping us with the investigation.
I want to talk too much about it because it still is an open investigation and around around the incidents but.
10th of of investments and.
We have seen significant amounts of capex upgrading our systems in North America, and we've spoken about 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 system been putting it onto UA system.
So more than moving net debt and.
Lauren.
I really don't want to give because it is mandated.
Jason just in terms of of Q2, the as it relates specifically to the incidents. We did do you anticipate from food and minimal really immaterial cost.
As the as we could have put it put the debate.
Okay. That's great. Thanks, Thanks, so much.
Thanks, Brian.
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 and.
Thanks, everybody for participating in our call there may be additional technical questions, which you have and please feel free to follow up with a flow of.
Investor Relations team.
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.