Q1 2023 Molson Coors Beverage Company Earnings Call

May 2, 2023

Operator: Good day, and welcome to the Molson Coors Beverage Company Q1 fiscal year 2023 earnings conference call. You can find related slides on the investor relations page of the Molson Coors website. Our speakers today are Gavin Hattersley, President and Chief Executive Officer, and Tracey Joubert, Chief Financial Officer. With that, I'll hand it over to Greg Tierney, Vice President of FP&A, Commercial Finance, and Investor Relations. Please go ahead.

Operator: Good day and welcome to the Molson Coors Beverage Company first quarter fiscal year 2023 earnings conference call. You can find related slides on the investor relations page of the Molson Coors' website. Our speakers today are Gavin Hattersley, President and Chief Executive Officer, and Tracey Joubert, Chief Financial Officer. With that, I'll hand it over to Greg Tierney, Vice President of FP&A, Commercial Finance, and Investor Relations. Please go ahead.

Speaker 1: With that, I'll hand it over to Greg Tierney, Vice President of FP&A, Commercial Finance, and Investor Relations. Please go ahead.

Greg Tierney: Thank you, operator, and hello, everyone. Following prepared remarks today from Gavin and Tracey, we will take your questions. In an effort to address as many questions as possible, we ask that you limit yourself to one question. If you have technical questions on the quarter, please pick them up with our IR team in the days and weeks that follow. Today's discussion includes forward-looking statements. Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in our most recent filings with the SEC. We assume no obligation to update forward-looking statements. GAAP reconciliations for any non-GAAP measures are included in our news release. Unless otherwise indicated, all financial results the company discusses are versus comparable prior year period in US dollars and in constant currency when discussing percentage changes from the prior year period.

Greg Tierney: Thank you operator and hello everyone. Following prepared remarks today from Gavin and Tracy we will take your questions. In an effort to address as many questions as possible, we ask that you limit yourself to one question. If you have technical questions on the quarter please take them up with our IR team in the days and weeks that follow. Today's discussion includes forward-looking statements. Actual results or trends could differ materially from out forecast. For more information, please refer to the risk factors discussed in our most recent filings with the SEC. We assume no obligation to update forward-looking statements. GAAP reconciliations for any non-US GAAP measures are included in our news release.

For more information, please refer to the risk factors discussed in our most recent filings with the SEC. We assume no obligation to update forward-looking statements. GAAP reconciliations for any non-GAAP measures are included in our news release. Unless otherwise indicated, all financial results the company discusses are versus comparable prior year period in US dollars and in constant currency when discussing percentage changes from the prior year period.

Greg Tierney: Unless otherwise indicated, all financial results the company discusses are versus the comparable prior year period in U.S. dollars and in constant currency when discussing percentage changes from the prior year period. Also, US shared data references are sourced from Circana, formerly called IRI.

Greg Tierney: Also, US share data references are sourced from Circana, formerly called IRI. Further, in our remarks today, we will reference underlying pre-tax income, which equates to underlying income before income taxes on the condensed consolidated statements of operations. With that, over to you, Gavin.

Also, US share data references are sourced from Circana, formerly called IRI. Further, in our remarks today, we will reference underlying pre-tax income, which equates to underlying income before income taxes on the condensed consolidated statements of operations. With that, over to you, Gavin.

Speaker 2: Also, US shared data references are sourced from Circana, formerly called IRI.

Greg Tierney: And further, in our remarks today, we will reference underlying pre-tax income, which equates to underlying income before income taxes on the condensed consolidated statements of operations. With that, over to you, Gavin.

Gavin Hattersley: Thanks, Greg, and thank you all for joining us this morning. When we reported our 2022 results, I said our ability to grow the top and bottom line was neither an anomaly nor an accident.

Speaker 2: With that, over to you, Gavin.

Gavin Hattersley: Thanks, Greg, and thank you all for joining us this morning.

Gavin Hattersley: When we reported our 2022 results, I said our ability to grow the top and bottom line was neither an anomaly nor an accident. It's the result of sticking relentlessly to a clear strategy. I also said our [inaudible] sustainable, long term top and bottom line growth. And while we remain cautious about the consumer outlook over the course of 2023, so far this year, we have continued to deliver.

Gavin Hattersley: ... It's the result of sticking relentlessly to a clear strategy. I also said our North Star is to deliver sustainable, long-term top and bottom line growth. While we remain cautious about the consumer outlook over the course of 2023, so far this year, we have continued to deliver. In Q1, we grew the top line by high single digits, and we nearly doubled our bottom line. These are clearly strong results following a strong 2022 as well, but I would caution you not to simply apply this growth rate to the entirety of 2023. Certainly, the fundamental strength of our business was a driver in our performance, but we also benefited from the lapping of Omicron-related restrictions in some of our markets, and particularly strong pricing in all of our major markets compared to the prior year period. These drivers were expected.

It's the result of sticking relentlessly to a clear strategy. I also said our North Star is to deliver sustainable, long-term top and bottom line growth. While we remain cautious about the consumer outlook over the course of 2023, so far this year, we have continued to deliver. In Q1, we grew the top line by high single digits, and we nearly doubled our bottom line. These are clearly strong results following a strong 2022 as well, but I would caution you not to simply apply this growth rate to the entirety of 2023.

Speaker 3: It's the result of sticking relentlessly to a clear strategy.

Speaker 3: And while we remain cautious about the consumer outlook over the course of 2023, so far this year, we have continued to deliver.

Gavin Hattersley: In the first quarter, we grew the top line by high single digits and we nearly doubled our bottom line. These are clearly strong results following a strong 2022 as well. But I would caution you not to simply apply this growth rate to the entirety of 2023. Certainly the fundamental strength of our business was a driver in our performance, but we also benefited from the lapping of Omicron-related restrictions in some of our market and particularly strong pricing in all of our major markets compared to the prior year period. These drivers were expected. As a result, we are maintaining our full year guidance, and Tracy will go into more detail on that shortly.

Speaker 3: These are clearly strong results following a strong 2022 as well. But I would caution you not to simply apply this growth rate to the entirety of 2023. Certainly the fundamental strength of our business was a driver in our performance, but we also benefited from the lapping of Omicron-related restrictions in some of our market.

Certainly the fundamental strength of our business was a driver in our performance, but we also benefited from the lapping of Omicron-related restrictions in some of our markets, and particularly strong pricing in all of our major markets compared to the prior year period. These drivers were expected.

Gavin Hattersley: As a result, we are maintaining our full year guidance, and Tracey will go into more detail on that shortly. Importantly, the fundamentals of our business are strong. We're growing revenue in both business units and across our iconic brands, and our above-premium innovation across the Americas, and the EMEA and APAC, is truly changing the shape of our portfolio. So we see reasons for continued caution in the broader consumer landscape. As you are all aware, the consumer packaged goods industry remains impacted by rising interest rates and global inflation, both of which persisted into the first quarter. While we are still not experiencing meaningful trade down in our US business, we have seen consumers shifting away from mid-size packs towards singles and larger packs. In February, I mentioned we had seen a price-sensitive subset of consumers shifting to smaller pack sizes, in particular to single serves.

As a result, we are maintaining our full year guidance, and Tracey will go into more detail on that shortly. Importantly, the fundamentals of our business are strong. We're growing revenue in both business units and across our iconic brands, and our above-premium innovation across the Americas, and the EMEA and APAC, is truly changing the shape of our portfolio. So we see reasons for continued caution in the broader consumer landscape.

Speaker 3: and particularly strong pricing in all of our major markets compared to the prior year period. These drivers were expected. As a result, we are maintaining our full year guidance, and Tracy will go into more detail on that shortly. Importantly, the fundamentals of our business are strong. We're growing revenue in both business units and across our iconic brands. And our above premium innovation across the Americas and the [inaudible] is truly changing the shape of our portfolio. So we see reasons for continued caution in the broader consumer landscape.

and particularly strong pricing in all of our major markets compared to the prior year period. These drivers were expected. As a result, we are maintaining our full year guidance, and Tracy will go into more detail on that shortly.

Gavin Hattersley: Importantly, the fundamentals of our business are strong. We're growing revenue in both business units and across our iconic brands. And our above premium innovation across the Americas and the [inaudible] is truly changing the shape of our portfolio. So we see reasons for continued caution in the broader consumer landscape.

As you are all aware, the consumer packaged goods industry remains impacted by rising interest rates and global inflation, both of which persisted into the first quarter. While we are still not experiencing meaningful trade down in our US business, we have seen consumers shifting away from mid-size packs towards singles and larger packs. In February, I mentioned we had seen a price-sensitive subset of consumers shifting to smaller pack sizes, in particular to single serves.

Speaker 3: So we see reasons for continued caution in the broader consumer landscape.

Gavin Hattersley: As you are all aware, the consumer packaged goods industry remains impacted by rising interest rates and global inflation, both of which persisted into the first quarter. And while we are still not experiencing meaningful trade down in our US business, we have seen consumers shifting away from mid-sized packs towards singles and larger packs. In February, I mentioned we had seen a price-sensitive subset of consumers shifting to smaller pack sizes in particular to single serves. Those trends remained in the first quarter.

Speaker 3: And while we are still not experiencing meaningful trade down in our US business, we have seen consumers shifting away from mid-sized packs towards singles and larger packs. In February I mentioned we had seen a price-sensitive subset of consumers shifting to smaller pack sizes in particular to single serves. Those trends remained in the first quarter.

Gavin Hattersley: Those trends remained in Q1, but we are also seeing a shift into larger packs among consumers with higher household income levels. This, combined with channel-shifting behavior among these same consumers, suggests an increased focus on finding the best value, even if it requires shopping at multiple stores. Trends notwithstanding, our brands proved incredibly resilient this quarter, starting with our premium light brands in the United States. Collectively in the US, Coors Light and Miller Lite grew revenue by double digits in the quarter and held total industry dollar share, and Miller Lite was a top 10 growth brand in the quarter. These brands benefited immensely from our first Super Bowl campaign in more than 30 years. During the run-up to the Super Bowl in February, Miller Lite and Coors Light both saw a positive volume trend change versus the prior 13 weeks.

Those trends remained in Q1, but we are also seeing a shift into larger packs among consumers with higher household income levels. This, combined with channel-shifting behavior among these same consumers, suggests an increased focus on finding the best value, even if it requires shopping at multiple stores. Trends notwithstanding, our brands proved incredibly resilient this quarter, starting with our premium light brands in the United States.

Gavin Hattersley: But we are also seeing a shift into larger packs among consumers with higher household income levels. This, combined with channel shifting behavior among these same consumers, suggests an increased focus on finding the best value, even if it requires shopping at multiple stores.

Speaker 3: This, combined with channel shifting behavior among these same consumers, suggests an increased focus on finding the best value, even if it requires stopping at multiple stores.

Collectively in the US, Coors Light and Miller Lite grew revenue by double digits in the quarter and held total industry dollar share, and Miller Lite was a top 10 growth brand in the quarter. These brands benefited immensely from our first Super Bowl campaign in more than 30 years. During the run-up to the Super Bowl in February, Miller Lite and Coors Light both saw a positive volume trend change versus the prior 13 weeks.

Gavin Hattersley: Trends notwithstanding, our brands proved incredibly resilient this quarter, starting with our premium light brands in the United States. Collectively in the US, Quizlite and Miller Lite grew revenue by double digits in the quarter and held total industry dollar share. And Miller Lite was a top 10 growth brand in the quarter. These brands benefited immensely from our first Super Bowl campaign in more than 30 years.

Speaker 3: Collectively in the US, Quizlite and Miller Lite grew revenue by double digits in the quarter and held total industry dollar share. And Miller Lite was a top 10 growth brand in the quarter. These brands benefited immensely from our first Super Bowl campaign in more than 30 years.

Gavin Hattersley: During the run-up to the Super Bowl in February, Miller Lite and Coors Lite both saw a positive volume trend change versus the prior 13 weeks. Coors Lite grew displays leading up to the Super Bowl and was a top three brand for all display activity in February due to the strength of our plans and execution. Outside the US, our iconic brands in Canada and in Europe remain strong as well. In Canada, Molson Canadian grew brand volume and is growing share again in 2023 after returning to share growth in 2022. Coors Lite also grew brand volume. In the UK, [inaudible] remains the number one beer by volume across the industry with distribution and velocity significantly ahead of competition from the Coors segment. More broadly, we grew total financial volume in [inaudible] in the first quarter and our [inaudible] premium portfolio in the UK has been a major growth driver. With re-exception I will continue to grow share during the first quarter.

Gavin Hattersley: Coors Light grew displays leading up to the Super Bowl and was a top three brand for all display activity in February due to the strength of our plans and execution. Outside the US, our iconic brands in Canada and in Europe remain strong as well. In Canada, Molson Canadian grew brand volume and is growing share again in 2023 after returning to share growth in 2022. Coors Light also grew brand volume in Canada. In the UK, Carling remains the number one beer by volume across the industry, with distribution and velocity significantly ahead of competition in the core segment. More broadly, we grew total financial volume in EMEA and APAC in Q1, and our above-premium portfolio in the UK has been a major growth driver. Madrí Excepcional continued to grow share during Q1.

Coors Light grew displays leading up to the Super Bowl and was a top three brand for all display activity in February due to the strength of our plans and execution. Outside the US, our iconic brands in Canada and in Europe remain strong as well. In Canada, Molson Canadian grew brand volume and is growing share again in 2023 after returning to share growth in 2022. Coors Light also grew brand volume in Canada.

In the UK, Carling remains the number one beer by volume across the industry, with distribution and velocity significantly ahead of competition in the core segment. More broadly, we grew total financial volume in EMEA and APAC in Q1, and our above-premium portfolio in the UK has been a major growth driver. Madrí Excepcional continued to grow share during Q1.

Gavin Hattersley: Madrí is now larger than Budweiser in the UK, and recently it moved ahead of Stella Artois in the on-trade, where it is now the number six beer. We continue to see tremendous potential for this brand as we head into the summer months. In the US, Peroni grew brand volume in the quarter, and in February, we introduced Peroni 0.0 in select US regions with a new marketing campaign and a global partnership with the Aston Martin Aramco Cognizant Formula One Team. Just as our portfolio performed strongly in the first quarter across above-premium beer, the same is true for our brands across above-premium flavor and Beyond Beer.

Madrí is now larger than Budweiser in the UK, and recently it moved ahead of Stella Artois in the on-trade, where it is now the number six beer. We continue to see tremendous potential for this brand as we head into the summer months. In the US, Peroni grew brand volume in the quarter, and in February, we introduced Peroni 0.0 in select US regions with a new marketing campaign and a global partnership with the Aston Martin Aramco Cognizant Formula One Team.

Speaker 3: in the UK has been a major growth driver.

Speaker 3: With re-exception I will continue to grow share during the first quarter.

Gavin Hattersley: Medree is now larger than Budweiser in the UK and recently it moved ahead of Stella Artois in the entree where it is now the number 6 beer. We continue to see tremendous potential for this brand as we head into the summer months.

Gavin Hattersley: In the US, Peroni grew brand volume in a quarter and in February we introduced Peroni 0.0 in select US regions with a new marketing campaign and a global partnership with the Aston Martin Formula One team.

Just as our portfolio performed strongly in the first quarter across above-premium beer, the same is true for our brands across above-premium flavor and Beyond Beer.

Gavin Hattersley: Just as our portfolio performed strongly in the first quarter across above premium beer, the same is true for our brands across above premium flavor and beyond beer. We have previously referenced these as distinct spaces in our portfolio, but given the recent evolution in our America's operating structure and to better align with broader industry definitions, we will now speak to beyond-beer inclusive of all non-beer brands, meaning FABs, hard seltzers, first-bake products, and non-alcohol.

Gavin Hattersley: We have previously referenced these as distinct spaces in our portfolio, but given the recent evolution in our Americas operating structure, and to better align with broader industry definitions, we will now speak to Beyond Beer inclusive of all non-beer brands, meaning FABs, hard seltzers, RTDs, and non-alcs. Starting with FABs in the US, Simply Spiked is now a top 10 brand in the segment. It was also a top 5 industry growth brand in the quarter, and just last month, we introduced Simply Spiked Peach. On its own, Simply Spiked Lemonade ended 2022 as the number 2 new item in the total category. We brought Simply Spiked to Canada in Q1, and there is significant runway as we continue to innovate under this brand. In Canada, we are the only large brewer growing share in hard seltzer.

We have previously referenced these as distinct spaces in our portfolio, but given the recent evolution in our Americas operating structure, and to better align with broader industry definitions, we will now speak to Beyond Beer inclusive of all non-beer brands, meaning FABs, hard seltzers, RTDs, and non-alcs. Starting with FABs in the US, Simply Spiked is now a top 10 brand in the segment.

Speaker 3: and to better align with broader industry definitions, we will now speak to beyond-beer inclusive of all non-beer brands, meaning FABs, hard seltzers, first-bake products, and non-alcohol.

It was also a top 5 industry growth brand in the quarter, and just last month, we introduced Simply Spiked Peach. On its own, Simply Spiked Lemonade ended 2022 as the number 2 new item in the total category. We brought Simply Spiked to Canada in Q1, and there is significant runway as we continue to innovate under this brand. In Canada, we are the only large brewer growing share in hard seltzer.

Gavin Hattersley: Starting with FABs in the US, Simply Spiked is now a top 10 brand in the segment. It was also a top 5 industry growth brand in the quarter and just last month we introduced Simply Spiked Peach. On its own, Simply Spiked Lemonade ended 2022 as the number two new item in the total category.

Speaker 3: On its own, Simply Spiked Lemonade ended 2022 as the number two new item in the total category.

Gavin Hattersley: We brought Simply Sprite to Canada in the first quarter and there is significant runway as we continue to innovate under this brand. And also in Canada we are the only large brewer growing share and hard seltzer. In the US, despite cycling last year's national launch, Topachica hard seltzer grew brand volume in March.

Gavin Hattersley: In the US, despite cycling last year's national launch, Topo Chico Hard Seltzer grew brand volume in March. In ready-to-drink cocktails, we've just released Topo Chico Spirited across more than 20 US markets. And recently, we announced our plans to continue building our presence in Beyond Beer with the launch of Peace Hard Tea in select markets later this year, another new branch of our successful relationship with The Coca-Cola Company. As we continue to premiumize our portfolio, we remain focused on growing ZOA as well. After doubling its volume in 2022, we are excited about the opportunity for ZOA in 2023 with our new and vibrant packaging. And finally, in full-strength bottled spirits, we are continuing to expand to whiskey with Five Trail and our new Barmen 1873 Bourbon.

In the US, despite cycling last year's national launch, Topo Chico Hard Seltzer grew brand volume in March. In ready-to-drink cocktails, we've just released Topo Chico Spirited across more than 20 US markets. And recently, we announced our plans to continue building our presence in Beyond Beer with the launch of Peace Hard Tea in select markets later this year, another new branch of our successful relationship with The Coca-Cola Company.

Gavin Hattersley: In Ready to Drink cocktails, we've just released Topachica's Spirit across more than 20 US markets. And recently, we announced our plans to continue building our presence in Beyond Beer with the launch of Peace Pod Tea in select markets later this year, another new branch of our successful relationship with the Coca-Cola Company. As we continue to premiumize our portfolio, we remain focused on growing ZOA as well.

As we continue to premiumize our portfolio, we remain focused on growing ZOA as well. After doubling its volume in 2022, we are excited about the opportunity for ZOA in 2023 with our new and vibrant packaging. And finally, in full-strength bottled spirits, we are continuing to expand to whiskey with Five Trail and our new Barmen 1873 Bourbon.

Speaker 3: As we continue to premiumize our portfolio, we remain focused on growing Zover as well.

Gavin Hattersley: And finally in full-strength bottled spirits we are continuing to expand the whisky with Five Trail and our new Barmen 1873 bourbon. Those brands will be in a total of 25 markets this year and just last week Five Trail was awarded two gold medals at the Denver International Spirits Competition. Our progress in Beyond Beer is just one marker of our commitment to total beverage and it's also a reflection of our successful approach to innovation. But none of this would be possible without continued investment in our capabilities. We've made progress here, and just this month our new flavor packing capabilities will be going on [inaudible] brewery. [inaudible] $65 million in the facility where we now produce majority of our flavor [inaudible] in-house. In modernizing our production capabilities, we've modernized our structure as well. In February, we established a new commercial [inaudible] as Chief Commercial Officer. This new structure is designed to growth across our brand geographies and capabilities.

Gavin Hattersley: Those brands will be in a total of 25 markets this year, and just last week, Five Trail was awarded two gold medals at the Denver International Spirits Competition. Our progress in Beyond Beer is just one marker of our commitment to total beverage, and it's also a reflection of our successful approach to innovation. But none of this would be possible without continued investment in our capabilities. We've made progress here, and just this month, our new flavor packing capabilities will be going online at our Fort Worth brewery. These enhancements involve a $65 million investment in the facility, where we now produce the majority of our flavor innovation brands in-house. Just as we're modernizing our production capabilities, we've modernized our structure as well. In February, we established a new commercial structure in the Americas and elevated Michelle St-Jacques to Chief Commercial Officer.

Those brands will be in a total of 25 markets this year, and just last week, Five Trail was awarded two gold medals at the Denver International Spirits Competition. Our progress in Beyond Beer is just one marker of our commitment to total beverage, and it's also a reflection of our successful approach to innovation. But none of this would be possible without continued investment in our capabilities. We've made progress here, and just this month, our new flavor packing capabilities will be going online at our Fort Worth brewery.

These enhancements involve a $65 million investment in the facility, where we now produce the majority of our flavor innovation brands in-house. Just as we're modernizing our production capabilities, we've modernized our structure as well. In February, we established a new commercial structure in the Americas and elevated Michelle St-Jacques to Chief Commercial Officer.

Gavin Hattersley: This new structure is designed to unlock the next phase of growth across our brands, geographies, and capabilities. First, our US sales and marketing teams will now be working even more closely together with one set of guiding commercial principles. We will also place more emphasis on key growth areas like innovation, Beyond Beer, and digital capabilities. And finally, all of these changes will enable us to make even faster decisions and better ensure our investments match our ambitions across the full commercial landscape. So from the changes we are making within our own team to the progress we are seeing across our global portfolio, the trajectory of our business is becoming clear, no matter how uncertain the environment around us might be. And the message I want to leave you with today is one of consistency and stability.

This new structure is designed to unlock the next phase of growth across our brands, geographies, and capabilities. First, our US sales and marketing teams will now be working even more closely together with one set of guiding commercial principles. We will also place more emphasis on key growth areas like innovation, Beyond Beer, and digital capabilities.

And finally, all of these changes will enable us to make even faster decisions and better ensure our investments match our ambitions across the full commercial landscape. So from the changes we are making within our own team to the progress we are seeing across our global portfolio, the trajectory of our business is becoming clear, no matter how uncertain the environment around us might be. And the message I want to leave you with today is one of consistency and stability.

Speaker 3: First, our US sales and marketing teams will now be working even more closely together with one set of guiding commercial principles. We will also place more emphasis on key growth areas like innovation, Beyond Beer, and digital capabilities. And finally, all of these changes will enable us to make even faster decisions and better ensure our investments match our ambitions across the full commercial landscape. So from the changes we are making within our own team to the progress we are seeing across our global portfolio, the trajectory of our business is becoming clear no matter how uncertain the environment around us might be. The message I want to leave you with today is one of consistency and stability. The results we saw in the first quarter underscore the strong foundation we have built to continue to drive consistent top and bottom line growth. And achieving our eighth consecutive quarter of revenue growth proved [inaudible]. The emphasis we put on our core brands across global markets shows that [inaudible] and grow consistently. The strength of our innovation shows we can premiumize our portfolio consistency. And even in parts of our business that is completely new, we are showing consistent progress and an ability to reach new consumers. There is power in consistency and in our case, there is power in our portfolio that is strategically built to offer consumers a range of winning brands across price tiers and preferences.

Gavin Hattersley: The results we saw in the first quarter underscore the strong foundation we have built to continue to drive consistent top and bottom line growth. And achieving our eighth consecutive quarter of revenue growth proves this out. The emphasis we put on our core brands across global markets shows they can stabilize and grow consistently. The strength of our innovation shows we can premiumize our portfolio consistently. And even in parts of our business that are completely new, we are showing consistent progress and an ability to reach new consumers. There's power in consistency, and in our case, there's power in a portfolio that is strategically built to offer consumers a range of winning brands across price tiers and preferences. And now to give you more detail on the financials and outlook, I'll hand it over to our Chief Financial Officer, Tracey Joubert. Tracey?

The results we saw in the first quarter underscore the strong foundation we have built to continue to drive consistent top and bottom line growth. And achieving our eighth consecutive quarter of revenue growth proves this out. The emphasis we put on our core brands across global markets shows they can stabilize and grow consistently. The strength of our innovation shows we can premiumize our portfolio consistently.

And even in parts of our business that are completely new, we are showing consistent progress and an ability to reach new consumers. There's power in consistency, and in our case, there's power in a portfolio that is strategically built to offer consumers a range of winning brands across price tiers and preferences. And now to give you more detail on the financials and outlook, I'll hand it over to our Chief Financial Officer, Tracey Joubert. Tracey?

Speaker 3: range of winning brands across price tiers and preferences.

Gavin Hattersley: Now to give you more detail on the financials and outlook, I'll hand it over to our Chief Financial Officer, Tracey Joubert. Tracy?

Tracey Joubert: Thank you, Gavin, and hello, everyone. In Q1, on a constant currency basis, we grew net sales revenue 8.2% and underlying pre-tax income 82.8%, while continuing to invest in our business and return cash to shareholders. While we remain mindful of the dynamic global macroeconomic environment and beer industry softness, our Q1 performance, coupled with the strong foundation we have laid over the last three years, provide us confidence to reaffirm our 2023 full year guidance. This guidance would mark another year of growth on a constant currency basis, delivering on our goal of sustainable top and bottom line growth. Now, let's talk about some of the drivers of the Q1 performance.

Tracey I. Joubert: Thank you Gavin and hello everyone. In the first quarter on a constant currency basis we grew net sales revenue 8.2% and underlying pre-tax income 82.8% while continuing to invest in our business and return cash to shareholders.

Tracey I. Joubert: While we remain mindful of the dynamic global macroeconomic environment and bear industry softness, our first quarter performance coupled with the strong foundation we have laid over the last three years provide us confidence to reaffirm our 2023 full-year guidance. This guidance would mark another year of growth on a constant currency basis, delivering on our goal of sustainable top and bottom line growth.

This guidance would mark another year of growth on a constant currency basis, delivering on our goal of sustainable top and bottom line growth. Now, let's talk about some of the drivers of the Q1 performance.

Speaker 4: This guidance would mark another year of growth on a constant currency basis, delivering on our goal of sustainable top and bottom line growth.

Tracey Joubert: Strong global net pricing due to rollover pricing benefits from higher than typical increases taken in 2022, and positive sales mix from premiumization and favorable geographic mix across both business units, led to 8.4% net sales per hectoliter growth. Financial volume declined 0.2%, as lower Americas volumes was partially offset by higher volume in EMEA and APAC. Consolidated brand volume declined 2.1%. Turning to costs. As expected, inflationary pressures continued to be a headwind in the quarter, driving underlying COGS per hectoliter up 7.4%. As you can see from the slides, we bucket COGS into three areas. First is cost inflation and other, which includes cost inflation, depreciation, cost savings, and other items. Second is mix, and third is deleverage.

Strong global net pricing due to rollover pricing benefits from higher than typical increases taken in 2022, and positive sales mix from premiumization and favorable geographic mix across both business units, led to 8.4% net sales per hectoliter growth. Financial volume declined 0.2%, as lower Americas volumes was partially offset by higher volume in EMEA and APAC. Consolidated brand volume declined 2.1%. Turning to costs.

Tracey I. Joubert: Now let's talk about some of the drivers of the first quarter performance.

Tracey I. Joubert: Strong global net pricing due to rollover pricing benefits from higher than typical increases taken in 2022 and positive sales mix from premiumization and favorable geographic mix across both business units led to 8.4% net sales per history to growth. Financial volume declined 0.2% as lower Americas volume was partially offset by higher volume in [inaudible]. Consolidated brand volume declined 2.1%. Turning to cost, as expected, inflationary continues to be a headwind in the quarter, driving underlying COGS at 7.4 percent. And as you can see from the slides, we back up COGS into three areas. First is cost inflation and other, which includes cost inflation, depreciation, cost savings and other items. Second is mix and third is deleverage. The cost inflation bucket drove almost 80% of the increase and was mostly due to higher material conversion and energy costs.

As expected, inflationary pressures continued to be a headwind in the quarter, driving underlying COGS per hectoliter up 7.4%. As you can see from the slides, we bucket COGS into three areas. First is cost inflation and other, which includes cost inflation, depreciation, cost savings, and other items. Second is mix, and third is deleverage.

Speaker 4: to leader at 7.4 percent.

Speaker 4: And as you can see from the slides, we back up COGS into three areas.

Speaker 4: First is cost inflation and other, which includes cost inflation, depreciation, cost savings and other items. Second is mix and third is deleverage. The cost inflation bucket drove almost 80% of the increase and was mostly due to higher material conversion and energy costs.

Tracey Joubert: The cost inflation bucket drove almost 80% of the increase and was mostly due to higher materials, conversion, and energy costs. Cost savings and our hedging program helped to mitigate some of these cost pressures. Other costs per hectoliter drivers included mix, which was about 20% of the increase. This is largely due to the impact of factor brands in the UK, as well as premiumization. While premiumization is a negative for COGS, it's a positive for gross margin per hectoliter. Deleverage had a negligible impact on COGS per hectoliter in the quarter. Now, let's look at our quarterly results by business unit. In the Americas, net sales revenue was up 6.5%, and underlying pre-tax income grew 37.7%.

The cost inflation bucket drove almost 80% of the increase and was mostly due to higher materials, conversion, and energy costs. Cost savings and our hedging program helped to mitigate some of these cost pressures. Other costs per hectoliter drivers included mix, which was about 20% of the increase. This is largely due to the impact of factor brands in the UK, as well as premiumization.

Tracey I. Joubert: Cost savings in our hedging program help to mitigate some of these cost pressures. Other cost per hectare of drivers included mix, which was about 20 percent of the increase. This is largely due to the impact of factored brands in the UK as well as premiumization. And while premiumization is a negative for COGS, it's a positive for gross margin per hectolitre.

Speaker 4: Other cost per hectare of drivers included mix, which was about 20 percent of the increase. This is largely due to the impact of factored brands in the UK as well as premiumization. And while premiumization is a negative for COGS, it's a positive for gross margin per hectolitre.

While premiumization is a negative for COGS, it's a positive for gross margin per hectoliter. Deleverage had a negligible impact on COGS per hectoliter in the quarter. Now, let's look at our quarterly results by business unit. In the Americas, net sales revenue was up 6.5%, and underlying pre-tax income grew 37.7%.

Speaker 4: This is largely due to the impact of factored brands in the UK as well as premiumization.

Speaker 4: And while premiumization is a negative for COGS, it's a positive for gross margin per hectolitre.

Speaker 4: De-leverage had a negligible impact on COGS per hectalissa in the quarter. Now let's look at our quarterly results by business unit. In the Americas, net sales revenue was up 6.5% and underlying pre-tax income grew 37.7%.

Tracey Joubert: Americas net sales per hectoliter increased 7.1%, largely benefiting from strong net pricing growth as well as favorable brand and geographic mix. The strong net pricing growth included benefits from higher than typical US and Canada pricing in 2022. As a reminder, in the US, in 2022, we took two pricing increases: a spring and a fall, each averaging approximately 5%. The spring increase was taken in January and the beginning of February, which was earlier in Q1 than usual, and the fall increase began in September 2022. Financial volume declined 0.5%, and this was due to industry softness as well as lower Latin American and contract brewing volumes.

Americas net sales per hectoliter increased 7.1%, largely benefiting from strong net pricing growth as well as favorable brand and geographic mix. The strong net pricing growth included benefits from higher than typical US and Canada pricing in 2022. As a reminder, in the US, in 2022, we took two pricing increases: a spring and a fall, each averaging approximately 5%.

Speaker 4: America's net sales for hexaliters increased 7.1%, largely benefiting from strong net passing growth as well as favorable brand and geographic mix.

Speaker 4: The strong net pricing growth included benefits from higher than typical US and Canada pricing in 2022.

Speaker 4: As a reminder, in the US in 2022 we took two pricing increases, a spring and a fall, each averaging approximately 5%.

The spring increase was taken in January and the beginning of February, which was earlier in Q1 than usual, and the fall increase began in September 2022. Financial volume declined 0.5%, and this was due to industry softness as well as lower Latin American and contract brewing volumes.

Speaker 4: The spring increase was taken in January and the beginning of February , which was earlier in the first quarter than usual, and the fall increase began in September 2022.

Speaker 4: Financial volume declined 0.5%. This was due to industry softness as well as lower Latin American and contract growing volumes.

Tracey Joubert: This is partially offset by a 1% increase in US domestic shipments to bring our distributor inventory levels, primarily for our core brands, to a stronger position compared to a year ago. Brand volumes were down 1.5%. Looking at brand volume by region, the US declined 1.2% on softer industry performance and lower economy volume. There was also one more trading day in the quarter, so on a trading day adjusted basis, US brand volume was down 2.8%. In Canada, brand volume increased 4.9%, driven by growth in core brands and lacking Omicron on-premise restrictions in the prior year period. In Latin America, brand volume was down 12.4%, largely due to industry softness in some of our major markets in the region.

This is partially offset by a 1% increase in US domestic shipments to bring our distributor inventory levels, primarily for our core brands, to a stronger position compared to a year ago. Brand volumes were down 1.5%. Looking at brand volume by region, the US declined 1.2% on softer industry performance and lower economy volume. There was also one more trading day in the quarter, so on a trading day adjusted basis, US brand volume was down 2.8%.

Speaker 4: This is partially offset by a 1% increase in US domestic shipments to bring our distributed inventory levels, primarily for our core brands, to stronger positions compared to a year ago.

Speaker 4: Brain volumes were down 1.5%.

Speaker 4: Looking at brand volume by region, the US declined 1.2% on software industry performance and lower economy volume.

Speaker 4: There was also one more trading day in the quarter. On a trading day adjusted basis, US brand volume was down 2.8%.

In Canada, brand volume increased 4.9%, driven by growth in core brands and lacking Omicron on-premise restrictions in the prior year period. In Latin America, brand volume was down 12.4%, largely due to industry softness in some of our major markets in the region.

Speaker 4: In Canada, brand volume increased 4.9%, driven by growth in core brands and lasting Omicron on-premise restrictions in the prior year period.

Speaker 4: In Latin America brand volume was down 12.4% largely due to industry softness in some of our major markets in the region.

Tracey Joubert: On the cost side, Americas' underlying COGS per hectoliter increased 5.6%, while MG&A was flat. Turning to EMEA and APAC, net sales revenue increased 16.1% and underlying pre-tax income increased 27.6%. Positive net pricing includes the rollover benefits from increases taken in 2022, favorable sales mix on continued premiumization, fueled by the strength of brands like Madrí, and positive geographic mix drove net sales per hectoliter growth of 15.1%. Financial volume grew 0.8% on the strength of our above-premium portfolio and higher factor brand volume. Brand volume declined 3.9%.

On the cost side, Americas' underlying COGS per hectoliter increased 5.6%, while MG&A was flat. Turning to EMEA and APAC, net sales revenue increased 16.1% and underlying pre-tax income increased 27.6%. Positive net pricing includes the rollover benefits from increases taken in 2022, favorable sales mix on continued premiumization, fueled by the strength of brands like Madrí, and positive geographic mix drove net sales per hectoliter growth of 15.1%. Financial volume grew 0.8% on the strength of our above-premium portfolio and higher factor brand volume. Brand volume declined 3.9%.

Speaker 4: On the cost side, America's underlying COGS per hectoliter increased 5.6% while MG&A was flat.

Speaker 4: Turning to EMEA and APAC, net sales revenue increased 16.1% and underlying pre-tax income increased 27.6%.

Speaker 4: Positive net pricing included the roll-out of benefits from increases taken in 2022. Favourable sales mix on continued premiumization fueled by the strength of brands like Madri and Positive geographic mix drove net sales per hectare growth of 15.1%.

Speaker 4: Financial volume grew 0.8% on the strength of our above premium portfolio and higher effective brand volume.

Tracey Joubert: Looking by market, brand volume grew in the UK, but this was more than offset by declines in our export and license business in markets impacted by the Russia war in Ukraine, which we exited in March 2022, as well as by declines in Central and Eastern Europe due to the impact of inflationary pressures on the consumer. On the cost side, underlying COGS per hectoliter increased 15.2%. This is largely due to cost inflation related to materials, transportation, and energy, as well as mix from premiumization and the impact of factor brands. Underlying free cash flow was -$174 million for the quarter, and this was an improvement of $185 million, primarily due to higher net income and lower cash capital expenditures.

Looking by market, brand volume grew in the UK, but this was more than offset by declines in our export and license business in markets impacted by the Russia war in Ukraine, which we exited in March 2022, as well as by declines in Central and Eastern Europe due to the impact of inflationary pressures on the consumer. On the cost side, underlying COGS per hectoliter increased 15.2%.

Speaker 4: brand volume decanned 3.9 percent

Speaker 4: Looking by markets, brand volume grew in the UK, but this was more than offset by declines in our export and license business in markets impacted by the Russian war in Ukraine, which we exited in March 2022, as well as by declines in Central and Eastern Europe .

Speaker 4: due to the impact of inflationary pressures on the consumer.

This is largely due to cost inflation related to materials, transportation, and energy, as well as mix from premiumization and the impact of factor brands. Underlying free cash flow was -$174 million for the quarter, and this was an improvement of $185 million, primarily due to higher net income and lower cash capital expenditures.

Speaker 4: On the cost side, underlying COGS, the HIC really increased 15.2%.

Speaker 4: This is largely due to cost sensation related to materials, transportation and energy, as well as mix from premiumization and the impact of factory brands.

Speaker 4: Underlying free cash flow was a negative $174 million for the quarter and this was an improvement of $185 million primarily due to higher net income and lower cash capital expenditures.

Tracey Joubert: Turning to capital allocation, our priorities remain to invest in our business to drive top-line growth and efficiencies, reduce net debt, and return cash to shareholders. Capital expenditures paid were $181 million for the quarter. This was down $62 million and was due to the timing of capital projects. Capital expenditures continue to focus on our Golden brewery modernization and expanding our capabilities in areas that drive efficiencies and savings, like our variety factor that Gavin mentioned earlier. We ended the quarter with net debt of $6.3 billion, which is essentially all at fixed rate. Our exposure to floating-rate debt is limited to our commercial paper and revolving credit facilities, which had 0 balances outstanding at quarter end.

Turning to capital allocation, our priorities remain to invest in our business to drive top-line growth and efficiencies, reduce net debt, and return cash to shareholders. Capital expenditures paid were $181 million for the quarter. This was down $62 million and was due to the timing of capital projects. Capital expenditures continue to focus on our Golden brewery modernization and expanding our capabilities in areas that drive efficiencies and savings, like our variety factor that Gavin mentioned earlier.

Turning to capital allocation, our priorities remain to invest in our business to drive top-line growth and efficiencies, reduce net debt, and return cash to shareholders.

Capital expenditures paid were $181 million for the quarter. This was down $62 million and was due to the timing of capital projects.

Catholic percentages continue to focus on our golden brewery modernization and expanding our capabilities in areas that drive efficiencies and savings, like our variety factor that Gavin mentioned earlier. We ended the quarter with net debt of $6.3 billion, which is essentially all at fixed rate.

We ended the quarter with net debt of $6.3 billion, which is essentially all at fixed rate. Our exposure to floating-rate debt is limited to our commercial paper and revolving credit facilities, which had 0 balances outstanding at quarter end.

Exposure to floating rate debt is limited to our commercial paper and revolving credit facilities which had zero balances outstanding at quarter end.

Tracey Joubert: Our net debt to underlying EBITDA ratio was just under 3x, and we remain committed to maintaining and in time, improving our investment grade rating and strive towards a longer-term leverage ratio target of approximately 2.5x. We returned cash to our shareholders with a quarterly cash dividend of $0.41 per share. The dividend represents an increase of 8% from the Q4 2022 level. It is our second increase since we reinstated the dividend in 2021, and it aligns with our intention to sustainably increase the dividend. Now let's discuss our outlook. But first, please recall that we cite year-over-year growth rates in constant currency. When considering the Q1 in relation to our full year, remember, the Q1 is our smallest quarter. The percentage changes in the Q1 are off much smaller bases. Onto our guidance.

Our net debt to underlying EBITDA ratio was just under 3x, and we remain committed to maintaining and in time, improving our investment grade rating and strive towards a longer-term leverage ratio target of approximately 2.5x. We returned cash to our shareholders with a quarterly cash dividend of $0.41 per share. The dividend represents an increase of 8% from the Q4 2022 level. It is our second increase since we reinstated the dividend in 2021, and it aligns with our intention to sustainably increase the dividend.

I mixed it to underline EBITDA ratio was just under three times.

We remain committed to maintaining any time, improving our investment grade rating and 5 towards a longer term leverage ratio target of approximately 2.5 times.

And we returned cash to our shareholders with a quarterly cash dividend of $0.41 per share.

The dividend represents an increase of 8% from the 4th quarter 2022 level.

It is our second increase since we reinstated the dividend in 2021, and it aligns with our intention to sustainably increase the dividend.

Now let's discuss our outlook. But first, please recall that we cite year-over-year growth rates in constant currency. When considering the Q1 in relation to our full year, remember, the Q1 is our smallest quarter. The percentage changes in the Q1 are off much smaller bases. Onto our guidance.

Now let's discuss our outlook. But first please recall that we cite year-over-year growth rates in constant currency.

And when considering the first quarter in relation to our full year, remember the first quarter is our smallest quarter. The percentage changes in the first quarter are off much smaller basis. On to our gardens. We are reaffirming our 2023 gardens, which include low single digit growth, low single digit growth, and low single digit growth.

Tracey Joubert: We are reaffirming our 2023 guidance, which includes low single-digit growth for both net sales revenue and underlying pre-tax income, and underlying free cash flow of $1 billion ±10%. This guidance anticipates full year growth despite softness in the beer industry, caution around the consumer, and impacts of continued global inflationary cost pressures. As we discussed on our Q4 call, our underlying assumptions assume that top line growth is more rate than volume driven, as we continue to benefit from the strong global net pricing that we took in 2022, as well as benefits from portfolio premiumization. Keep in mind that due to the timing of our 2022 US pricing increases, we had a disproportionate benefit in the Q1 of this year.

We are reaffirming our 2023 guidance, which includes low single-digit growth for both net sales revenue and underlying pre-tax income, and underlying free cash flow of $1 billion ±10%. This guidance anticipates full year growth despite softness in the beer industry, caution around the consumer, and impacts of continued global inflationary cost pressures.

for both net sales revenue and underlying free tax income and underlying free cash flow of $1 billion plus a modest 10%

This guidance anticipates full growth despite softness in the beer industry, caution around the consumer and impacts of continued global inflationary cost pressures.

As we discussed on our Q4 call, our underlying assumptions assume that top line growth is more rate than volume driven, as we continue to benefit from the strong global net pricing that we took in 2022, as well as benefits from portfolio premiumization. Keep in mind that due to the timing of our 2022 US pricing increases, we had a disproportionate benefit in the Q1 of this year.

As we discussed on our fourth quarter call, our underlying assumptions assume that top-line growth is more rate than volume driven as we continue to benefit from the strong global net pricing that we took in 2022 as well as benefits from portfolio premiumization. Please be in mind that due to the timing of our 2022 US price...

Tracey Joubert: While it's early yet, we don't anticipate taking another potential general increase in the US until the fall of this year, at which point it is possible we could see pricing return to its more historical levels of 1 to 2%. In terms of financial volume, recall that we have a headwind as a large contract brewing agreement begins to wind down ahead of its termination at the end of 2024. We expect significant volume declines under this contract in the H2 of the year, with acceleration in the Q4. As I previously mentioned, we built stronger US distributor inventory levels at the end of the Q1 versus the prior year, with US shipment trends roughly 4 percentage points ahead of trading day adjusted brand volume.

While it's early yet, we don't anticipate taking another potential general increase in the US until the fall of this year, at which point it is possible we could see pricing return to its more historical levels of 1 to 2%. In terms of financial volume, recall that we have a headwind as a large contract brewing agreement begins to wind down ahead of its termination at the end of 2024. We expect significant volume declines under this contract in the H2 of the year, with acceleration in the Q4.

levels of 1 to 2 percent.

In terms of financial volume, recall that we have a headwind as a large contract brewing agreement begins to wind down ahead of its termination at the end of 2024.

We expect significant volume declines under this contract in the second half of the year with acceleration in the fourth quarter.

As I previously mentioned, we built stronger US distributor inventory levels at the end of the Q1 versus the prior year, with US shipment trends roughly 4 percentage points ahead of trading day adjusted brand volume.

And as I previously mentioned, we built stronger US distributor inventory levels at the end of the first quarter versus the prior year, with US shipment trends roughly 4% points ahead of trading day adjusted brand volume.

Tracey Joubert: We expect this inventory build will unwind in the subsequent quarters as we maintain our goal to ship to consumption for the year. In terms of costs, we expect the impact of inflation on COGS to remain elevated in Q2 before moderating in H2 of the year, and we continue to expect it will be a headwind for the year. However, utilizing our levers, which include pricing, ongoing cost savings efforts, our hedging program, and continued premiumization, we expect gross margin dollars per hectoliter to increase for the full year in both business units. We also expect to continue to strongly support our core brands and key innovations, particularly in the key beer selling season. As a result, we plan to increase marketing dollar investments in 2023 versus the prior year.

We expect this inventory build will unwind in the subsequent quarters as we maintain our goal to ship to consumption for the year. In terms of costs, we expect the impact of inflation on COGS to remain elevated in Q2 before moderating in H2 of the year, and we continue to expect it will be a headwind for the year.

We expect this inventory build will unwind in the subsequent quarters as we maintain our goal to shift to consumption for the year. In terms of cost, we expect the impact of inflation on COGS to remain elevated in the second quarter before moderating in the second half of the year, and we continue to expect it will be a headwind for the year.

However, utilizing our levers, which include pricing, ongoing cost savings efforts, our hedging program, and continued premiumization, we expect gross margin dollars per hectoliter to increase for the full year in both business units. We also expect to continue to strongly support our core brands and key innovations, particularly in the key beer selling season. As a result, we plan to increase marketing dollar investments in 2023 versus the prior year.

However, utilizing our levers, which include pricing, ongoing cost savings efforts, our hedging program and continued premiumization, we expect gross margin dollars per hectometer to increase for the full year in both business units.

We also expect to continue to strongly support our core brands and key innovations, particularly in the key selling season. As a result, we plan to increase marketing dollar investments in 2023 versus the prior year.

Tracey Joubert: In closing, we are pleased with our Q1 performance and our ability to manage the dynamic macro environment. With a strong portfolio of brands across all price segments and the financial flexibility that enables us to continue to invest prudently in our business, we are confident in our ability to sustainably deliver growth in full year 2023 and beyond. With that, we look forward to answering your questions. Operator?

In closing, we are pleased with our Q1 performance and our ability to manage the dynamic macro environment. With a strong portfolio of brands across all price segments and the financial flexibility that enables us to continue to invest prudently in our business, we are confident in our ability to sustainably deliver growth in full year 2023 and beyond. With that, we look forward to answering your questions. Operator?

In closing, we are pleased with our first quarter performance and our ability to manage the dynamic macro environment. With a strong portfolio of brands across all price segments and the financial flexibility that enables us to continue to invest prudently in our business, we are confident in our ability to sustainably deliver growth in full year 2023 and beyond.

Operator: Absolutely. We will now begin the Q&A session. If you'd like to ask a question, please press star followed by one on your touchtone keypad. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. Our first question is from the line of Bonnie Herzog with Goldman Sachs. You may proceed.

With that, we look forward to answering your questions. Operator? Absolutely. We will now begin the Q&A session. If you'd like to ask a question, please press star followed by one on your touchtone keypad. For any reason you'd like to remove that question, please press star followed by two.

Again, to ask a question, press star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question.

Bonnie Herzog: All right, thank you. Good morning. So I had a question on your guidance. So given the strength you saw in Q1, and then, you know, the share gains you're seeing maybe in the last few weeks from Bud Light pressures, you know, your guidance feels pretty conservative, especially on pre-tax income, with your guidance implying probably a low single-digit decline for the remainder of the year. So I guess I'm trying to understand the drivers of this and, you know, maybe if you're assuming some of these short-term gains you're seeing won't necessarily be sustainable, or are you now planning on stepping up, you know, reinvestments, possibly not letting any of the incremental top-line strength flow to the bottom line? So any color on that would be helpful. Thank you.

Our first question is from the line of Bonnie Herzog with Goldman Sachs. You may proceed.

question is from the line of Bonnie Herzog with Goldman Sachs. You may proceed. All right, thank you. Good morning.

So I had a question on your guidance. So given the strength you saw in Q1 and then the share gains you're seeing maybe in the last few weeks from Bud Light pressures, your guidance feels pretty conservative, especially on pre-taxed income.

So I guess I'm trying to understand the drivers of this and, you know, maybe if you're assuming some of these short-term gains you're seeing won't necessarily be sustainable, or are you now planning on stepping up, you know, reinvestments, possibly not letting any of the incremental top-line strength flow to the bottom line? So any color on that would be helpful. Thank you.

with your guidance implying probably a low single digit decline for the remainder of the year so I guess

I'm trying to understand the drivers of this and maybe if you're assuming some of these short-term gains you're seeing won't necessarily be sustainable or are you now planning on stepping up reinvestments, possibly not letting any of the incremental top-line strength flow to the bottom line? So any color on that would be helpful. Thank you. Thanks Bonnie. Good morning.

Gavin Hattersley: Thanks, Bonnie. Good morning. Yes, you're right. Look, we did have a really strong performance in Q1, and we, we're really pleased about that. But it is a small quarter for us, and many of the drivers that we saw in the first quarter, we were expecting. You know, there's obviously a lot of uncertainty out there from a macroeconomic environment and, how that might or impact or not impact, the consumer base. And, you know, frankly, we haven't even got to the peak selling season, yet. The other point I would make is that we haven't factored any of the trends that we've seen in April into our guidance. We really, and I'm sure nobody has any idea how long these are gonna continue, so they're not factored into our guidance at this point.

Yes, you're right. Look, we did have a really strong performance in Q1 and we're really pleased about that. But it is a small quarter for us and many of the drivers that we saw in the first quarter we were expecting. There's obviously a lot of uncertainty out there from a macroeconomic environment and how that might or

And, you know, frankly, we haven't even got to the peak selling season, yet. The other point I would make is that we haven't factored any of the trends that we've seen in April into our guidance. We really, and I'm sure nobody has any idea how long these are gonna continue, so they're not factored into our guidance at this point.

impact or not impact the consumer base. And you know frankly we haven't even got to the peak selling season yet. The other point I would make is that we haven't factored any of the trends that we've seen in April into our garden sweep. Really and I'm sure nobody has any idea how long these are going to continue. So they're not factored into.

Gavin Hattersley: So yeah, we didn't raise our guidance at this time for those reasons.

So yeah, we didn't raise our guidance at this time for those reasons.

into our guidance at this point. So yeah, we didn't raise our guidance at this time for those reasons.

Operator: Thank you. The next question is from the line of Kevin Grundy with Jefferies. You may proceed.

Thank you. The next question is from the line of Kevin Grundy with Jefferies. You may proceed. Great. Thanks. Good morning, everyone, and congrats on the strong results here. Kevin, just to come back, maybe just to spend a moment on this, it sounds like specifically the amateur field.

Kevin Grundy: Great. Thanks. Good morning, everyone, and congrats on the strong results here. Gavin, just to come back, maybe just to spend a moment on this. So it sounds like, and specifically the issue with your key competitor, because I kind of feel like it's the elephant in the room here. So just to be clear, there's nothing embedded in your guidance. April, clearly off to a really strong start. How do you see this sort of playing out? I know it's a difficult question to answer, but, you know, based on your long history in the industry, I know there's sort of a uniqueness to this. How do you potentially see this playing out? And you may have not embedded some of the favorable trends we've seen in April.

How do you see this sort of playing out? I know it's a difficult question to answer, but, you know, based on your long history in the industry, I know there's sort of a uniqueness to this. How do you potentially see this playing out? And you may have not embedded some of the favorable trends we've seen in April.

long history in the industry, I know there's sort of a uniqueness to this, how do you potentially see this playing out? And you may have not embedded some of the favorable trends we've seen in April . Is there sort of cushion in your guidance to contemplate what will likely be sort of a step up in investment, maybe across whether we're talking price, whether we're talking advertising and marketing?

Kevin Grundy: Is there sort of cushion in your guidance to contemplate what will likely be sort of a step up in investment, maybe across, whether we're talking price, whether we're talking advertising and marketing from your key competitors? They would naturally attempt to sort of stabilize trends. So maybe just a little bit more time on this in terms of how you're, how you're contemplating it, I think, would be of great interest to, to folks. So thank you very much.

Is there sort of cushion in your guidance to contemplate what will likely be sort of a step up in investment, maybe across, whether we're talking price, whether we're talking advertising and marketing from your key competitors? They would naturally attempt to sort of stabilize trends. So maybe just a little bit more time on this in terms of how you're, how you're contemplating it, I think, would be of great interest to, to folks. So thank you very much.

from your key competitors, they would naturally attempt to sort of stabilize trends. So maybe just a little bit more time on this in terms of how you're contemplating it, I think would be of great interest to folks. So thank you very much. Thanks, Kevin.

Gavin Hattersley: Thanks, Kevin. Yeah, just a couple maybe additional points to that. Obviously, our focus right now is on our brands completely and not looking at what our competitors are or aren't doing. You know, I'm particularly proud of the work that we've done over the last three years, because we've built our brands very deliberately. And, Kevin, we're seeing progress across our portfolio as a result of that, and that tells us that our strategy is working. So, you know, no matter what happens with our competitors, we're gonna continue to make the right decisions for our brands and the long-term health of our brands. As I said to you, we haven't factored in the current situation into the guidance, holding our guidance where it is.

Yeah, just a couple maybe additional points to that. Obviously, our focus right now is on our brand completely and not looking at what our competitors are or aren't doing.

And, Kevin, we're seeing progress across our portfolio as a result of that, and that tells us that our strategy is working. So, you know, no matter what happens with our competitors, we're gonna continue to make the right decisions for our brands and the long-term health of our brands. As I said to you, we haven't factored in the current situation into the guidance, holding our guidance where it is.

You know I'm particularly proud of the work that we've done over the over the last three years because we've built our brands very deliberately And and you know Kevin we're seeing Progress across our portfolio as a result of that and that tells us that our strategy is working So you know no matter what happens with our competitors? We're going to continue to make the right direct Decisions for for our brains and the long-term health of our brains

Gavin Hattersley: Honestly, you know, we can't say how long the current situation is gonna last, and, you know, our focus is gonna stay on our brands. Our guidance did contemplate previously an increase in our marketing spend, particularly in the summer part of the year as we head into Memorial Day and after that, as we go into Fourth of July. Our guidance did include supporting our brands in a meaningful way. I guess that's about all I can say on that at this point, Kevin.

Honestly, you know, we can't say how long the current situation is gonna last, and, you know, our focus is gonna stay on our brands. Our guidance did contemplate previously an increase in our marketing spend, particularly in the summer part of the year as we head into Memorial Day and after that, as we go into Fourth of July. Our guidance did include supporting our brands in a meaningful way. I guess that's about all I can say on that at this point, Kevin.

As I said to you, we haven't factored in the current situation into the guidance, holding our guidance where it is. And honestly

We can't say how long the current situation is going to last. Our focus is going to stay on our brands. Our guidance did contemplate previously an increase in our marketing spend, particularly in the summer part of the year. As we head into Memorial Day and after that as we go into 4 July , our guidance did...

Operator: ... Thank you. The next question is from the line of Vivien Azer from TD Cowen. You may proceed.

Operator: Thank you. The next question is from the line of Vivien Azer from TD Cowen. You may proceed.

[Analyst] (TD Cowen): Hi, this is Victor Ma on for Vivien Azer, and thank you for the question. While it's hard to know how durable the faster growth in April will prove to be, can you speak to the flexibility in your supply chain to accommodate outsized consumer demand for Coors Light and Miller Lite in the US?

Victor Ma: Hi, this is Victor Ma on for Vivien Azer, and thank you for the question. While it's hard to know how durable the faster growth in April will prove to be, can you speak to the flexibility in your supply chain to accommodate outsized consumer demand for Coors Light and Miller Lite in the US?

The next question is from the line of Vivian Azare from TD Cowen. You may proceed.

Hi, this is Victor Ma on Provipinazer and thank you for the question. While it's hard to know how durable the faster growth in April will prove to be, can you speak to the flexibility in your supply chain to accommodate outsized consumer demand for course light and low light in the US?

Gavin Hattersley: Yeah, thanks, Victor. Thanks for that question. Yes, certainly I can do that. You know, and I'll do that by saying that, you know, we came into this year with inventories in really good shape, and that was the good starting point. And then, as Tracey said in her remarks, we shipped ahead of consumption in the first quarter as well. So we came out of Q1 in good shape from an inventory point of view. Our inventories were healthy. And our inventories have remained stable in the last four weeks. So we are keeping up with the demand that we're seeing, certainly in April.

Yeah, thanks Victor, thanks for that question. Yes, certainly I can do that. I'll do that by saying that we came into this year with inventories in really good shape, and that was the good starting point. And then as Tracy said in her remarks,

We shipped ahead of consumption in the first quarter as well. So we came out of Q1 in good shape from an inventory point of view. Our inventories were healthy and our inventories have remained stable in the last four weeks. So we are keeping up with the demand that we're seeing.

Gavin Hattersley: You know, many of the changes that we made over the last year or so, and decisions that we've made, put us in a much better position from a supply chain point of view than we have been for quite some time. You know, if you remember our economy SKU rationalization, we expanded our supplier base, and that's just allowed us to be much more nimble from an overall business point of view. You know, as a result, we, we, we have improved our ability to react to potential sharp changes in supply. So thanks for the question.

You know, many of the changes that we made over the last year or so, and decisions that we've made, put us in a much better position from a supply chain point of view than we have been for quite some time. You know, if you remember our economy SKU rationalization, we expanded our supplier base, and that's just allowed us to be much more nimble from an overall business point of view. You know, as a result, we, we, we have improved our ability to react to potential sharp changes in supply. So thanks for the question.

Certainly in April , many of the changes that we made over the last year or so, and decisions that we've made, put us in a much better position from a supply chain point of view than we have been for quite some time. If you remember our economy skew rationalisation, we expanded our supplier base.

Operator: Thank you. The next question is from the line of Andrea Teixeira from J.P. Morgan. You may proceed.

Thank you. The next question is from the line of Andrea Texera from JP Morgan. You may proceed. You may proceed.

Andrea Teixeira: Thank you. Gavin, you spoke a little bit in on the demand in April. So how can you kind of think about all these forces? And you're correct, and I think it's prudent not to assume that this is gonna continue, in history of brands, having those, those, those points, right? I wouldn't say, but how it resonates or how it will change, the consumer perception of a specific brand. But thinking of what you described as, the package, dynamics that happen in the US, how does that... How, how can you kind of shift a little bit of your price pack architecture going into the summer, and if any changes you are envisioning?

Thank you. Gavin, you spoke a little bit on the demand in April . So how can you kind of think about all these forces and you're correct and I think it's prudent not to assume that from a legal standpoint the US demand is going to Beware perchest.

This is going to continue in the history of brands having those points, right? I wouldn't say how it resonates or how it will change the consumer perception of a specific brand. But thinking of what you described as the package dynamics that happen in the U.S.,

But thinking of what you described as, the package, dynamics that happen in the US, how does that... How, how can you kind of shift a little bit of your price pack architecture going into the summer, and if any changes you are envisioning?

How can you shift a little bit of your price-back architecture going into the summer and if any changes you are envisioning? Have you seen conversely, as you pointed out, the most affluent consumers?

Andrea Teixeira: And have you seen, conversely, as you pointed out, the most affluent consumers actually looking for more value also in the bigger packs? Are you seeing on-trade some deceleration that we saw at the end of March, I think, in the, you know, in the data? Are you seeing that happening through, as the weather in some places is still challenging, other places that the weather got better, you've seen that, that shift back to on-premise? So can you talk about those dynamics, and how are you seeing that play out in your guide? Thank you.

And have you seen, conversely, as you pointed out, the most affluent consumers actually looking for more value also in the bigger packs? Are you seeing on-trade some deceleration that we saw at the end of March, I think, in the, you know, in the data? Are you seeing that happening through, as the weather in some places is still challenging, other places that the weather got better, you've seen that, that shift back to on-premise? So can you talk about those dynamics, and how are you seeing that play out in your guide? Thank you.

actually looking for more value also in the bigger packs. Are you seeing on trade some deceleration that we saw at the end of March, I think, in the data? Are you seeing that happening through, as the weather in some places is still challenging, or the places that the weather got better?

you've seen that shift back to on-premise. So can you talk about those dynamics and how are you seeing that play out in your guide? Thank you. Thanks, Andrea. Look, from an overall industry point of view and your questions directed more at the US, I'll keep my comments there.

Gavin Hattersley: Thanks, Andrea. Look, from an overall industry point of view, and your question is directed more at the US, so I'll keep my comments there. You know, we had a number of dynamics that played out in the first quarter. In January, it was certainly positive for us because we were cycling Omicron, which certainly benefited the on-premise volume trend versus the prior year. But, you know, in March, we did see on-premise trends slow a little bit. Didn't provide us the offset to the off-premise performance, which remained reasonably soft during the quarter, mostly because of what was happening out in the Pacific region and specifically California. That was the biggest geographic driver of industry softening, frankly, Andrea, at least in part-

we had a number of dynamics that played out in the first quarter. In January it was certainly positive for us because we were cycling Omicron, which certainly benefited the on-premise volume trend versus the prior year. But in March we did see on-premise trends slow a little bit. It didn't provide us the offset to the off-premise.

Didn't provide us the offset to the off-premise performance, which remained reasonably soft during the quarter, mostly because of what was happening out in the Pacific region and specifically California. That was the biggest geographic driver of industry softening, frankly, Andrea, at least in part mostly due to the weather situation out that part of the world. From our point of view, we did perform ahead of the industry in the Pacific region and California, and we gained share in California, which we're particularly pleased about.

performance, which remained reasonably softer in a quarter, mostly because of what was happening out in the Pacific region, and specifically California. That was the biggest geographic driver of industry softening, frankly, Andrea, at least in part, mostly due to the weather situation out that part of the world.

Andrea Teixeira: Mm-hmm

Gavin Hattersley: ... mostly due to the weather situation out that part of the world. From our point of view, we did perform ahead of the industry in the Pacific region and California, and we gained share in California, which we're particularly pleased about. And, you know, when you couple all of that with the current macroeconomic environment and the fact that we haven't built any of this current trend change into our guidance, it's just left us a bit cautious in the short term. But very confident that our portfolio, the work that we've done over the last three years, has strategically positioned us to navigate the dynamic environment that we're seeing. So thanks for that question.

From our point of view, we did perform ahead of the industry in the Pacific region and California, and we gained share in California, which we were particularly pleased about. And you know, when you couple all of that with the current macroeconomic environment, and the fact that we haven't built any of this.

And, you know, when you couple all of that with the current macroeconomic environment and the fact that we haven't built any of this current trend change into our guidance, it's just left us a bit cautious in the short term. But very confident that our portfolio, the work that we've done over the last three years, has strategically positioned us to navigate the dynamic environment that we're seeing. So thanks for that question.

current trend change into our guidance. It's just a bit cautious in the short term, but very confident that our portfolio, the work that we've done over the last three years has strategically positioned us to navigate the dynamic environment that we're seeing. So thanks for that question. That's super helpful. Yeah, super helpful. Can you talk then the...

Andrea Teixeira: That's super helpful. Yeah, super helpful. Can you talk then the same similar view on Europe?

Gavin Hattersley: Yeah, sure. So, in Europe, from a UK point of view, the consumers remained, frankly, remarkably resilient. And so we haven't seen much degradation in consumer behavior in the UK. And, you know, certainly from a sales revenue point of view, our on-premise trends are above what they were in 2019. A little different in Central and Eastern Europe. I mean, the consumer there is less discretionary disposable income, and with the, you know, inflation being where it is, and particularly in consumer durables... Sorry, not durables, fast-moving consumer goods. We've seen more of an impact in Central and Eastern Europe than we have in the UK.

I mean, the consumer there is less discretionary disposable income, and with the, you know, inflation being where it is, and particularly in consumer durables... Sorry, not durables, fast-moving consumer goods. We've seen more of an impact in Central and Eastern Europe than we have in the UK.

point of view, our on-premise trends are above what they were in 2019. A little different in Central and Eastern Europe . I mean the consumer there is less discretionary disposable income and with the inflation being where it is and particularly

in consumer durables, sorry, not durables, fast-moving consumer goods. We've seen more of an impact in Central and Eastern Europe than we have in the UK. In Canada, we saw a similar trend as we did in the US excluding the

Gavin Hattersley: In Canada, we saw a similar trend as we did in the US, excluding obviously the California situation. You know, we were very pleased with the fact that our volumes in Canada were up 4.9%. So thanks for that, Andrea.

In Canada, we saw a similar trend as we did in the US, excluding obviously the California situation. You know, we were very pleased with the fact that our volumes in Canada were up 4.9%. So thanks for that, Andrea.

Andrea Teixeira: Thank you.

Operator: Thank you. The next question is from the line of Robert Ottenstein with Evercore ISI. You may proceed.

Operator: Thank you. The next question is from the line of Robert Ottenstein with Evercore. You may proceed.

Robert Ottenstein: Great. Thank you very much. Gavin, you know, the beer industry is very, you know, high fixed costs, so any kind of increase in volumes, you get a lot of operating leverage from that. And given that your supply chain sounds, you know, in great shape and your ability to meet increased demand seems very solid, you know, at least for a short period of time, who knows how long? You know, you will have some windfall in terms of profitability. How... and, you know, it's kind of in the books already, right, for April. So how should we think about you spending that money? Would you step up marketing even more? Do you bring it to the bottom line? Do you, you know, think about different capital allocation?

The next question is from the line of Rob Einstein with Evercore. You may proceed.

Thank you very much.

The beer industry is very high fixed costs. So any kind of increase in volumes.

You get a lot of operating leverage from that. Given that your supply chain sounds in great shape and the ability to meet increased demand seems very solid, at least for a short period of time, who knows how long, you will have some windfall. Kelly.

You know, you will have some windfall in terms of profitability. How... and, you know, it's kind of in the books already, right, for April. So how should we think about you spending that money? Would you step up marketing even more? Do you bring it to the bottom line? Do you, you know, think about different capital allocation?

in terms of profitability. And it's kind of in the books already, right, for April . So how should we think about you spending that money? Would you step up marketing even more? Do you bring it to the bottom line? Do you think about different capital allocation? Just trying to get a sense of how you're thinking about spending that?

Robert Ottenstein: Just trying to get a sense of how you're thinking about spending that, you know, windfall.

Just trying to get a sense of how you're thinking about spending that, you know, windfall.

Gavin Hattersley: Robert, you're right. I mean, our supply chain is in much better shape than it was several years ago. And as I said, you know, they've done a brilliant job of meeting demand as we've gone along. And you're right, the more volume you get through your breweries, the more fixed cost deleverage or the opposite of that comes into play. But as I said earlier, none of this what's happening in April is in any of our guidance going forward as we assess it and see what happens and see how sustaining it is.

you know, windfall. Robert, you're right, I mean our supply chain is in much better shape than it was several years ago and as I said, you know, they've done a brilliant job of meeting demand as we've gone along.

And you're right, the more volume you get through your breweries, the more fixed cost deleverage or the opposite of that comes into play. But as I said earlier, none of this, what's happening in April , is in any of our guidance.

Gavin Hattersley: We always were going to increase our marketing spend as we headed into summer and, you know, Memorial Day and into Fourth of July, in fact, for the whole of summer. So, you know, we feel that we have really strong plans for summer behind all of our core brands, whether they're here in the United States or up in Canada or across the ocean. So, you know, we'll continue to spend what we think is right behind our brands. If we saw an opportunity, we could change that, obviously. But that's factored into our guidance as we've got it now.

We always were going to increase our marketing spend as we headed into summer and, you know, Memorial Day and into Fourth of July, in fact, for the whole of summer. So, you know, we feel that we have really strong plans for summer behind all of our core brands, whether they're here in the United States or up in Canada or across the ocean. So, you know, we'll continue to spend what we think is right behind our brands. If we saw an opportunity, we could change that, obviously. But that's factored into our guidance as we've got it now.

going forward as we assess it and see what happens and see how sustaining it is. We always were going to increase our marketing spend as we headed into summer and Memorial Day and into Fourth of July , in fact for the whole of summer. So we feel that we have really strong plans for summer behind all of our core brands, whether based...

here in the United States or up in Canada or across the ocean. So, you know, we'll continue to spend what we think is right behind our brands. If we saw an opportunity, we could change that, obviously, but that's factored into our guidance as we've got it now. Thank you.

Robert Ottenstein: Should we expect that perhaps given the momentum that you have in the market, you would look to take advantage of that and perhaps pick up spending in marketing, while you have the wind behind your back?

Should we expect that perhaps given the momentum that you have in the market, you would look to take advantage of that and perhaps pick up spending in marketing? Well, you have the wind behind your back.

Gavin Hattersley: You know, Robert, you know, as you're kind of implying, you know, where, where our focus is, and our focus remains on our brands and, you know, not really focused on what the competitors are or aren't doing. And as I said, we've built our brands very deliberately over the last three years, and we've made great progress on our portfolio. I think our, our portfolio, particularly, our core portfolio, is in really a great spot from a, from an overall health point of view. The momentum we saw in our core brands coming out of 2022 continued into the, into Q1. And, you know, we, we, we believe we're set up for a... We, we, we believe we're set up for a really strong summer, regardless of what's happening in the, in the broader environment.

You know, Robert, as you're kind of implying, you know, where our focus is, and our focus remains on our brands and, you know, not really focused on what the competitors are or aren't doing. And as I said, we've built our brands very deliberately over the last three years.

And we've made great progress on our portfolio. I think our portfolio, particularly our core portfolio is really a great spot from an overall health point of view. The momentum we saw in our core brands coming out of 2022 continued into the first quarter. And we believe we're set up for a.

The momentum we saw in our core brands coming out of 2022 continued into the, into Q1. And, you know, we, we, we believe we're set up for a... We, we, we believe we're set up for a really strong summer, regardless of what's happening in the, in the broader environment.

Gavin Hattersley: And our marketing plans and support plans from a sales execution point of view, were designed to support that brand strength before all this happened.

And our marketing plans and support plans from a sales execution point of view, were designed to support that brand strength before all this happened.

We believe we're set up for a really strong summer regardless of what's happening in the in the broader environment and our marketing plans and support plans from a sales execution point of view were designed to support that brand strength before all this happened.

Robert Ottenstein: Great. Thank you very much, Gavin.

Gavin Hattersley: Thanks, Robert.

Operator: Thank you. The next question is from the line of Bryan Spillane with Bank of America. You may proceed.

Great. Thank you very much, Gavin. Thanks, Robert. Thank you. The next question is from the line of Brian Stallane with Bank of America. You may proceed.

Bryan Spillane: Hey, thanks, operator. And good morning, Gavin and Tracey. I actually had two quick questions if you will. The first one is just in Q1 in the US, the shipping ahead of consumption, is that really more just kind of getting back to a normal, you know, seasonality, right? You try to build some inventory in the shoulder seasons to have enough in the peak. So with the supply chain normalizing, is that really kind of what it – why you would have shipped ahead in Q1? And then I have a follow-up.

Thanks, operator. And good morning, Gavin Tracy, I actually had two quick questions, if you will. The first one is just in the first quarter in the US, the shipping ahead of consumption, is that really more just kind of getting back to a normal, you know, seasonality, right? You try to build some inventory in the in the shoulder seasons to have

Gavin Hattersley: Bryan, look, I mean, frankly, we're living in such uncertain, volatile times, but it has been our practice, when we can, to make sure that we're at the top end of where we would like our inventory to be. And so that's how we felt coming out of 2022, and that's why we were where we were, at the end of Q1. You know, it feels like over the last three years, there's always been something, right? And so we wanted to make sure that we had our inventories at the right level to make sure that our out-of-stocks were as low as we can possibly have them. And so that was the position we found ourselves coming out of Q1.

to be and so that's how we felt coming out of 2022 and that's why we were where we were at the end of the the first quarter. You know it feels like over the last three years there's always been something right and so we wanted to make sure that we had our inventories at the right level to make sure that our outer stocks were as low as we can possibly have them and so that was the position we found ourselves coming out of Q1 higher.

And so we wanted to make sure that we had our inventories at the right level to make sure that our out-of-stocks were as low as we can possibly have them. And so that was the position we found ourselves coming out of Q1.

Gavin Hattersley: Higher inventory than we perhaps would have been in previous years, because build for summer normally takes place in April and through into May. So, you know, it was... we're in a good place from an inventory point of view at the moment, Brian.

Higher inventory than we perhaps would have been in previous years, because build for summer normally takes place in April and through into May. So, you know, it was... we're in a good place from an inventory point of view at the moment, Brian.

higher inventory than we perhaps would have been in in in previous years because build for summer normally takes place in in April and and through into May so, you know, it was We're in a good place from an inventory point of view at the moment, right?

Bryan Spillane: Okay. And then just a quick one on MG&A. It was a little bit lower than what we were expecting in Q1, and, and I think, Tracey, in your remarks, you talked about more of the spend in the, in the middle of the year. So just wanted to make sure that that was... there wasn't anything unusual in Q1, and what we're seeing is just sort of the anticipation or the, the expectation that you're, you're-- you'll have more marketing spend in the middle of the year.

Okay, and then just a quick one on MG&A. It was...

a little bit lower than what we were expecting in the first quarter and I think Tracy in your remarks you talked about more of the spend in the in the middle of the year so just wanted to make sure that that was there wasn't anything unusual in the first quarter and what we're seeing is just sort of

Robert Ottenstein: Yeah. So our MG&A was flat. You know, if you have a look at the marketing spend in particular, you know, as Gavin said, we've always planned to spend more marketing dollars in 2023. In Q1, you know, we obviously did put you know, a-

Tracey Joubert: Yeah. So our MG&A was flat. You know, if you have a look at the marketing spend in particular, you know, as Gavin said, we've always planned to spend more marketing dollars in 2023. In Q1, you know, we obviously did put you know, a lot of investment around our Super Bowl ad. But we spent that money very wisely. You know, we went into two, three weeks before Super Bowl, talking about our Miller Lite and Coors Light brands.

the anticipation or the expectation that you'll have more marketing spend in the middle of the year.

Yeah, so our NG&A was flat. If you have a look at the marketing spend in particular, as Gavin said, we've always planned to spend more marketing dollars in 2023. In Q1, we obviously did put, you know,

Tracey Joubert: ... a lot of investment around our Super Bowl ad. But we spent that money very wisely. You know, we went into two, three weeks before Super Bowl, talking about our Miller Lite and Coors Light brands. So there was a big price tag, but we were able to spend less and actually deliver more. In fact, we had over 60% increase in impressions across our three key brands, in January and February versus the prior year. But also just to remind you that last year, in Q1, we had the big launch of Topo Chico Hard Seltzer, and so there was big spend that we were lapping, you know, from last year.

a lot of investment around our Super Bowl ad, but we spent that money very wisely. We went into two, three weeks before Super Bowl talking about our Miller Lite and Kurzlei brands. And so there was a big price tag, but we were able to spend less and actually deliver more. In fact, we had over 60% increase in...

So there was a big price tag, but we were able to spend less and actually deliver more. In fact, we had over 60% increase in impressions across our three key brands, in January and February versus the prior year. But also just to remind you that last year, in Q1, we had the big launch of Topo Chico Hard Seltzer, and so there was big spend that we were lapping, you know, from last year.

in impressions across our three key brands in January and February versus the prior year. But also just to remind you that last year in Q1 we had the big launch of Topo Chico hard sulfur and so there was big spin that we were lapping from last year. All right, that's helpful. Thanks, Tracy. Thanks, Kevin.

Nadine Sarwat: All right. That's helpful. Thanks, Tracey. Thanks, Kevin.

Bryan Spillane: All right. That's helpful. Thanks, Tracey. Thanks, Kevin.

Operator: Thank you. The next question is from the line of Steve Powers with Deutsche Bank. You may proceed.

Thank you. The next question is from the line of Steve Powers with Deutsche Bank. You may proceed. Please return to your seats.

Steve Powers: Thanks. Good morning. Just going back to the supply chain, I guess, you know, should these share shifts, you know, prove to be structural and the trends continue or even extend? I guess I just wanna go back to it and think about over the course of the summer, is there any risk that you can't keep up if these trends continue all the way through the peak selling season, and that we hit thin inventories and potential for out of stocks, you know, over the summer? Just wanna kinda sanity check that.

Thanks. Good morning. Just going back to the supply chain, I guess, should these share shifts prove to be structural and the trends continue or even extend? I guess I just want to go back to it and think about over the course of the summer, is there any risk?

that you can't keep up if these trends continue all the way through the peak selling season and we hit, you know, thin inventories and potential for out of stocks, you know, over the summer. Just want to kind of sanity check that. And then on the volume leverage that you're getting, again, assuming these trends continue, is there a tipping point where though we're at about two thirds that we're at holds of buybacks in the month of

Steve Powers: And then on the volume leverage that you're getting, again, assuming these trends continue, is there a tipping point where the positive leverage and the economies of scale, you know, through the course of your factories and supply chain, become sort of too much to handle and you start to get into diseconomies of scale, trying to keep up with much faster than expected volumes? Just wanna think that through as we think about the remainder of the year. Thanks.

And then on the volume leverage that you're getting, again, assuming these trends continue, is there a tipping point where the positive leverage and the economies of scale, you know, through the course of your factories and supply chain, become sort of too much to handle and you start to get into diseconomies of scale, trying to keep up with much faster than expected volumes? Just wanna think that through as we think about the remainder of the year. Thanks.

the positive leverage in the economies of scale, you know, through the course of your factories and supply chain become sort of too much to handle, and you start to get into diseconomies of scale, trying to keep up with much faster than expected volumes. Just want to think that through as we think about the remainder of the year. Thanks. Thanks, Steve. Thank you for having me. Thank you. Great to see you.

Gavin Hattersley: Thanks, Steve. Look, to answer your second question first, no, there isn't. So, you know, the benefit of spreading our fixed costs across a larger volume set doesn't have a reduction as things move forward. So I wouldn't factor that in any way. You know, from an overall capacity point of view, it's a little bit of a hypothetical question, right? Because it's hard to predict how big or how long these current trends are going to are gonna continue. I would just tell you that in terms of where we're positioned, we're as good as we could have been.

Look, to answer your second question first, no, there isn't. So the benefit of spreading our fixed costs across a larger volume set doesn't have a...

reduction as things move forward. So I wouldn't factor that in any way. You know, from an overall capacity point of view, it's a little bit of a hypothetical question, right, because it's hard to predict how big or how long these current trends are going to continue. I would just tell you that in terms of...

Gavin Hattersley: Obviously, we weren't planning for this, but, you know, as I said, we had great inventories coming out of the year. Our distributors were very supportive in building inventories towards the back end of the year, and we've kept up that momentum in the first quarter. So we're positioned as well as we could be from a supply point of view. So, you know, we'll just have to see how that plays out.

Obviously, we weren't planning for this, but, you know, as I said, we had great inventories coming out of the year. Our distributors were very supportive in building inventories towards the back end of the year, and we've kept up that momentum in the first quarter. So we're positioned as well as we could be from a supply point of view. So, you know, we'll just have to see how that plays out.

we've kept up that momentum in the first quarter. So we're positioned as well as we could be from a from a supplier point of view. So now we'll just have to see how that how that plays out.

Steve Powers: Thanks, Steve.

Thanks, Steve.

Operator: Thank you. The next question is from the line of Nadine Sarwat with Bernstein. You may proceed.

Thanks, Steve. Thank you.

The next question is from the line of Nadine Sarwat with Bernstein. You may proceed.

Nadine Sarwat: Hi. Morning, everybody. Two questions from me. First, do you anticipate that the recent share shifts between you and your, you know, biggest US competitor to have any longer-term implications on share of shelf space, perhaps, you know, in your favor? And then second question, you know, we're obviously all seeing the scanner data very strong for April, but could you provide any commentary or feedback from what you're getting from distributors and retailers, you know, right now on the ground in terms of changes in consumer preferences? Thank you.

Hi, morning, everybody. Two questions for me. So first, do you anticipate that the recent share shifts between you and your biggest US competitor to have any longer term implications on share of shelf space? Perhaps, you know, in your favor. And then second question, you know, we're obviously all seeing the scanner data very strong for April , but could you provide any commentary or feedback from what you're getting from the data?

Gavin Hattersley: Thanks, Nadine. Look, from a consumer point of view and from a distributor point of view, I... you know, frankly, I don't think anybody can say how long this situation is going to last. And that's why our focus is squarely on our brands and taking advantage of the momentum that we created coming out of 2022 and also out of the first quarter. In terms of spring resets, look, the retailers only make meaningful changes to their resets coming into the spring, and then they do minor ones in the fall. Most of the retail chains have finished their sets and have actually begun the reset process.

In terms of spring resets, look, the retailers only make meaningful changes to their resets coming into the spring, and then they do minor ones in the fall. Most of the retail chains have finished their sets and have actually begun the reset process.

of the momentum that we created coming out of 2022 and also out of the first quarter. In terms of spring resets, look, the retailers only make meaningful changes to their resets coming into the spring and then they do minor ones in the fall. Most of the retail chains have finished their sets and have actually begun the reset process and...

Gavin Hattersley: You know, as you can expect, there was a bigger growth in shelf space going to RTDs, coming directly from FABs and seltzers, with some reduction in shelf space for craft. Craft changes seem to be very dependent on retail strategy, and it's not consistent across retailers. We have seen a significant growth in space for imports, and premium lights and super premiums growing, but to a lesser extent. You know, we don't have a complete picture of all the resets that have taken place, but where we do have a read, we're growing both distribution, and we're growing physical space. And frankly, we've seen growth, strong growth in distribution, and space due to innovation.

You know, as you can expect, there was a bigger growth in shelf space going to RTDs, coming directly from FABs and seltzers, with some reduction in shelf space for craft. Craft changes seem to be very dependent on retail strategy, and it's not consistent across retailers. We have seen a significant growth in space for imports, and premium lights and super premiums growing, but to a lesser extent.

You know, as you can expect, there was a bigger growth in shelf space going to RTDs coming directly from fabs and seltzers, with some reduction in shelf space for craft. Craft changes seem to be very dependent on retail strategy and not consistent across retailers. We have seen a significant growth in space for imports and premium lights and super premiums growth.

You know, we don't have a complete picture of all the resets that have taken place, but where we do have a read, we're growing both distribution, and we're growing physical space. And frankly, we've seen growth, strong growth in distribution, and space due to innovation.

Gavin Hattersley: But we're also growing space in the core of our portfolio as well. So, you know, the biggest opportunity for us to gain additional retail space aligns really well with the category segment trends we're seeing in seltzer and craft. And we're feeling really good about our biggest bets in innovation for 2023, like Simply Spiked.

But we're also growing space in the core of our portfolio as well. So, you know, the biggest opportunity for us to gain additional retail space aligns really well with the category segment trends we're seeing in seltzer and craft. And we're feeling really good about our biggest bets in innovation for 2023, like Simply Spiked.

in the core of our portfolio as well. So the biggest opportunity for us to gain additional retail space aligns really well with the category segment trends we're seeing in Seltzer and Kraft, and we're feeling really good about our biggest bets in innovation for 2023, usually in the last 70 spot. Okay, thank you.

Nadine Sarwat: Got it. Thank you.

Gavin Hattersley: Thanks, Nadine.

Operator: Thank you. The next question is from the line of Chris Carey with Wells Fargo. You may proceed.

Thank you. Thanks Nadine. Thank you. The next question is from the line of Chris Carey with Wells Fargo. You may proceed.

Thank you. Thanks Nadine. Thank you. The next question is from the line of Chris Carey with Wells Fargo. You may proceed. Hi, thank you.

Steve Powers: Hi, thank you.

Gavin Hattersley: Hi, Chris.

Chris Carey: ... Tracey, I think you mentioned that, you know, built into plans were for, you know, a price, you know, increase in the US that would, you know, probably be more in line with, you know, your typical pricing strategies in the market. You know, I think one of the concerns that are, you know, out there with the, you know, the competitive activity, you know, is from this, you know, Bud Light saga, effectively, you know, what does AB do, right? And a price cut is something that I think many are contemplating.

Chris Carey: Tracey, I think you mentioned that, you know, built into plans were for, you know, a price, you know, increase in the US that would, you know, probably be more in line with, you know, your typical pricing strategies in the market. You know, I think one of the concerns that are, you know, out there with the, you know, the competitive activity, you know, is from this, you know, Bud Light saga, effectively, you know, what does AB do, right? And a price cut is something that I think many are contemplating.

Tracy, I think you mentioned that built into plans were for a price increase in the US that would probably be more in line with your typical pricing strategies in the market.

I think one of the concerns that are out there with the competitive activity from this Bud Light saga is effectively what does AB do? A price cut is something that I think many are contemplating.

Chris Carey: So I guess, in the context of, you know, you're gonna be increasing marketing spending through this year, which makes total sense. Can you just maybe, you know, frame how you would be thinking about, you know, that fall price increase, should there be, you know, a broader price competition within beer? Perhaps, you know, just over-delivery on volume gives you enough flexibility to work through that if you didn't want to price. But maybe just any thoughts on, you know, your sensitivity to that fall price increase and, you know, how firm you view it? Thanks so much.

So I guess, in the context of, you know, you're gonna be increasing marketing spending through this year, which makes total sense. Can you just maybe, you know, frame how you would be thinking about, you know, that fall price increase, should there be, you know, a broader price competition within beer? Perhaps, you know, just over-delivery on volume gives you enough flexibility to work through that if you didn't want to price. But maybe just any thoughts on, you know, your sensitivity to that fall price increase and, you know, how firm you view it? Thanks so much.

broader price competition within beer, perhaps just over delivery on volume gives you enough flexibility to work through that if you didn't want to price, but maybe just any thoughts on your sensitivity to that fall price increase and how firm you view it. Thanks so much.

Gavin Hattersley: Thanks, Chris. Look, I mean, I'll make the point upfront that, you know, we're not seeing competitive moves from a promotional point of view, to the degree that you may have seen being reported. It certainly isn't a full market thing, it's not a full portfolio thing, and certainly not half of last year's full GI. You know, we have seen some increase in brewer-funded levels, but, you know, hard to say where that's all going. But certainly it's not as widespread as you may have read in the media. We continue to do pricing as we've always done it, right? Which is on a brand-by-brand, market-by-market basis.

Thanks, Chris. Look, I mean, I'll make the

the point up front that you know we're not seeing competitive moves from a promotional point of view to the degree that you you may have seen being been being reported.

certainly isn't a full market thing, it's not a full portfolio thing and certainly not half of last year's full GI.

You know, we have seen some increase in brewer-funded levels, but, you know, hard to say where that's all going. But certainly it's not as widespread as you may have read in the media. We continue to do pricing as we've always done it, right? Which is on a brand-by-brand, market-by-market basis.

You know, we have seen some increase in brewer funded levels, but you know.

Hard to say with where that's all going but certainly it's not as widespread as you may have read in the media. We continue to do pricing as we've always done it, right, which is on a brand by brand, market by market basis. We're holding steady on what we said on our last earnings call.

Gavin Hattersley: We're holding steady on what we said on our last earnings call. But, you know, obviously we've cycled through the spring price increases from last year and we've now got the full price increase we put through last year, which was in the sort of 5% to 6% range, holding steady through this coming fall. And we still continue to believe that the full price increases will revert back to more historical levels, in that sort of 1% to 2% range. But obviously, there's plenty of time between now and when we have to make a decision on that, to determine exactly what we'll do from a pricing point of view, for our brand portfolio. Thanks, Chris.

We're holding steady on what we said on our last earnings call. But, you know, obviously we've cycled through the spring price increases from last year and we've now got the full price increase we put through last year, which was in the sort of 5% to 6% range, holding steady through this coming fall.

You know, obviously we've cycled through the spring price increases from last year and and we've now got the fall price increase we put through last year, which was in the sort of 5 to 6% range holding steady through.

And we still continue to believe that the full price increases will revert back to more historical levels, in that sort of 1% to 2% range. But obviously, there's plenty of time between now and when we have to make a decision on that, to determine exactly what we'll do from a pricing point of view, for our brand portfolio. Thanks, Chris.

through this coming fall and we still continue to believe that the full price increases will revert back to more historical levels in that sort of one to two percent range. But obviously there's plenty of time between now and when we have to make a decision on that to determine exactly what what we'll do for pricing point of view for our brand portfolio.

Operator: Thank you. The next question is from the line of Lauren Lieberman with Barclays. You may proceed.

Thanks, Chris. Thank you. The next question is from the line of Lauren Lieberman with Barclays. You may proceed.

Lauren Lieberman: Great, thanks. Good morning. I have two questions. The first was just knowing that, you know, the recent, you know, share momentum that you've seen in recent weeks is not included in the guidance, and, and who knows what happens from here? But I was just curious how to think about that in the context of the four-point spread between brand volume and, and, financial volume in the US or four-ish. So the thought was, with it in the guidances, it kind of takes all year or through the year that you work through that. You know, should the recent, market share dynamics hold the volume trends that we see in Nielsen, would that gap be closed sooner? You know, would that be something that, yeah, that, that we should just think about in, in it closing more quickly?

Great, thanks. Good morning. I have two questions. The first was just knowing that you said the recent shared momentum that you've seen in recent weeks is not included in the guidance and who knows what happens from here. But I was just curious how to think about that in the context of the four-point spread between brand volume and...

So the thought was, with it in the guidances, it kind of takes all year or through the year that you work through that. You know, should the recent, market share dynamics hold the volume trends that we see in Nielsen, would that gap be closed sooner? You know, would that be something that, yeah, that, that we should just think about in, in it closing more quickly?

Nielsen, would that gap be closed sooner? Would that be something that we should just think about in closing more quickly? So that was kind of question one. And the second was on the contract manufacturing exit. I know you've spoken to it before, but in not quite as specific fashion, and I think the language previously, or at least we heard it, was...

Lauren Lieberman: So that was kind of question one. And the second was on the contract manufacturing exit. I think, and I know you've spoken to it before, but in a not quite as specific fashion, and I think the language previously, or at least as we'd heard it, was a gradual sort of wind down until the contract terminates. But now you're speaking to an accelerating and significant pressure from that in the back half. So I was just wondering, and more so than the fourth quarter, if you could put any kind of quantification around that, 'cause that might also help with tying in some of the decision to hold the line on guidance despite such a, you know, significant outperformance in Q1. Thanks.

So that was kind of question one. And the second was on the contract manufacturing exit. I think, and I know you've spoken to it before, but in a not quite as specific fashion, and I think the language previously, or at least as we'd heard it, was a gradual sort of wind down until the contract terminates. But now you're speaking to an accelerating and significant pressure from that in the back half.

a gradual sort of wind down until the contract terminates, but now you're speaking to an accelerating and significant pressure from that in the back half. So I was just wondering, and more so in the fourth quarter, if you could put any kind of quantification around that, because that might also help with tying in some of the decision to hold the line on guidance despite such a significant outperformance in Q1. Thanks.

So I was just wondering, and more so than the fourth quarter, if you could put any kind of quantification around that, 'cause that might also help with tying in some of the decision to hold the line on guidance despite such a, you know, significant outperformance in Q1. Thanks.

Gavin Hattersley: Thanks, Lauren. Tracey, you'll take the second question. But from an overarching point of view, Lauren, as I said, we haven't built in any of the current trends into our guidance, reiteration, right? Obviously, it's too soon to tell where this is all going to go. And point you towards Tracey's comments, where she said our plan is always to try and ship to consumption for the full year. So, you know, as we said, we over-shipped in first quarter very deliberately to make sure that we could weather any unexpected issues which may rear their head through summer. And our inventory levels have remained pretty steady through the whole month of April.

Thanks, Lauren. Tracy, you'll take the second question. But from an overarching point of view, Lauren, as I said, we haven't built in any of the current trends into our guidance reiteration, right? Obviously, it's too soon to tell where this is all going to go. And point you towards Tracy's comments where she said, our plan is always to try and ship to consumption for the full year. So...

So, you know, as we said, we over-shipped in first quarter very deliberately to make sure that we could weather any unexpected issues which may rear their head through summer. And our inventory levels have remained pretty steady through the whole month of April.

As we said, we overshipped in first quarter very deliberately to make sure that we could weather any unexpected issues which may rear their head through summer, and our inventory levels have remained pretty steady through the whole month of April . So our supply chain has been able to meet the increased demand.

Gavin Hattersley: So our supply chain has been able to meet the increased demand that you can obviously see through the publicly available channel and scan data. So that's about all the color I can add for you as it relates to shipments for the year, and then contract brewing, Trace.

So our supply chain has been able to meet the increased demand that you can obviously see through the publicly available channel and scan data. So that's about all the color I can add for you as it relates to shipments for the year, and then contract brewing, Trace.

Tracey Joubert: Yeah. So, again, I can't quantify this because it is with a contract brewing partner, Lauren, but you know, it is a large contract brewing agreement. It does wind down at the end of 2024. We do expect, based on forecast, et cetera, that we do receive to see a significant decline in volumes related to this in the second half of the year. And you know, as I mentioned, accelerating in Q4. So you know, other than being able to quantify, which we can't, that's about as much color as I can add to that.

So again, I can't quantify this because it is with a contract brewing partner, Lauren, but you know, it is a large contract brewing agreement. It does wind down at the end of 2024. We do expect based on forecasts, etc., that we do receive to see a significant declining volume.

related to this in the second half of the year and as I mentioned, accelerating in Q4. So, other than being able to quantify which we can't, that's about as much color as I can add to that. Okay.

Operator: ... Thank you. The next question is from the line of Filippo Falorni with Citi. You may proceed.

Operator: Thank you. The next question is from the line of Filippo Falorni with Citi. You may proceed.

Thank you. The next question is from the line of Filippo Filorni with Citi. You may proceed. Hey, good morning, guys.

Filippo Falorni: Hey, good morning, guys.

Gavin Hattersley: Morning.

Tracey Joubert: Morning.

Filippo Falorni: Just a question on, again, the pricing that you're assuming in the balance of the year. I know obviously you mentioned the competitive dynamics. You haven't really seen anything yet, but do you see a need maybe for the beer industry to step up a bit promotional activity to reflect some of the trade-down or signs of more consumers looking for more value? How do you see that evolving in the balance of the year? And bigger picture, obviously, we've talked a lot about market share dynamics within the beer industry, but what are your expectations for the entire industry growth for 2023? Thank you.

So, question on, just question on again the pricing that you are assuming in the balance of the year. I know obviously you mentioned the competitive dynamics, you haven't really seen anything yet but do you see a need maybe for the beer industry to step up a bit promotional activity?

How do you see that evolving in the balance of the year? And bigger picture, obviously, we've talked a lot about market share dynamics within the beer industry, but what are your expectations for the entire industry growth for 2023? Thank you.

Gavin Hattersley: Thanks, Filippo. So a couple of things in there. You know, from a pricing point of view, not—I can't really add much more than what I've already, I've already said, other than that we don't approach pricing on a one-size-fits-all. We certainly look at by brand, by pack, by market, very specifically, and we will continue to do that. And I think we've been pretty effective at that. You know, as Tracey said, from an overall point of view, our assumptions for the full year is that top line growth is going to come more from rate than volume.

growth for 2023. Thank you.

Thanks, Filippo. So a couple of things in there. From a pricing point of view, I can't really add much more than what I've already said, other than that we don't approach pricing on a one star split goal. We certainly look at five brand, five pack, five market.

very specifically and we will continue to do that and I think we've been pretty effective at that. From a.

You know, as Tracey said, from an overall point of view, our assumptions for the full year is that top line growth is going to come more from rate than volume.

As Tracy said, from an overall point of view, our assumptions for the full year is that the top line growth is going to come more from rate than volume.

Gavin Hattersley: As I said, there's a lot of uncertainty from a macro environment point of view and what impact that may or may not have on the consumer. You know, we are still seeing premiumization, though, albeit at a slower pace. We're not observing significant segment trade down. We're seeing the value, that segment trends are stabilizing. And, you know, as for consumers, we continue to see trips and dollars being up, primarily due to that pricing. Buyers and units down, which is obviously impacting overall industry volumes. And as I said, consumers continue to make trade-offs as they look for value, which shifts into the larger packs and into the singles away from mid-size packs.

As I said, there's a lot of uncertainty from a macro environment point of view and what impact that may or may not have on the consumer. You know, we are still seeing premiumization, though, albeit at a slower pace. We're not observing significant segment trade down. We're seeing the value, that segment trends are stabilizing.

As I said, there's a lot of uncertainty from a macro environment point of view and what impact that may or may not have on the consumer. We are still seeing premiumization though, albeit at a slower pace.

We're not observing significant segment trade down. We're seeing the value that segment trends are stabilizing. And you know as for consumers, we continue to see trips and dollars being up primarily due to that pricing. Buyers and units down, which is obviously impacting overall industry volumes.

And, you know, as for consumers, we continue to see trips and dollars being up, primarily due to that pricing. Buyers and units down, which is obviously impacting overall industry volumes. And as I said, consumers continue to make trade-offs as they look for value, which shifts into the larger packs and into the singles away from mid-size packs.

As I said, consumers continue to make trade-offs as they look for value, with shifts into the larger packs and into the singles away from mid-sized packs. And we build all of that into how we think about pricing of our various brands and packs.

Gavin Hattersley: We build all of that into how we think about pricing of our various brands and packs. Thanks, Filippo.

We build all of that into how we think about pricing of our various brands and packs. Thanks, Filippo.

Operator: Thank you. The next question is from the line of Eric Serotta with Morgan Stanley. You may proceed.

Thanks, Philippa. Thank you.

The next question is from the line of Eric Serrata with Morgan Stanley . You may proceed.

Gavin Hattersley: Erik?

Operator: Eric, your line is now open.

Eric

Eric. Eric, your line is now open.

Gavin Hattersley: Maybe Eric had his question answered already.

Eric Serotta: Sorry about that. I was on mute there. Oh, sorry. I was on mute there. Yeah, most of my questions have been answered, but one for you. You previously had the billion-dollar revenue target for your emerging growth unit. With the reorganization, my understanding is that business unit doesn't really exist anymore or doesn't exist anymore. So wondering how you're thinking about growth prospects for the brands that used to be part of that unit. I understand if you can't fully reconcile it exactly, but how are you thinking about growth for that portfolio, you know, with the progress that we've seen to date and the reorganization?

Most of my questions have been answered, but one for you. You previously had the billion dollar revenue target for your emerging growth unit.

So wondering how you're thinking about growth prospects for the brands that used to be part of that unit. I understand if you can't fully reconcile it exactly, but how are you thinking about growth for that portfolio, you know, with the progress that we've seen to date and the reorganization?

With the reorganization, my understanding is that business unit doesn't really exist anymore or doesn't exist anymore. So wondering how you're thinking about growth prospects for the brands that used to be part of that unit. I understand if you can't fully reconcile it exactly, but

How are you thinking about growth for that portfolio with the progress that we've seen to date and the reorganization? Thanks Eric. Look, I mean, you're right. I mean, we don't have an emerging growth division anymore, so the billion dollar goal.

Gavin Hattersley: Thanks, Eric. Look, I mean, you're right. I mean, we don't have an emerging growth division anymore, so the billion dollar goal is no longer applicable. You know, but the changes to the org structure that we've made here in Americas is completely designed to support accelerating future growth. You know, we're going to have more aligned priorities, we're going to have more aligned leadership. The collaboration between sales and marketing is going to be much more, and it allows us to have more scale in Beyond Beer. And it does allow us to accelerate and have more aligned capabilities. Two examples of that would be innovation and then obviously digital.

The collaboration between sales and marketing is going to be much more, and it allows us to have more scale in Beyond Beer. And it does allow us to accelerate and have more aligned capabilities. Two examples of that would be innovation and then obviously digital.

between sales and marketing is going to be much more and it allows us to have more scale in beyond bear and it does allow us to accelerate and have more aligned capabilities. Two examples of that would be innovation and then obviously digital.

Gavin Hattersley: And all of that is in support of our Beyond Beer initiatives as well as obviously our core brands. You know, with total Beyond Beer coming together because they were sort of housed in different houses. You know, like Topo Chico Spirited and expanded relationships with the Coca-Cola, with the Peace Hard Tea, full-strength, Full Strength Spirits like Five Trail and Barmen and non-alcs with brands like ZOA. All of the activity that now fits into this one big house is designed to drive that even faster. And you're-- we're seeing that with Simply, we're seeing that with ZOA, we're seeing that with our Full Strength spirits.

And all of that is in support of our Beyond Beer initiatives as well as obviously our core brands. You know, with total Beyond Beer coming together because they were sort of housed in different houses. You know, like Topo Chico Spirited and expanded relationships with the Coca-Cola, with the Peace Hard Tea, full-strength, Full Strength Spirits like Five Trail and Barmen and non-alcs with brands like ZOA.

And all of that is in support of our Beyond Beer initiatives as well as obviously our core brands. With total Beyond Beer coming together, because they were sort of housed in different houses, like Topachica Spirited and expanded relationships with Coca-Cola, with Peace Heart Tea, Full Spirit Strength.

All of the activity that now fits into this one big house is designed to drive that even faster. And you're-- we're seeing that with Simply, we're seeing that with ZOA, we're seeing that with our Full Strength spirits.

full strength spirits like 5 Trail and Varmint and Non-Alk with with brands like Zoa. All of the activities that now fits into this one big house is designed to drive that even faster and we're seeing that with with Simply, we're seeing that with Zoa. We're seeing that with our full strength spirits. So, you know, we're only about 45 days into the into the new structure, but the benefits of it

Gavin Hattersley: So, you know, we're only about forty-five days into the new structure, but the benefits of it are already becoming really clear. So I'm very pleased with the sort of first month or two of our new process. So thanks for that question, Eric.

So, you know, we're only about forty-five days into the new structure, but the benefits of it are already becoming really clear. So I'm very pleased with the sort of first month or two of our new process. So thanks for that question, Eric.

of it are already becoming really clear. So I'm very pleased with the first month or two of our new process. So thanks for that question, Eric.

Operator: The next question is from the line of Peter Grom with UBS. You may proceed.

The next question is from the line of Peter Grum with UBS. You may proceed. Thanks, operator. Good morning, everyone. So, Tracy, I appreciate the commentary on inflation and I know you still expect gross margin for Hecht-Leder to increase.

Filippo Falorni: Thanks, operator. Good morning, everyone. So, Tracey, I appreciate the commentary on inflation and I know you still expect gross margin per hectoliter to increase. But when you look at your kind of inflation basket today versus earlier in the year, has anything materially changed? Is it broadly similar? And then just, you know, given the strong starts of the year, how should we think about the phasing of gross margin more on a year-over-year basis, particularly as, you know, inflation moderates? Thanks.

Peter Grom: Thanks, operator. Good morning, everyone. So, Tracey, I appreciate the commentary on inflation and I know you still expect gross margin per hectoliter to increase. But when you look at your kind of inflation basket today versus earlier in the year, has anything materially changed? Is it broadly similar? And then just, you know, given the strong starts of the year, how should we think about the phasing of gross margin more on a year-over-year basis, particularly as, you know, inflation moderates? Thanks.

But when you look at your kind of inflation basket today versus earlier in the year, has anything materially changed? Is it broadly similar? And then just, you know, given the strong starts of the year, how should we think about the phasing of gross margin, more on a year-over-year basis, particularly as, you know, inflation moderates? Thanks.

Tracey Joubert: ... Okay. So, thanks for that, Peter. So, you know, the inflation baskets are pretty similar. You know, it's driven by our brewing and packaging materials, some brewery inflation. But also what's a little bit different is the premiumization, especially coming out of EMEA and APAC. So as we drive our portfolio premiumization, it does come at a higher cost, although, as I said, it comes at higher margins as well. So with the performance we saw in UK, you know, driven by the on-premise performance, and the portfolio premiumization, we did have higher COGS in Q1.

Tracey Joubert: Okay. So, thanks for that, Peter. So, you know, the inflation baskets are pretty similar. You know, it's driven by our brewing and packaging materials, some brewery inflation. But also what's a little bit different is the premiumization, especially coming out of EMEA and APAC.

Okay, so thanks for that Peter. So you know the inflation buckets are pretty similar, you know, it's driven by our brewing and packaging materials, some brewery inflation, but also what's a little bit different is the premiumization.

So as we drive our portfolio premiumization, it does come at a higher COGS, although, as I said, it comes at higher margins as well. So with the performance we saw in UK, you know, driven by the on-premise performance, and the portfolio premiumization, we did have higher COGS in Q1.

Tracey Joubert: But you know, as we look at the balance of the year, we've got a good line of sight to our COGS based on our hedging programs, you know, contract passes, and as well as our expected cost savings. So you know, that helps us to moderate some of the inflationary increases we're seeing. And you know, that's why, with this good line of sight, we are able to look at the COGS moderating or at least the inflation moderating in the back half of the year. So I mean, I think, I think that you know, there's nothing significantly different, other than maybe the premiumization.

But you know, as we look at the balance of the year, we've got a good line of sight to our COGS based on our hedging programs, you know, contract passes, and as well as our expected cost savings. So you know, that helps us to moderate some of the inflationary increases we're seeing.

and the portfolio premiumization, we did have a higher COGS in Q1. But as we look at the balance of the year, we've got a good line of start to our COGS based on our hedging programs, contract passes, and as well as our expected cost savings. And so that helps us to moderate some of the inflation increases we...

And you know, that's why, with this good line of sight, we are able to look at the COGS moderating or at least the inflation moderating in the back half of the year. So I mean, I think, I think that you know, there's nothing significantly different, other than maybe the premiumization.

Gavin Hattersley: Thanks, Peter.

Operator: Thank you. The final question will be from the line of Gerald Pascarelli with Wedbush Securities. You may proceed.

Thanks, Peter.

Thank you. The final question will be from the line of Gerald Pasquarelli with Wedbush Securities. You may proceed.

Gerald Pascarelli: Hi, good morning. Thanks very much for the question. Just on Simply Spiked, it's obviously been incremental to your top line growth, and you're going to come up on cycling your national launch in June. So how do you think about cycling these distribution gains that you've been achieving? And then going back to shelf resets, do you think the fact that we likely see less shelf space allocated to hard seltzers does that help to mitigate the potential impact you may see in the back half of the year due to better product placement? Any color there would be helpful. Thank you.

Hi, good morning. Thanks very much for the question. Just on Simply Spiked, it's obviously been incremental to your top line growth and you're going to come up on cycling your national launch in June . So how do you think about cycling these distribution gains that you've been achieving? And then going back to shelf resets, do you think the fact that we likely see less?

And then going back to shelf resets, do you think the fact that we likely see less shelf space allocated to hard seltzers does that help to mitigate the potential impact you may see in the back half of the year due to better product placement? Any color there would be helpful. Thank you.

shelf space allocated to heart shelters. Does that help to mitigate the potential impact you may see in the back half of the year due to better product placement? Any color there would be helpful. Thank you. Thanks, Gerald. Look, I mean, from a US point of view, very pleased with the performance of Topachico and Vise. Topachico's on track to be the number three heart shelter, because number four coming out of the first quarter.

Gavin Hattersley: Thanks, Gerald. Look, I mean, from a US point of view, you know, very pleased with the performance of Topo Chico and Vizzy. You know, Topo Chico is on track to be the number three hard seltzer, 'cause number four coming out of the first quarter. Simply Spiked has just been, as you say, a massive success since we launched it in summer of 2022. And frankly, it caught us a little bit by surprise, and we weren't able to meet all of the demand that existed. And, you know, with the work that our supply chain team have done to in-house that, and with the variety packet coming online now in May, we feel very, very confident that we're gonna be able to meet the elevated demand.

And frankly, it caught us a little bit by surprise, and we weren't able to meet all of the demand that existed. And, you know, with the work that our supply chain team have done to in-house that, and with the variety packet coming online now in May, we feel very, very confident that we're gonna be able to meet the elevated demand.

SimplySparked has just been, as you say, a massive success since we launched it in summer of 2022. And frankly, it caught us a little bit by surprise and we weren't able to meet all of the demand that existed. And, you know, with the work that our supply chain team have done to in-house that and with a variety packet coming online now in May, we feel very, very confident that we're going to be able to meet the elevated demand. So, you know, although we're going up against strong comps, in many respects, they could have been even stronger. And that's what we're going to take advantage of.

Gavin Hattersley: So, you know, although we're going up against strong comps, in many respects, they could have been even stronger, and that's what we're gonna take advantage of. We've also got Simply Spiked Peach, which has just launched, which has been... You know, I mean, it's really early days, but it's been amazingly successful, so far. We've just launched Simply Spiked in Canada, very late in Q1, so it really had no impact on our Q1 performance up in Canada. But it's off to a really strong start with some of our key retailers. So we're feeling really good about our position from a full flavor and flavor point of view, which is how we're looking at it right now. So thanks for that question.

So, you know, although we're going up against strong comps, in many respects, they could have been even stronger, and that's what we're gonna take advantage of. We've also got Simply Spiked Peach, which has just launched, which has been... You know, I mean, it's really early days, but it's been amazingly successful, so far.

We've just launched Simply Spiked in Canada, very late in Q1, so it really had no impact on our Q1 performance up in Canada. But it's off to a really strong start with some of our key retailers. So we're feeling really good about our position from a full flavor and flavor point of view, which is how we're looking at it right now. So thanks for that question.

retailers. So we're feeling really good about our position from a full flavor and flavor point of view, which is how we're looking at it right now.

our position from a full flavor point of view, which is how we're looking at it right now. Thanks for that question.

Operator: Thank you. That concludes our Q&A session for the call this morning. I would like to turn the call back over to Greg Tierney for concluding remarks.

Thank you. That concludes our Q&A session for the call this morning. I would like to turn the call back over to Greg Attirney for concluding remarks. Thank you, operator. I know there may have been additional questions that we weren't able to answer today, so please follow up with our investor relations team in the days and weeks that come. We look forward to talking with many of you as the year progresses.

Tracey Joubert: Thank you, operator. I know there may have been additional questions that we weren't able to answer today, so please follow up with our investor relations team, in the days and weeks that come, and we look forward to talking with many of you as the year progresses. Thanks much, and thanks everybody for participating in today's call. Have a great day.

Greg Tierney: Thank you, operator. I know there may have been additional questions that we weren't able to answer today, so please follow up with our investor relations team, in the days and weeks that come, and we look forward to talking with many of you as the year progresses. Thanks much, and thanks everybody for participating in today's call. Have a great day.

Operator: That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.

Thanks much and thanks everybody for participating in today's call. Have a great day. That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.

Q1 2023 Molson Coors Beverage Company Earnings Call

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