Q2 2024 Molson Coors Beverage Co Earnings Call
Good morning and welcome to the Molson Coors Beverage Company second quarter earnings conference call. With that, I'll hand it over to Traci Mangini, Vice President, Investor Relations.
Operator: With that, I'll hand it over to Traci Mangini, Vice President, Investor Relations.
Traci Mangini: Thank you, Operator, and hello, everyone. Following our prepared remarks today, we look forward to taking your questions. In an effort to address as many questions as possible, we ask that you limit yourself to one question.
Traci Mangini: Thank you, Operator, and hello, everyone. Following prepared remarks today, we look forward to taking your questions. In an effort to address as many questions as possible, we ask that you limit yourself to one question.
Traci Mangini: If you have technical questions about the quarter, please reach out to our IR team. Also, I encourage you to review our earnings release and earnings slides, which are posted in the IR section of our website and provide detailed financial and operational metrics. Today's discussion includes forward-looking statements, and 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 except as required by applicable law.
Speaker Change: If you have technical questions on the quarter, please reach out to our IR team. Also, I encourage you to review our earnings release and earnings slides, which are posted to the IR section of our website, and provide detailed financial and operational metrics.
Speaker Change: Today's discussion includes forward-looking statements. Actual results or trends could differ materially from our forecast.
Speaker Change: For more information, please refer to the risk factors discussed in our most recent filings with the SEC. We assume no obligation to update forward-looking statements except as required by applicable law. Reconciliation for any non-U.S. GAAP measures are included in our earnings release.
Traci Mangini: Reconciliation for any non-U.S. GAAP measures is included in our earnings release. Unless otherwise indicated, all financial results we discuss are compared to the comparable prior year period and are in U.S. dollars. With the exception of earnings per share, all financial metrics are in constant currency when referencing percentage changes from the prior year period. Also, share data references are sourced from Cercana in the U.S. and from Bear Canada in Canada, unless otherwise indicated.
Speaker Change: Unless otherwise indicated, all financial results we discuss are versus the comparable prior year period and are in U.S. dollars. With the exception of earnings per share, all financial metrics are in constant currency when referencing percentage changes from the prior year period.
Speaker Change: Also, shared data references are sourced from Cercana in the U.S. and from Bear Canada in Canada, unless otherwise indicated.
Traci Mangini: Further, in our remarks today, we will reference underlying pre-tax income, which equates to underlying income before income taxes, and underlying earnings per share, which equates to underlying diluted earnings per share, as defined in our earnings release. With that, over to you, Gavin.
Speaker Change: Further, in our remarks today, we will reference underlying pre-tax income, which equates to underlying income before income taxes, and underlying earnings per share, which equates to underlying diluted earnings per share, as defined in our earnings release. With that, over to you, Gavin.
Gavin Hattersley: Thank you, Traci. Good morning everybody, and thank you for joining the call. We are pleased with our results this quarter, which played out largely as we had expected. However, we acknowledge that there are a few near-term timing dynamics impacting our quarter-to-quarter performance this year. In today's call, we will unpack these as well as the drivers of the second half of the year to demonstrate why we are maintaining our guidance for the full year 2024.
Gavin: Thank you, Traci. Good morning, everybody, and thank you for joining the call.
Gavin: We are pleased with our results this quarter, which played out largely as we had expected.
Gavin: We acknowledge that there are a few near-term timing dynamics impacting our quarter-to-quarter performance this year.
Speaker Change: In today's call, we will unpack these, as well as the drivers of the second half of the year, to demonstrate why we are maintaining our guidance for the full year 2024.
Gavin Hattersley: In the second quarter, we essentially held our top line and grew our bottom line while cycling a very difficult year-over-year comparison. If you recall, the second quarter of 2023 was our strongest second quarter net sales revenue since the 2005 Molson and Coors merger. Consolidated net sales revenue was down 0.1%, underlying pre-tax income grew 5.2%, and underlying earnings per share grew 7.9%, while we continue to invest behind our brands globally heading into peak season. We also accelerated the pace of share repurchases for the quarter, given the compelling valuation as we see it, amid the strong performance of the business and our confidence in our long-term algorithms.
Gavin: In the second quarter, we essentially held our top line and grew our bottom line while cycling a very difficult year-over-year comparison.
Gavin: If you recall, the second quarter of 2023 was our strongest second quarter net sales revenue since the 2005 Molson and Coors merger.
Gavin: Consolidated net sales revenue was down 0.1%, underlying pre-tax income grew 5.2%, and underlying earnings per share grew 7.9%, while we continued to invest behind our brands globally heading into peak season.
Gavin: We also accelerated the pace of share repurchases for the quarter, given compelling valuation as we see it, amid the strong performance of the business and our confidence in our long-term algorithm.
Gavin Hattersley: Contributing meaningfully to our results was our EMEA and APAC business due to favorable net pricing, premiumization, and brand volume growth. For the first half of the year, we increased net sales revenue by 4.2%, underlying pre-tax income by 20.4%, and underlying earnings per share by 23.8%. While this is a very strong performance year over year, there are a few timing factors that will impact us in the third and fourth quarters, which is why we are maintaining our guidance for the full year.
Gavin: Contributing meaningfully to our results was our EMEA and APAC business due to favorable net pricing, premiumization, and brand volume growth.
Gavin: For the first half of the year, we increased net sales revenue by 4.2%, underlying pre-tax income by 20.4%, and underlying earnings per share by 23.8%.
Gavin: While this is a very strong performance year over year, there are a few timing factors that will impact us in the third and fourth quarters, which is why we are maintaining our guidance for the full year.
Gavin Hattersley: These timing factors will result in an unwind in the back half of the year, and the resulting temporary trends are not reflective in any way of our confidence in our acceleration plan and growth initiatives. The most important timing factor to understand regarding our performance in the first and second halves of the year is U.S. shipment timing. We made the deliberate decision to increase our U.S. inventories in anticipation of and during the strike at our Fort Worth brewery, which ran 14 weeks from February through May.
Gavin: These timing factors will result in an unwind in the back half of the year, and the resulting temporary trends are not reflective in any way of our confidence in our acceleration plan and growth initiatives.
Gavin: The most important timing factor to understand regarding our performance in the first and second halves of the year is US shipment timing.
Gavin: We made the deliberate decision to increase our U.S. inventories in anticipation of and during the strike at our Fort Worth brewery, which ran 14 weeks during February through May.
Gavin Hattersley: We did this to ensure we had healthy inventories during the peak summer season. As a result, excluding contract volumes, SDWs exceeded STRs by about 750,000 hectoliters in the first quarter and by about 350,000 hectoliters in the second quarter.
Gavin: We did this to ensure we had healthy inventories during the peak summer season.
Gavin: As a result, excluding contract volumes, SDWs exceeded STRs by about 750,000 hectoliters in the first quarter and by about 350,000 hectoliters in the second quarter.
Gavin Hattersley: And we continue to expect this will essentially fully unwind in the third and fourth quarters with more waiting for the third quarter. Another factor impacting our results is the continued exit of PEP's contract brewing volume as we approach the termination of the agreement at year end. This reduced second quarter financial volume by 580,000 hectares, with declines accelerating from the first quarter.
Gavin: Another factor impacting our results is the continued exit of PEP's contract brewing volume as we approach the termination of the agreement at year-end.
Gavin Hattersley: It reduced our first half financial volume by over 900,000 hectoliters, which represents a decline in PAP's contract volume of over 50% from the first half of 2023. To put a finer point on it, PAF had a negative 3.2 percentage point impact on both our second quarter and first half America's financial volume on a year-over-year basis. And while PAPS is a near-term headwind to total volume and net sales revenue, the mixed benefits related to its exit, along with favorable global net pricing and premiumization in Mayo and APAC, drove an increase in consolidated net sales revenue per hectoliter of 4.2% for both the quarter and for the first half.
Gavin: To put a finer point on it, PAF's had a negative 3.2 percentage point impact on both our second quarter and first half America's financial volume on a year-over-year basis.
Gavin: And while perhaps there's a near-term headwind to total volume and net sales revenue.
Gavin: The mixed benefits related to its exit, along with favorable global net pricing and premiumization in the Mayo and APAC, drove an increase in consolidated net sales revenue per hectolitre of 4.2% for both the quarter and for the first half.
Gavin Hattersley: Turning to cash flow, we generated $505 million in underlying free cash flow for the first half of the year while investing meaningfully in our business, and we returned $564 million in cash to shareholders through both our dividends and share repurchase program.
Gavin Hattersley: Tracey will cover more on our capital allocation and outlook drivers. But to sum it up, given our strong performance for the first half of the year, we remain on track to deliver a 2024 guide. This guidance calls for top and bottom line growth for the third straight year, something that has not been done in over a decade. Now, let me take you through our strategic priorities, starting with our core power brand.
Gavin: Tracey will cover more on our capital allocation and outlook drivers, but to sum it up, given our strong performance for the first half of the year, we remain on track to deliver our 2024 guidance.
Gavin Hattersley: In the US, Coors Light, Miller Light, and Coors Bank, with combined volume share down a half share point from a year ago when we saw a peak share gain. However, these brands remain up two full share points compared to the second quarter of 2022. This means that we have retained approximately 80% of our peak share gains on our core power brand. Coors Banquet, in particular, is performing extremely well.
Tracey: Now let me take you through our strategic priorities, starting with our core power brand.
Gavin: In the US, Coors Light, Miller Light and Coors Bank with second quarter combined volume share is down a half share point of industry versus a year ago when we saw our peak share gains.
Gavin: However, these brands remain up two full share points compared to the second quarter of 2022.
Gavin: This means that we retained approximately 80% of our peak share gains on our core power brands.
Gavin Hattersley: We have deliberately built on this 150-year-old brand over the last several years, building on its loyal consumer base and attracting new Gen Z and millennial legal drinking age consumers, and the results have been impressive. Coors Banquet grew brand volume nearly 13% in the first half of the year and gained dollar share at the fastest rate among the top 15 brands in the beer category, and we see great potential ahead as we continue to close distribution gaps and increase brand awareness. In Canada, Kurzweil continues to be the number two brand in the country, and the Molson family of brands gained volume share in both the three months and year to date ended May.
Gavin: Coors Banquet, in particular, is performing extremely well. We have deliberately built on this 150-year-old brand over the last several years, building on its loyal consumer base and attracting new Gen Z and millennial legal drinking age consumers.
Gavin: And the results have been impressive.
Gavin Hattersley: In fact, in Ontario, Coors Light and Molson Canadian continue to be the number one and number two brands respectively in both the three months and year to date ended May, and Collings Brand Equity continues to benefit from its partnership with the FA Cup. Turning to our premiumization priority for both beer and beyond beer, our above-premium portfolio was over 26% of total net brand revenue for the 12 months ended June 30th.
Gavin: In fact, in Ontario, Coors Light and Molson Canadian continue to be the number one and number two brand respectively in both the three months and year to date ended May.
Speaker Change: In EMEA and APAC, strong results in Central and Eastern Europe have been supported by OJSCO in Croatia, which has gained nearly two value share points of the core segment year-to-date in June , as well as the extremely successful launch of a new core power brand, CARIMAN, in Romania, reaching about 150,000 HEC leaders since March.
Gavin: And Carling's Brand Equity continued to benefit from its partnership with the FA Cup.
Speaker Change: Turning to our premiumization priority for both Beer and Beyond Beer, our above-premium portfolio was over 26% of total net brand revenue for the 12 months ended June 30th.
Gavin Hattersley: Premiumization progress is at different stages across our markets, and we have had success in APEC, Canada, and Latin America. In America and APAC, our above-preempt share of net brand revenue continues to be over 50 percent, up nearly 10 percentage points from the full year 2019. This improvement is primarily due to the very successful launch of METRI, which continued to grow revenue double digits in the second quarter. And it is the number three logger in the on premise market in the UK in terms of sales.
Speaker Change: Our premiumization progress is at different stages across our markets and we have had success in Mayo and APEC, Canada and Latin America.
Speaker Change: In America and APEC, our above premium share of net brand revenue continues to be over 50%, up nearly 10 percentage points from the full year 2019.
Speaker Change: This improvement is primarily due to the very successful launch of METRI, which continued to grow revenue double digits in the second quarter.
Speaker Change: And it is the number three logger in the on-premise in the UK in terms of value.
Gavin Hattersley: In the Americas, our above-premium share of net brand revenue was over 21% for the 12 months ended June 30, which is up 82 percentage points from the full year 2019. This was supported by Canada, where our above-premium share of net brand revenue has also grown, driven by the success of Miller Lite, Coors Delta, and Visio. Also contributing to the mix is Latin America, where more than three-quarters of our net brand revenue is above premium.
Speaker Change: This was supported by Canada, where our above-premium share of net brand revenue has also grown driven by the success of Miller Lite, Coors Delta, and Vizi.
Speaker Change: Also contributing to the mix is Latin America, where more than three quarters of our net brand revenue is above premium.
Gavin Hattersley: In the US, our net brand revenue share from above premium has improved compared to 2019, but our above premium trends have been more challenged recently, and we have work to do yet. This is largely due to the strong performance of our core power brands in 2023, but we believe we can build from here. And we have focused plans around our key above-premium brands and innovations to do just that. This starts with a Blue Moon family performance, and we feel good about our new campaign and packaging, our repositioning of Blue Moon Light, as well as our line extensions into non-ALC.
Speaker Change: In the U.S., our net brand revenue share from above premium has improved compared to 2019. But our above premium trends have been more challenged recently, and we have work to do here.
Speaker Change: Now, this is largely due to the strong performance of our core power brands in 2023, but we believe we can build from here, and we have focused plans around our key above-premium brands and innovations to do just that.
Speaker Change: This starts with a Blue Moon family performance, and we feel good about our new campaign and packaging, our repositioning of Blue Moon Light, as well as our line extensions into non-alch. It's early, but we believe we are moving in the right direction.
Gavin Hattersley: It's early, but we believe we are moving in the right direction. We are committed to continuing to innovate and scale Beyond Beer, which for us is all about above premium. Flavor is a key focus area because it's big and it's growing. Given the flavor consumer evolves and shifts quickly, flavor innovation is key to keeping pace with their demands. We believe we have impactful brands with potential in the space. For example, we have built SimpliSpike into a $100 million brand in just two years, illustrating the power of the Molson Coors platform as a launchpad for innovation and growing brands.
Speaker Change: Given the flavor consumer evolves and shifts quickly, flavor innovation is key to keeping pace with their demands.
Speaker Change: For example, we have built SimpliSpike into a $100 million brand in just two years, illustrating the power of the Molson Coors platform as a launchpad for innovation and growing brands.
Gavin Hattersley: And while we have seen some suffering on our original packs as we launched into new flavors, with the SimpliBrand in one out of every two households in the US, we believe the SimpliSpark brand family has more on the way, and we have exciting plans for Peroni. By outsourcing production in the US, we believe we can better ensure consistency of supply and ultimately drive scale and margin for this high-potential brand. Before I pass it to Tracey, I'll conclude by saying that we are confident we have the right strategy to achieve our long-term growth objective, and we are very pleased with our progress against our strategy. We are in much different companies today than we were four years ago, and we are most certainly stronger than we were just 16 months ago.
Speaker Change: And while we have seen some suffering on our original packs as we launched into new flavors, with the Simply brand in one out of every two households in the US, we believe the Simply Spark brand family has more runway.
Speaker Change: And, we have exciting plans for Peroni.
Speaker Change: By on-shoring production in the U.S., we believe we can better ensure consistency of supply and ultimately drive scale and margin for this high-potential brand.
Speaker Change: Before I pass it to Tracey, I'll conclude by saying that we are confident we have the right strategy to achieve our long-term growth objectives.
Speaker Change: And we are very pleased with our progress against our strategy. We are a much different company today than we were four years ago, and we are most certainly stronger than we were just 16 months ago. With that, I will pass it to Tracey.
Gavin Hattersley: With that, I will pause it to trace it.
Tracey Joubert: Thank you, Gavin. We reported another strong quarter of financial performance and continue to expect that we will achieve our goal of growing the top and bottom lines for the third year in a row. As Gavin mentioned, with our strong free cash flow generation, we continue to invest strategically in our business and also return cash to shareholders. Since October 2019, when we launched the initial phase of a new strategy, we have invested substantially in our capabilities, from supply chain to marketing to technology and tools that advance our insights and analytics.
Tracey: Since October 2019, when we launched the initial phase of a new strategy, we have invested substantially in our capabilities.
Tracey Joubert: These investments have driven substantial cost savings, which help to offset inflationary pressures and support long-term, sustainable, profitable growth. In recent years, this has included adding shrimp production and coastal packing capabilities, expanding and diversifying our supplier base. Building Slim Can Capacity in our Can Farm and replacing several breweries with state-of-the-art facilities in Canada. In the first half of this year, a big focus has been our multi-year, multi-hundred million dollar modernization of our Golden Colorado Brewery, which is near completion.
Tracey: These investments have driven substantial cost savings which help to offset inflationary pressures and support long-term, sustainable, profitable growth.
Tracey: In recent years, this has included adding further production and coast packing capabilities, expanding and diversifying our supplier base,
Tracey: Building a slim can capacity in our can farm and replacing several breweries with state-of-the-art facilities in Canada.
Tracey Joubert: This project at our largest U.S. brewery, which broke ground in the fall of 2020, is completely overhauling the brewery's infrastructure and is expected to result in more efficient fermenting, aging, and filtration facilities, as well as a state-of-the-art upgrade to the cellars. When it is fully operational in a few weeks' time, we will have a more efficient brewery that produces less waste.
Tracey: This project at our largest U.S. brewery, which broke ground in the fall of 2020, is completely overhauling the brewery's infrastructure, and is expected to result in more efficient fermenting, aging, and filtration facilities, as well as a state-of-the-art upgrade to the cellars.
Tracey: When it is fully operational in a few weeks' time, we will have a more efficient brewery that produces less waste.
Tracey Joubert: We have also commenced a new multi-year project in the U.K. to increase our brewing and packaging capacity, which is necessary in part due to the continued growth of Madrid. And it is these investments, along with our extensive hedging program, that have helped us to offset inflation, particularly during the significant inflationary period we have experienced in recent years. And while inflation has moderated, as expected, it remains a headwind this year.
Tracey Joubert: In the second quarter, our COGS per hectoliter increased 2.9%, which was driven by the Americas business, which was at 4.1%. This is largely due to ongoing inflationary pressure, as well as volume de-leverage, in part due to the reduced tax contract brewing volume in the Americas business. Turning to marketing capabilities, we overhauled our marketing strategy several years ago, making us more nimble and efficient as we have continued to invest in our brand.
Speaker Change: In the second quarter, our COGS per hectolitre increased 2.9 percent, which was driven by the American business, which was up 4.1 percent.
Tracey: This is largely due to ongoing inflationary pressure, as well as volume de-leverage in part due to the reduced tax contract brewing volume in the Americas business.
Tracey Joubert: By improving our ability to analyze and evaluate the effectiveness of marketing investments, we are able to assess our campaigns in almost real time. And we built our own in-house agency, enabling us to meaningfully shift our percentage of spend to more working versus non-working marketing dollars.
Speaker Change: By improving our ability to analyze and evaluate the effectiveness of marketing investments, we are able to assess our campaigns in almost real time.
Tracey: And we built our own in-house agency, enabling us to meaningfully shift our percentage of spend to more working versus non-working marketing dollars.
Tracey Joubert: It's our deep marketing capabilities that have enabled us to meaningfully improve our return on marketing investment since 2019 and support why our long-term growth algorithm does not contemplate step changes in marketing spend. As for returning cash to shareholders, in the first half of this year, we paid $188 million in cash dividends. And in February, we raised the dividend for the third consecutive year, a cumulative 29.4% increase.
Tracey: As for returning cash to shareholders, in the first half of this year, we paid $188 million in cash dividends. And in February , we raised the dividends for the third consecutive year, a cumulative 29.4% increase.
Tracey Joubert: As such, we are generating a dividend yield of 3.2% as of August 1st. Additionally, we are active in executing against our up to five-year, $2 billion share repurchase program that we announced last October. We continue to view our stock as a compelling investment opportunity amid the strong performance of the business and our confidence in our long-term growth algorithm. And utilizing a sustained and opportunistic approach, we repurchased 4.6 million shares for a total cost of $260.7 million in the quarter.
Tracey: As such, we are generating a dividend yield of 3.2% as of August 1st.
Tracey: Also, we are active in executing against our up-to-five-year, $2 billion share repurchase program that we announced last October .
Tracey: We continue to view our stock as a compelling investment opportunity amidst a strong performance of the business and our confidence in our long-term growth algorithm.
Tracey: And utilizing a sustained and opportunistic approach, we repurchased 4.6 million shares for a total cost of $260.7 million in the quarter.
Tracey Joubert: Since the inception of the plan, we have already repurchased 8.8 million shares, or 4.4% of our Class B shares outstanding, since September 30, 2023, for a total cost of $521.1 million. That means we have completed approximately 26% of the TAN in just the first three quarters.
Tracey: Since the inception of the plan, we have already repurchased 8.8 million shares, or 4.4% of our Class B shares outstanding, since September 30, 2023, for a total cost of $521.1 million.
Tracey: That means we have completed approximately 26% of the task in just the first three quarters.
Tracey Joubert: And the reason we're able to deploy our capital in these ways is because our balance sheet is strong and healthy, healthier than it has been since before the 2016 Monecres acquisition. We ended the quarter with a leverage ratio of 2.13 times, which remained in line with our long-term target range of less than 2.5 times. In May, we issued an eight-year 800 million euro note at a fixed rate of 3.8% and used the proceeds to pay down our 800 million euro notes upon their maturity in July. And now, to conclude with our financial outlook. We are reaffirming our commitment to our 2024 garden.
Tracey: And the reason we've been able to deploy our capital in these ways is because our balance sheet is strong and healthy. Healthier than it has been since before the 2016 Medicare's acquisition.
Tracey: We ended the quarter with a leverage ratio of 2.13 times, which remained in line with our long-term target range of less than 2.5 times.
Tracey: In May, we issued an 8-year, 800 million euro note at the fixed rate of 3.8% and used the proceeds to pay down our 800 million euro note upon its maturity in July .
Tracey: And now I'd like to conclude with our financial outlook.
Tracey Joubert: As a reminder, the key metrics fall for low single-digit net sales revenue growth on a constant currency basis. Miss Single-Digit Underlying Pre-Tax Income Growth on a Constant Currency Basis. Miss Single-Digit Underlying Earnings per Share Growth and underlying free cash flow of $1.2 billion plus or minus 10%.
Tracey: We are reaffirming our 2024 garden.
Speaker Change: As a reminder, the key metrics for low single-digit net sales revenue growth on a constant currency basis
Speaker Change: Miss Single-Digit Underlying Pre-Tax Income Growth on a Constant Currency Basis Miss Single-Digit Underlying Earnings Per Share Growth and Underlying Pre-Cash Flow of $1.2 Billion plus or minus 10%
Tracey Joubert: While this guidance implies slower trends for the second half of the year, it's important to remember that this is driven by shipment timing this year, and it does not alter our confidence in our long-term growth expectations. As Gavin discussed, in the US, excluding contract volume, we deliberately shipped ahead of demand by about 1.1 million hectoliters in the first half of the year. This compares to the first half of 2023, when our FTWs were behind our STRs by about 400,000 hectoliters.
Speaker Change: While this guidance implies slower trends for the second half of the year, it's important to remember that this is driven by shipment timing this year, and it does not alter our confidence in our long-term growth expectations.
Speaker Change: As Gavin discussed, in the US, excluding contract volume, we deliberately shipped ahead of demand by about 1.1 million hectolitres in the first half of the year.
Gavin: This compares to the first half of 2023, when our SDWs were behind our SGRs by about 400,000 hectoliters.
Tracey Joubert: And since we currently plan to shift to consumption for the year, we expect to reverse that in the second half, mostly in the third quarter. At the same time, our contract with PEPS continued to wind down. Recall that we expected the impact for the year from the PEPS contract termination to be approximately 2 million hectoliters, or about 3% of America's financial volume. There is about 1 million hectoliters remaining that will come out of that system in the second half of the year, with over half of that expected to come out in the third quarter.
Speaker Change: And since we currently plan to shift to consumption for the year, we expect this to reverse in the second half, mostly in the third quarter.
Speaker Change: At the same time, our contract with PEPS continued to wind down. Recall that we expected the impact for the year from the PEPS contract termination to be approximately 2 million hectolitres, or about 3% of America's financial volume.
Speaker Change: There is about 1 million hectolitres remaining that will come out of that system in the second half of the year, with over half of that expected to exit in the third quarter.
Tracey Joubert: These U.S. shipment trains are expected to result in volume de-leverage in the second half of the year. And recall that we had a volume leverage benefit on a consolidated basis of about 60 basis points in a comparable period in 2023. For some perspectives, on a consolidated basis, we estimate that our fixed costs in 2024 will comprise approximately 20% of our total costs. However, the anticipated benefits of roll forward pricing taken in the first quarter, premiumization of our portfolio, moderating innovation, and cost savings should partially offset the impact of Volume D leverage.
Speaker Change: These U.S. shipment trains are expected to result in volume D leverage in the second half of the year.
Speaker Change: And recall that we had a volume leverage benefit on a consolidated basis of about 60 basis points in a comparable period in 2023.
Speaker Change: For some perspectives, on a consolidated basis, we estimate that our fixed costs in 2024 will comprise approximately 20% of our total costs.
Speaker Change: However, the anticipated benefits of roll-forward pricing taken in the first quarter, premiumization of our portfolio, moderating inflation, and cost savings should partially offset the impact of Volume D leverage.
Tracey Joubert: And we expect MG&A for the second half to be down compared to the prior year period as we tackle the second half of 2023, when we had high marketing investment to support the momentum in our brand, as well as higher incentive compensation. And as we look to the longer term, we remain confident in our growth algorithm as we have multiple leaders to achieve it. From a robust revenue management platform, to our premiumization and innovation plans, to our continued investment to drive efficiencies and cost savings, these levers help us to navigate various market circumstances. In closing, we had another strong financial quarter and remain committed to our short and long-term financial and strategic goals. And with that, we'd like to open it up to your questions, Operator.
Speaker Change: And we expect MG&A for the second half to be down compared to the prior year period as we tackle the second half of 2023 when we had high marketing investment to support the momentum in our brand, as well as higher incentive compensation.
Speaker Change: As we look to the longer term, we remain confident in our growth algorithm as we have multiple leaders to achieve it.
Speaker Change: From a robust revenue management platform, to a premiumization and innovation plan, to a continued investment to drive efficiencies and cost savings, these levers help us to navigate various market circumstances.
Speaker Change: In closing, we had another strong financial quarter and remained committed to our short and long term financial and strategic goals.
Speaker Change: And with that, we'd like to open it up to your questions, operator.
Operator: Thank you. If you'd like to ask a question today, please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind and would like to be removed from the queue, please press star followed by two. When preparing to ask your question, please ensure that your device and your microphone are unmuted locally. Our first question comes from Bonnie Herzog with Goldman Sachs. Bonnie, please go ahead.
Speaker Change: Thank you. If you would like to ask a question today, please do so now by pressing Start followed by the number 1 on your telephone keypad. If you change your mind and would like to be removed from the queue, please press Start followed by 2. When preparing to ask your question, please ensure that your device and your microphone are unmuted locally.
Speaker Change: Our first question comes from Bonnie Herzog with Goldman Sachs. Bonnie, please go ahead.
Bonnie Herzog: All right. Thank you. Good morning, everyone.
Gavin Hattersley: I guess I had a question on your guidance, which you did maintain, you know, in terms of full year and all metrics, which, you know, certainly implies a deceleration in the second half, as you highlighted. So maybe you could unpack this a little bit more for us. For instance, you know, how should we think about the volume to leverage impact in the back half and, you know, possibly provide a little more color on any offsets you have to mitigate the impact on margins?
Bonnie Herzog: All right. Thank you. Good morning, everyone.
Bonnie Herzog: I guess I had a question on your guidance, which you did maintain, you know, in terms of full year and all metrics, which, you know, certainly implies a deceleration in the second half, as you highlighted. So
Bonnie Herzog: Maybe you could unpack this a little bit more for us, for instance, you know, how should we think about the volume to leverage impact in the back half and
Speaker Change: [inaudible]
Gavin Hattersley: I think you touched on this. And then, in terms of marketing spend levels, Tracey, I think you just mentioned that you expect spending levels to be lower in the second half versus the first half. So just hoping for a little more color on your strategy with that and, you know, really how we should think about your spending levels moving forward as I think about, you know, your ability to continue to hold on to some of these share gains since, you know, 2022. Thank you. Good morning, Bonnie.
Speaker Change: possibly provide a little more color on any offsets you have to mitigate the impact on margins. I think you touched on this. And then
Speaker Change: In terms of marketing spend levels, Tracey, I think you just mentioned that you expect, you know, spending levels to be lower in the second half versus the first half, so just
Speaker Change: Hoping for a little more color on your strategy with that and, you know, really how we should think about your spending levels moving forward, you know, as I think about, you know, your ability to continue to hold on to some of these share gains since, you know, 2022. Thank you.
Tracey Joubert: Good morning, Bonnie. Yeah, thanks for the question. So, you know, as we look at the volume de-leverage, you know, for the back half of the year, so, from a COGS point of view, we do expect higher COGS in 2024 versus 2023, and our second half to be higher than our first half. And really, this is all driven by the de-leverage, as well as mix. So, you know, we spoke about the de-leverage impact of our shipment timing, as well as the exit of packs.
Speaker Change: Good morning, Bonnie. Yeah, thanks for the question. So, you know, as we look at the volume de-leverage, you know, for the back half of the year,
Speaker Change: So
Speaker Change: From a COGS point of view, we do expect higher COGS in 2024 versus 2023, and our second half to be higher than our first half, and really this is all driven by the de-leverage, as well as mix. So, you know, we spoke about the de-leverage impact from our shipment timing, as well as the exit of PAPs.
Tracey Joubert: But also, as we premiumize our portfolio, you know, that does add COGS, although it is margin accretive. We have said that we expect to see continued inflation, although it is moderating. And, you know, some of the things that are driving inflation are we do have material conversion costs, which are generally linked to inflation indices, and they do tend to lag. In addition, we've spoken about our hedging program; generally, our hedges are longer term. So, you know, anything up to three years.
Speaker Change: But also, as we premiumize our portfolio, you know, that does add COGS, although it is margin accretive.
Speaker Change: We have said that we expect to see continued inflation, although it is moderating. And, you know, some of the things that is driving the inflation is we do have material conversion costs, which generally are linked to inflation indices and they do tend to lag.
Speaker Change: In addition, we've spoken about our hedging program, generally our hedges are longer term, so, you know, anything up to three years.
Tracey Joubert: And so we do have some hedges that we put in place in 2022 and 2023, which, you know, will roll off this year and next year. And in terms of, you know, helping to moderate, you know, some of the COGS inflation increases that we've seen, we have cost savings, and we've invested in our breweries to drive efficiencies and cost savings. So that is going to help us balance. In terms of margin, with the contract brewing volume coming out, remember that is at a very low margin for us, so that's certainly going to help margins.
Speaker Change: So we do have some hedges that we put in place in 22 and 23, which we'll roll off this year and next year.
Speaker Change: In terms of, you know, helping to moderate, you know, some of the COGS inflation increases that we've seen, we have got cost savings, we've invested in our breweries to drive efficiencies and cost savings, so that is going to help us offset.
Speaker Change: In terms of margin, you know, with the contract brewing volume coming out, remember that is at a
Speaker Change: A very low margin for us, so that's certainly going to help margins, even though it does have a volume leverage impact, it does take a lot of complexity out of our breweries, especially during the peak summer seasons where we need the capacity.
Tracey Joubert: Even though it does have a volume leverage impact, it does take a lot of complexity out of our breweries, especially during the peak summer seasons, where we need the capacity. And taking out some of that volume will not only impact efficiencies but can lead to reduced waste, so that will drive our COGS down as well.
Speaker Change: And, you know, taking out some of that volume will not only just impact efficiencies, but, you know, can lead to reduced waste. So, you know, that will drive our COGS down as well.
Tracey Joubert: And in terms of marketing, we do expect our MG&A to be lower in the back half of the year versus the first half of the year. And if you recall, in the second half of 2023, we spent an incremental $100 million in marketing, really to drive the strong momentum in our brands. And this was evenly split between Q2 and Q3. Now, typically, we spend more marketing dollars in the summer.
Speaker Change: In terms of the marketing, so we do expect our MG&A to be lower in the back half of the year versus the first half of the year.
Speaker Change: And if you recall, in the second half of 2023, we spent an incremental hundred million dollars in marketing, really to drive the strong momentum in our brands. And this is evenly split between Q2 and Q3.
Tracey Joubert: So you can expect lower year-over-year spend, particularly in Q4. But just remember, we do expect 2024 marketing to be up immediately from 2022. So, you know, there's no pullback on marketing; we'll continue to invest in our brands. And, you know, make sure that we've got the right fuel to drive the momentum.
Speaker Change: Now, typically, we spend more marketing dollars in the summer, so you can expect lower year-over-year spend, particularly in Q4. But just remember, we do expect 2024 marketing to be up immediately from 2022.
Speaker Change: So, you know, there's no pullback on marketing. We'll continue to invest behind our brand and, you know, make sure that we've got the right fuel to drive the momentum.
Speaker Change: anyone.
Operator: The next question comes from Andrea Teixeira with J.P. Morgan. Andrea, please go ahead.
Bonnie Herzog: Thanks, Bonnie.
Speaker Change: The next question comes from Andrea Teixeira with J.P. Morgan. Andrea, please go ahead.
Drew Levine: Hey, good morning. This is Drew Levine speaking for Andrea.
Drew Levine: Hey, good morning. This is Drew Levine. I'm for Andrea. Thank you for taking our questions. So Gavin, you've talked previously about April and May being relatively soft for the beer industry. Can you just talk maybe on the monthly progression on brand volumes?
Drew Levine: Thank you for taking our questions. So Gavin, you've talked previously about April and May being relatively soft for the beer industry. Can you just talk maybe on the monthly progression on brand volume? In the U.S., through the quarter, did you see improvement in June and perhaps how performance has been in July? It seems like it's been a little choppy, but the weather's been a bit better. And in that context, how are you thinking about the industry's performance for the rest of the year? And then, just secondly, maybe, Tracey, on the brand volume performance for the U.S. mid-quarter, any way to contextualize the holiday load and timing impact? Thank you.
Speaker Change: In the U.S. through the quarter, did you see improvement in June and perhaps how performance has been in July ? It seems like it's been a little choppy, but the weather's been a bit better. And in that context, how you're thinking about the industry performance for the rest of the year?
Tracey: And then just secondly, maybe Tracey, on the brand volume performance for the U.S. mid-quarter, any way to contextualize the holiday load and timing impact. Thank you.
Gavin Hattersley: Thanks, June. Good morning. Thanks for the question.
Speaker Change: Thanks, June . Good morning. Thanks for the question.
Gavin Hattersley: Look, you know, obviously, as you rightly say, there was a fair amount of noise in the second quarter. You know, there was holiday timing, and a bit of turbulent weather in the first part. So, you know, certainly April and May were tougher, but we did see some improvement in June. Collectively, when you look at the second quarter in totality, particularly if you just look at the timing of the July fourth holiday, you know, it's just a continuation of what we've been seeing for a while, right?
Speaker Change: You know, there obviously, as you rightly say, there was a fair amount of noise in the second quarter. You know, there was holiday timing, a bit of turbulent weather in the first part. So, you know, certainly April .
Speaker Change: April and May were tougher. And we did see some improvement in June . Collectively, when you look at the second quarter in totality, particularly if you adjust out for the timing of the July the 4th holiday, you know, it's just a continuation of what we've been seeing for a...
Gavin Hattersley: And, you know, from a consumer point of view, not trading down between or up between brands but more pack shifting within the brand portfolio to singles or to larger pack sizes. I think as we look ahead, and I think if Q2 taught us anything, it's that you can't make a prediction for a quarter based on a few weeks of data. So let's see how quarter three turns out, but certainly, Q2 is a continuation of what we've been seeing for a while. Traci, what is the second part of the question? Yeah, I mean, just in terms of contextualizing, so
Speaker Change: for a while, right? And, you know, from a consumer point of view, you know, not, not, not trading down between or up between brands, but, but, but more, you know, pack shifting within the, the brand portfolio to, to singles or to, or to larger, larger pack sizes.
Speaker Change: I think as we look going forward, if Q2 taught us anything, it's that you can't make a prediction on a quarter based on a few weeks of data. So let's see how quarter 3 turns out. But certainly Q2 is a continuation of what we've been seeing for a while.
Tracey Joubert: Yeah, I mean, just in terms of contextualizing, so if we exclude our contracts, brewing volumes, we deliberately shift ahead of demand in the first half of the year. So that was about 1.1 million hectoliters that we shipped ahead of demand. And if you compare that to the first half of 2023, we actually shipped behind our demand by about 400,000 hectoliters. So that just gives you some context in terms of our domestic shipments.
Speaker Change: Tracey, the second part of the question? Yeah, I mean just in terms of contextualizing, so...
Speaker Change: [inaudible]
Tracey: If we exclude our contract's booing volumes, we deliberately shift ahead of demand.
Tracey: in the third half of the year, so that was about 1.1 million hectolitres.
Speaker Change: that we shipped ahead of demand. And if you compare that to...
Speaker Change: The first half of 2023, we actually shipped behind our demand by about 400,000 hectolitres. So that just gives you some context in terms of our domestic shipments. And then if we add the PEPs...
Tracey Joubert: And then if we add the PEPs shipment in there, so we have approximately 2 million hectoliters of PEPs coming out of our system this year. We have about a million hectoliters remaining for the back half of the year, most of that coming out of Q3.
Speaker Change: We had approximately 2 million hectolitres this year of PEPs coming out of our system. We have about a million hectolitres remaining for the back half of the year, most of that coming out of Q3.
Operator: Thanks Drew. Our next question comes from Bill Kirk with Rock Capital Parts. Now, please go back.
Operator: Our next question comes from Bill Kirk with Rock Capital Partners. Bill, please go ahead.
Speaker Change: [inaudible]
Speaker Change: Our next question comes from Bill Kirk with Rock Capital Partners. Bill, please go ahead.
Bill Kirk: Hi, I wanted to ask about on-premise strategy, in particular kegs and drafts within that strategy.
Speaker Change: So, how have the two channels differed for you in the U.S., on-premise versus off-premise?
Bill Kirk: And what is the role of KEGs in on-premise strategy? It seems like a lot of the vertical prefers cases over KEGs when dealing with the on-premise. So curious what your draft strategy is going forward.
Operator: Thanks, Paul. Good morning to you.
Speaker Change: Thanks, Paul. Good morning to you.
Speaker Change: From our perspective, the data that we see and from internal estimates, the on-premise in the US, which I assume your question is directed at, is performing slightly better than the off-premise in the quarter. And given how important...
Gavin Hattersley: And, you know, look, I mean, from our perspective, the data that we see from internal estimates, you know, the on premise in the US, which I assume your question is directed at, is performing, you know, slightly better than the off premise in the quarter. And, and, and, given how important it is to building brands. It's an area we focus on meaningfully, right? Whether it's our core brands of Merillite and CoorsLite or whether it's Blue Moon, right?
Speaker Change: is to building brands. It's an area we focus on.
Gavin Hattersley: And KEGS is an important part of that strategy. Now, where changes occur on-premise, sometimes it's between KEGS sizes, but KEGS is and will remain an important part of our on-premise strategy and an important part of how we continue to build our brand.
Speaker Change: Meaningfully, right? Whether it's our core brands of Merlite and CoorsLite, or whether it's Blue Moon, right?
Bill Kirk: And kegs is an important part of that strategy. Now, where changes occur on-premise, sometimes it's between keg sizes, but kegs is and will remain an important part of our on-premise strategy and an important part of how we continue to build our brands.
Operator: The next question comes from Rob Ottenstein with Evercore. Rob, please go ahead.
Bill Kirk: Thanks both.
Bill Kirk: The next question comes from Bob Ottenstein with Evercore. Bob, please go ahead.
Robert Ottenstein: Hey Gavin, you guys have done a really nice job, obviously, with Banquet and Coors Light and Miller Light. But I think you're probably a bit disappointed with Blue Moon, Peroni, and some of those above-premium initiatives. Um, can you talk to us maybe a little bit about, you know, what's working, what's not working, uh, in terms of driving the high end of the business, and, and maybe what you might do differently going forward to rebalance the portfolio for growth going forward?
Bob: Hey, Gavin.
Bob Ottenstein: You guys have done a really, you know, nice job, obviously, with Banquet and Coors Light and Miller Light.
Bob Ottenstein: But I, you know, I think probably you're a bit disappointed with Blue Moon, Peroni, and some of those above-premium initiatives.
Speaker Change: Can you talk to us maybe a little bit about, you know, what's working, what's not working in terms of driving the high end of the business?
Speaker Change: and maybe what you might do differently going forward to rebalance the portfolio for growth going forward. Thanks.
Gavin Hattersley: Thanks, Robert. And good morning to you.
Speaker Change: Thanks Robert, and good morning to you, and yes, I'll take the compliments on the core brands and we of course agree with you, I think our team has done a really nice job marketing and executing our core brands and we've seen the benefits of that.
Gavin Hattersley: And yes, I'll take the compliments on the core brands. And we, of course, agree with you. I think we I think our team has done a really nice job marketing and executing our core brands, and we've seen the benefits of that. You rightly point out that we've got work to do in the premiumization space in the U.S. However, I would say that our premiumization progress outside of the U.S. has been very strong. It's growing strongly in Canada. We're over half in our EMEA and APAC business, and 75% of our volume in Latin America is in the above premiums as well. But you're right.
Speaker Change: You rightly point out that we've got work to do in the premiumization space in the U.S. I would say that our premiumization progress outside of the U.S. has been very strong. It's growing strongly in Canada, we're over half in our EMEA APEC business, and 75% of our volume in Latin America is in the above premiums as well.
Gavin Hattersley: We've got work to do in the U.S. We recognize that, and Blue Moon is our biggest above-premium brand. It's a big, important brand for us and for our distributors and our retailers, and we're committed to turning that brand around. And that's why we've launched the new packaging. And that's why we've got a new campaign.
Speaker Change: But you're right, we've got work to do in the US, we recognize that, and Blue Moon is our biggest above premium brand. It's a big, important brand for us and for our
Speaker Change: distributors and our retailers. And we're committed to turning that brand around. And, you know, that's why we've launched the new packaging. It's why we've got a new campaign. We've got new innovation there with Bluemoon Non-ALC and we've repositioned Bluemoon Lite this year and the early signs on
Gavin Hattersley: We've got new innovation there with Blue Moon Non-ALC, and we've repositioned Blue Moon Light this year, and the early signs on Blue Moon Light are very promising, and we've seen very promising initial traction on Blue Moon Non-ALC as well.
Speaker Change: You know, Blue Moon large are very promising, and we've seen initial very promising initial traction on Blue Moon non-alk as well.
Gavin Hattersley: We are completely committed to reinvigorating this brand, and we think the changes that we've made in the first part of this year are a really important step in that direction. As far as Peroni is concerned, I mean, we believe that Peroni could be a big brand. And we've obviously made some changes to that, which we've made very clear about, right, as we are shifting to domestic production of Peroni in the U.S. And that does three things for us.
Speaker Change: You know, completely committed to reinvigorating this brand and we think the changes that we've made in the first part of this year are a really important step in that direction.
Speaker Change: As far as Peroni is concerned, I mean, we believe that Peroni could be a big brand. And we've obviously made some changes to that, which we've made very clear about, right, as we are shifting to domestic production of Peroni in the U.S.
Gavin Hattersley: The biggest challenge that we've had with Peroni has been consistent supply. And by bringing it onshore and putting it into our supply chain network, which is operating really well and effectively at the moment, it's going to allow us to give a really consistent supply of fresh Peroni to our distributors and, obviously, our retailers. So we think that's really important. It also gives us the opportunity to increase the different pack formats that we have available in the U.S., which we haven't had with Peroni, and that's going to allow us to much better compete in the U.S. And then, of course, it gives us more margin, right, because we're eliminating a very long part of the supply chain.
Speaker Change: You know, that does three things for us. The biggest challenge that we've had with Peroni has been consistent supply.
Speaker Change: and by bringing it on shore and putting it into our supply chain network, which is operating really well and effectively at the moment, it's going to allow us to give us, you know, really consistent supply of fresh Peroni to our
Speaker Change: to our distributors and obviously our retailers. So we think that's really important. It also gives us the opportunity to increase the different pack formats that we that we have available in the US, which we haven't had with with Peroni. And that's going to allow us to
Speaker Change: compete in the U.S.
Gavin Hattersley: And that's going to allow us to reinvest in the brand from a marketing and execution point of view. So we think it's got a lot of runway, its awareness is still fairly low, and its distribution is low. So I like our plan. We've started it. It's just kicked off, and our expectations for Peroni are high. Thanks for that, Robert. Onyx.
Speaker Change: of this of the supply chain. And that's going to allow us to, to reinvest behind the brand from a marketing and execution point of view. So
Speaker Change: We think it's got a lot of runway, it's awareness is still fairly low and it's distribution is low.
Speaker Change: I like our plan, we've started it, it's just kicked off and our expectations for Peroni are high.
Operator: Our next question comes from Chris Carey with World Fargo. Chris, please go ahead.
Speaker Change: Thanks for that, Robert.
Speaker Change: Our next question comes from Chris Carey with World Fargo. Chris, please go ahead.
Operator: Gavin. Kevin, you spoke of trends, you know, kind of tracking your expectations at the overall category level or something of the sort. And, you know, I wonder, you know, as to the world as Wall Street is a bit more concerned about, Unknown Executive, Michelle Jacques, Molson Coors, Michael Lavery, Robert Ottenstein,
Chris Carey: Thank you.
Chris Carey: Hi, good morning, everyone.
Gavin: Hatters. Gavin.
Speaker Change: Kevin, you had spoken to...
Gavin: [inaudible]
Speaker Change: kind of tracking your expectations, you know, at the overall category level or something of the sort. And, you know, I wonder, you know, as the world, as Wall Street is a bit more concerned about
Speaker Change: the consumer, are you starting to see any sequential changes in the consumer appetite for your categories?
Speaker Change: Does that help or hurt your business on a relevant basis? And I wonder if you could just comment on, you know, perhaps what you're seeing in July when it comes to overall consumer engagement, you know, with which category of brands. So thanks for any perspective there.
Gavin Hattersley: Thanks, Chris. And look, from an industry point of view, I won't rehash my remarks on the second quarter, other than to say, you know, we had noise, you know, in different weeks performed differently, but collectively, when you got to the end of the second quarter, not terribly dissimilar to what we've been experiencing over the last few years. From a consumer health point of view, just run around our markets for a second and start at the smallest, right?
Speaker Change: Thanks, Chris. Look, I mean, from an industry point of view, I won't rehash my remarks on the second quarter other than to say, you know, we had noise, you know, just...
Speaker Change: in different weeks performed differently. But collectively, when you got to the end of the second quarter, not terribly dissimilar to what
Speaker Change: We've been experiencing over the last few years.
Speaker Change: From a consumer health point of view, you know, just run around our markets for a second and start in the smallest, right?
Gavin Hattersley: See our Central and Eastern Europe market. We've been talking about how the consumer there has been challenged for some time, and we're starting to see that change. There's the reduction in CPI, it's putting less pressure on the consumer's disposable income level, and that started to translate to an increase in market demand in the first half. So we'll watch that carefully, but promising signs there. In the UK, consumers remained resilient.
Speaker Change: central and eastern Europe market. We've been talking about how the consumer there has been challenged for some time, and we're starting to see that change. There's the reduction in CPI, it's putting less pressure on the consumer's disposable income level, and that started to translate to an increase in market demand in the first half. So we'll watch that carefully, but promising signs there. In the UK, the consumers remained resilient. I think the weather in June in the UK has been well.
Gavin Hattersley: I think the weather in June in the UK has been well documented by all of our competitors, but the economy certainly is improving with inflation slowing down and wages continuing to rise. So we'll watch carefully how that translates into consumer demand. In Canada, the industry is performing fairly similarly to the US, right? Overall consumer spending was a little lower in the second quarter, but inflation continued its downward trajectory.
Speaker Change: document by all of our competitors. But the economy certainly is improving with inflation slowing down and wages continuing to rise. So we'll watch carefully how that translates into consumer demand.
Speaker Change: In Canada, the industry is performing fairly similarly to the U.S., right?
Speaker Change: Overall consumer spending was a little lower in the second quarter.
Gavin Hattersley: Frankly, our performance in Canada is very, very pleasing, right? And it's all the work that we've done over the last few years to execute the revitalization strategy in Canada with our core brands. And we're seeing the benefit of that as we're gaining market share at a good clip. And in the US, as I said, we're not seeing anything terribly different from what we've previously seen. Value conscious consumers are continuing to engage in channel and impact shifting, but not brand shifting from a value perspective.
Speaker Change: Inflation continued its downward trajectory. Frankly, our performance in Canada is very, very pleasing, right? And it's all the work that we've done over the last few years to execute the revitalization strategy in Canada with our core brands.
Speaker Change: And we're seeing the benefit of that as we're gaining market share at a good clip.
Speaker Change: And in the U.S., as I said, we're not seeing anything terribly different from...
Speaker Change: from what we've previously seen, you know, value, value conscious consumers are continuing to engage in in channel and impact shifting, but not not brand shifting from a from a value perspective. But we've kind of noted that that trend before.
Gavin Hattersley: We've kind of noted that trend before. You know, as to address your July question, I think, as I said, if the second quarter taught us anything, it's not to judge a quarter on a few weeks' trends. And so we'll, let's see how Q3 plays out, and then we'll have a good idea whether it's a continuation of the trend we've been experiencing or not, and Robert Moskow with T.D. Cohen. Hi, good morning, this is Victor Ma on behalf of Rob Moskow, and thanks for the question. So, so for
Speaker Change: You know, I think as to address your July question, I think, as I said, you know, if the second quarter taught us anything, it's not to judge a quarter on a few weeks trends. And so we'll
Speaker Change: Let's see how Q3 plays out and we'll have a good idea whether it's a continuation of the trend we've been experiencing or not.
Operator: Our next question comes from Robert Moskow of TD Cowen. Please go ahead.
Speaker Change: Our next question comes from Robert Moskow of TD Cohen. Please go ahead.
Speaker Change: Hi, good morning, this is Victor Ma on for Rob Moskow and thanks for the question.
Victor Ma: So 4.1% price mix in America seems kind of high, can you maybe help dimensionalize how much of that was from pricing, how much from organic positive mix, and how much from mixed benefits from Pabst? And can you also maybe comment on how prepared the company is for an area where you do have like a slight recession in the U.S. and just the resiliency of the beer category within total alcohol? Thanks.
Gavin Hattersley: Thanks, Victor. And good morning to you. Look, from a pricing point of view, I assume your question is directed at the US, you know, and the net pricing increase comprised just a little over half of the increase with the balance coming from mix, whether that was, you know, brand Brennan Pecknicks, or, or perhaps coming out.
Speaker Change: Thanks Victor, and good morning to you. Look, from a pricing point of view, I assume your question is directed at the US, you know, and net pricing increase comprised, you know, it's a little over half of the increase with the balance coming from mix, whether that was, you know, brand
Gavin Hattersley: So, you know, my sorry, my comment on net pricing was for the consolidated, consolidated results and pretty much holds true for our Americas as well. Net price was, was a little over half of the game with the REX coming from mixed benefits, either from a PEPS point of view, or from a brand pick.
Speaker Change: [inaudible]
Speaker Change: or perhaps cutting out. So, sorry, my comment on net pricing was for the consolidated results and pretty much holds true for our Americas as well. Net price was...
Speaker Change: was a little over half of the game with the regs coming from mixed benefits either from a perhaps point of view.
Grant Peck: or a Grant Peck point of view.
Operator: Our next question comes from Bryan Spillane with Bank of America. Please go ahead, Bryan.
Victor Ma: Thanks, Victor.
Speaker Change: Our next question comes from Bryan Spillane with Bank of America. Please go ahead, Bryan.
Bryan Spillane: Hi, thanks, operator. Good morning, Gavin. Good morning, Tracey. Um, I have a question. My question is related to the US, Gavin, and I guess kind of twofold.
Gavin Hattersley: One is, you know, at the start of this year, there was a lot of anticipation around shelf sets and, you know, more shelf space gains. And so, if you can kind of give us a little bit of insight in terms of how that's turned out, has it helped, I guess, in terms of market share? And, you know, do you think that the space you've gained can be held, and then I could just squeeze also into that? You kind of look at the depletion in the US for the first half.
Brian Spillane: Hi, thanks, operator. Good morning, Gavin. Good morning, Tracey.
Brian Spillane: I have a question. My question is related to the U.S., Gavin.
Brian Spillane: I guess kind of twofold. One is, you know, at the start of this year, there was a lot of, you know, anticipation around shelf sets and, you know, more shelf space gains.
Speaker Change: If you can kind of give a...
Speaker Change: a little bit of insight in terms of, you know, how that's turned out? Has it has it helped, I guess, in terms of market share? And
Speaker Change: You know, do you think that the space you've gained can be held? And then if I could just squeeze also into that, you know, as you kind of look at the depletion in the U.S. for the first half,
Gavin Hattersley: Is it more or less in line with your expectation? I guess I understand that the market share, for certain, seems like it is, but just kind of curious if just an overall volume, if that's come in relative to what you were expecting at the start.
Speaker Change: Is it more or less in line with your expectations? I guess I understand that the market share for certain seems like it is, but just kind of curious if, you know, just an overall volume, if that's come in, you know, relative to what you were expecting at the start of the year.
Gavin Hattersley: Thanks, Brian. Great question.
Speaker Change: Thanks, Brian . Great question. Look, from a spring reset point of view, I think we said we expected about a 13% share of space increase for our core brands.
Speaker Change: Premium being MiddleEight, CoorsLight, Imports were certainly the biggest winners as far as a space allocation point of view. I guess Kraft and Seltzer.
Gavin Hattersley: And look, from a spring reset point of view, I think we said we expected about a 13% share of space increase for our core brands in the large format stores. And that's what we got, you know, premium and so premium being, you know, middle light, of course, like imports were certainly the biggest, biggest winners as far as the space allocation point of view. And I guess Kraft and Seltzer continued to feel the biggest pinch in space.
Speaker Change: continue, I guess, to feel the biggest pinch in space. As it relates to going forward,
Gavin Hattersley: As it relates to going forward, You know, we were, as I said, a clear winner, based on what we've seen. And from a full perspective, Last year, we did see an unprecedented, unusually high percentage of retailers that executed some of their resets. This year, we don't expect that based on the data that we're seeing.
Speaker Change: You know, we were, as I said, a clear winner, based on what we've seen. And from a full perspective,
Speaker Change: Last year, we did see an unprecedented, unusually high percentage of retailers that executed some of their resets. This year, we don't expect that based on the data that we're seeing. There may be some minor tweaks.
Gavin Hattersley: There may be some minor tweaks up or down, but we certainly don't expect anything meaningful. And if you go to when most of the resets are normally done, which is spring, again, we saw an unprecedented shift in how the brands were showing up at retail. And generally, for as long as I can remember, there were only really minor adjustments to shelf space, mostly focused on ads for new items or deletions of brands that needed to be discontinued, or it was simply just not performing from a velocity point of view.
Speaker Change: Up or down, but we certainly don't expect anything meaningful. And if you go to when most of the resets are normally done, which is spring, again, we saw an unprecedented shift.
Speaker Change: in how the brands were showing up at retail.
Speaker Change: You know, generally, for as long as I can remember, there were only really minor adjustments to shelf space, mostly focused on...
Speaker Change: you know, ads of new items or deletes of brands that needed to be discontinued, or it was simply just not performing from a velocity point of view.
Gavin Hattersley: And again, based on the data we see and our success in holding the large majority of our core share gains that we gained against, frankly, the toughest comps we're going to experience the whole year, Brian. I mean, as you remember, the second quarter was really, really tough from a comp point of view because our share price spiked quite dramatically, and then it came down and settled. So we've cycled our toughest comp, we've retained 80% of the share gains, and it only gets easier from here on out.
Speaker Change: The whole year, Bryan, as you remember, the second quarter was really, really tough from a comp point of view.
Brian Spillane: I think our share spiked quite dramatically and then it came down and settled.
Brian Spillane: We've cycled our toughest comp, we've retained 80% of the share gains and it only gets easier from here on out. And so again, our expectation from a shelf space point of view is...
Gavin Hattersley: And so again, our expectation from a shelf space point of view is retailers will go back to that tweaking and minor adjustments process which they've done over the years. And so again, we're not expecting a meaningful change there.
Speaker Change: These retailers will go back to that tweaking and minor adjustments process which they've done over the years, and so again, we're not expecting...
Gavin Hattersley: From a depletions point of view, and shipments, it's how we plan shipments, right? We were aware that we could have a potential work stoppage at our Fort Worth brewery, so we wanted to make sure that we could meet the higher share levels which we were experiencing and make sure we didn't have any out of stocks. And I think the supply chain team did a really good job of that. So that was planned, this cycle, different to previous years, right, where there was probably more of a balance between the first and second half.
Speaker Change: i mean, The name. From a depletions point of view and know it's been shipments. It's, it's how we plan shipments, right? Is, is, is we were aware that we could have
Speaker Change: You know, potential work stoppage at our Fort Worth brewery. We wanted to make sure that we that we could meet
Speaker Change: the highest share levels that you're experiencing and make sure we didn't we didn't have any out of stocks. And I think the supply chain team did a really good job of that. So that was that was planned this cycle different to different previous years, right, where there was probably more of a balance between first and second half. But no, that was
Gavin Hattersley: But no, that was planned, and we've reaped the benefit of that, with out of stock being very, very low, and our supply and inventory levels and our distributor right where we need them to be. So, you know, in a good place. And I mean, some of that's obviously reflected in the fact that we ended up as the number one supplier in the Tamron survey. All of these things play into that, how we came to life on the shelf resets, how we've done the supply, and how they feel about our brands and execution. So yeah, thanks, Brian.
Speaker Change: in a good place. And I mean, some of that's obviously reflected in the
Speaker Change: In the fact that we ended up as...
Speaker Change: So it's the number one.
Operator: The next question comes from Peter Grom with Nubia. Please go ahead, Peter.
Speaker Change: The next question comes from Peter Grom with UBS. Please go ahead, Peter.
Brian: Hey, good morning, everyone. This is actually Brian speaking on behalf of Peter Grom. Thanks for taking the question. Hey, can you guys hear me?
Speaker Change: Hey, good morning, everyone. This is actually Brian on for Peter Grom. Thanks for taking the question.
Operator: Yep, we can hear you loud and clear. Thanks.
Brian Spillane: Hey, can you guys hear me?
Brian: Hey guys, sorry about that. I have just two quick housekeeping questions for you. First one, I actually wanted to follow up on Victor's question. Not trying to get too into the weeds on the price mix piece, but in the Americas, that 4.1% being roughly split between rate pricing and mix, is it fair to think that this contribution should be largely similar looking into 3Q and into the back half, particularly as it seems like you've got even more contract volume coming out in 3Q? And then just quickly on volumes in the Americas, it sounds like the gap between financial volume and brand volume is wider in 3Q versus 4Q. Just wanted to make sure that I'm thinking about that right.
Speaker Change: Yep, we can hear you loud and clear, thanks.
Brian Spillane: Hey guys, sorry about that. Just two quick housekeeping questions for me. First one, I actually wanted to follow up on Victor's question. Not trying to get too into the weeds on the price mix piece, but
Speaker Change: In the Americas, that 4.1% being roughly split between rate pricing and mix.
Speaker Change: Is it fair to think that this contribution should be largely similar, looking into 3Q and into the back half, particularly as it seems like you've got even more contract brewing volume coming out in 3Q, and then just quickly on volumes in the Americas, it sounds like the gap
Speaker Change: between financial volume and brand volume is wider in 3Q versus 4Q. Just wanted to make sure that I'm thinking about that right. Thanks, guys.
Tracey Joubert: Thanks, Bryan. Tracey, Nick wouldn't mind taking the second part of the question.
Tracey Joubert: The first part, look, I mean, from a pricing point of view, Bryan, I think we've been saying for quite some time now that we believe pricing is going to sort of land in that historical one to two percent increase level. And, you know, that's where it's holding at the moment. And so that will translate into the full year. And from a mixed point of view, you're right.
Speaker Change: Thanks, Bryan. Tracey, Nick wouldn't mind taking the second part of the question. The first part, look, I mean, from a pricing point of view, Bryan, we've, we've...
Tracey: I think we've been saying for quite some time now that we believe pricing is going to sort of land in that historical one to two percent increase level and you know that's where it's holding at the moment and so that will translate into the full year. And from a mixed point of view, you're right, I mean we do have a lot more perhaps volume to come out which will be mixed favorable.
Gavin Hattersley: I mean, we do have a lot more volume to come out, which will be mixed favorably. So, you know, not intending to give any guidance from that perspective, but those are just the inputs which go into it. The trends are not going to change dramatically from a PAPS point of view, from a frontline pricing point of view. Grace, I think the other question was about shipments.
Tracey: I'm not intending to give any guidance from that perspective, but those are just the inputs which go into it. The trends are not going to change dramatically from a PAPS point of view and from a frontline pricing point of view.
Tracey Joubert: From a financial point of view, financial volume point of view, so as I said, we shipped ahead of demand by about 1.1 million hectoliters in the first half of the year. And we do expect that to reverse in the second half of the year, most of that coming out of Q3. And then from a PAPS exit point of view, again, about another million hectoliters of PAPS volume remaining, and we expect over half of that to reverse or exit in the third quarter of the back half. So to summarise, Bryan, yes, most of it will take place in Q3.
Speaker Change: From a financial volume point of view, as I said, we shipped ahead of demand.
Tracey: about 1.1 million hectolitres in the first half of the year, and we do expect that to reverse in the second half of the year, most of that coming out of Q3.
Tracey: And then from a PEPS exit point of view, again, about another million hectolitres of PEPS volume remaining and we expect over half of that to reverse or exit in the third quarter.
Tracey: of the of the back half.
Tracey: So to summarize, Bryan, yes, most of it will take place in Q3.
Operator: Our next question comes from Michael Lavery. Please go ahead.
Tracey: Our next question comes from Michael Lavery with Piper Sandler. Please go ahead.
Michael Lavery: Thank you. Good morning.
Gavin Hattersley: Two quick ones. Just to follow up on the shelf reset question, I know some of the consumer pack shifts that we've seen are a little bit more recent and perhaps difficult to have been planning for. But in the resets, were you able to tweak the sets at all to adjust for how consumers are going to more, Unknown Executive, Michelle Jacques, Molson Coors, Unknown Executive, Michelle Jacques, How did Madrid go really well when it's new to the world as well? Was that some of the, I guess, inspiration, or was it just that there wasn't anything else in the portfolio that fit what you were trying to do? Just how do you think about that launch there?
Michael Lavery: Thank you. Good morning.
Michael Lavery: Two quick ones. Just to follow up on the shelf reset question, I know some of the consumer pack shifts that we've seen is
Michael Lavery: A little bit more recent and perhaps difficult to have been planning for, but in the resets, were you able to tweak the sets at all to adjust for how consumers are going to more experience?
Speaker Change: single cans or bigger packs? And is it potentially a better set given that you had some chance to reshuffle there a little bit? And then just second on the Romanian, the new brand launch there, maybe what was some of the thinking of a brand new brand? Obviously you saw
Speaker Change: Madrid go really well when you know that's new to the world as well it was that some of the I guess inspiration or was it just that there wasn't something else in the portfolio that said what you were trying to do just how do you think about that launch there
Operator: Thanks, Michael. Look, from a shelf reset point of view, we certainly got a lot more skews, pack formats into both C stores and into grocery and large formats. So I'm not going to say that we got all of the current consumer trends in, but we certainly made a dent in that. And certainly given the extra space that we've got, our ability to hold from a large pack point of view and a small pack point of view is much stronger than it was before.
Speaker Change: Thanks, Michael. Look, from a shelf reset point of view, we've certainly got a lot more skews, pack formats into both C-stores and into grocery and large formats. So I'm not going to say that we got...
Speaker Change: All of the...
Michael Lavery: The current consumer trends, but we certainly made a dent on that. And certainly given the extra space that we've got.
Speaker Change: ability to hold from a large pack point of view and a small pack point of view is much stronger than it was before.
Operator: To put it another way, we have, We have much less out-of-stock because of that, because of the holding power that we've gained in store. I think you were referencing Kariman there in Romania, and that's a brand we've had around for a while. And without peeling back the onion as to how innovation works, when I said it had been around for a while, we'd used it a while before. And so the innovation team found a gap in the marketplace, and we launched it.
Michael Lavery: We have much less out-of-stocks because of that, because of the holding power that we've gained in store.
Speaker Change: I think you were referencing Kariman there in Romania, and you know, that's a brand we've had around for a while, and without...
Speaker Change: You know, peeling back the onion as to how innovation works, right. When I said it'd been around for a while, we'd used it a while before. And so the innovation team found a gap in the marketplace. And we launched it. And it's proving to be...
Operator: And it's proving not to be very cannibalistic to our existing portfolio and adding really nice incrementality to the overall core portfolio. So, you know, a mark they had in the past, and we brought back to life so far very successfully. Just a few months, but 150,000 hectometers in just a few months is a meaningful volume in a market that size.
Speaker Change: you know, not very cannibalistic to our existing portfolio and adding really nice incrementality to the overall core portfolio. So
Speaker Change: A mark they had in the past and we've brought back to life so far very successfully, but you know, just a few months, but 150,000 hectometers in just a few months is a meaningful volume in a market that size.
Lauren Lieberman: Our next question comes from Lauren Lieberman with Barclays. Lauren, please go ahead.
Speaker Change: Our next question comes from Lauren Lieberman with Barclays. Lauren, please go ahead.
Lauren Lieberman: Great, thanks. Good morning.
Gavin Hattersley: I'm trying to maybe try to get it this another way in terms of the industry backdrop in the US because I, you know, understand you said it pretty clearly all year, intentional overship and make sure you weren't in an out of supply situation and so on. But the data that we all receive shows, and this is like Nielsen-slash-Circana, right, shows industry volume down about 3% year-to-date. So I know that's not inclusive.
Gavin Hattersley: That's not the full market. So I was curious, maybe, what your read is on industry volume in the US year-to-date and how you're thinking about that for the full year. So it's kind of part one. And the second is great to get also your read on your full set of data in terms of market share. Being down 50 basis points, I just wanted to confirm what the kind of expectation would still be to ground to sort of a second half of 23 type level for share and what you're able to retain if that's still a good way of thinking about it. Thanks.
Gavin Hattersley: Thanks for the question, Lauren. And I'll take the second part first.
Gavin Hattersley: You know, in terms of, in terms of share our core power brands, which are Coors Light, Middle Light, Coors Banquet, we grew two and a half points of case share in the second quarter of last year. It was our highest share gain that we had experienced in the last year, and we've retained 80% of that. And so, you know, compared to the second quarter of 2022, our total portfolio is up over 1.7 points in volume share.
Gavin Hattersley: And, you know, obviously, we're very pleased with that, and in particular, given that we're going up against peak share growth. And as I said, it only gets, in inverted commas, easier from here because the share came down and settled. And, you know, we've done that through the shelf resets, which I just spoke about. So increased distribution, we've got increased display, we've got increased features, we've got really relevant marketing campaigns, like our Middle Light All Stars campaign that we've got our Coors Light Leagues Cup, which is attracting new Hispanic drinkers into our portfolio.
Speaker Change: The second quarter of 2022, our total portfolio is up over 1.7 points of volume share. Now, obviously, we're very pleased with that, and in particular, given that we're going up against the peak share growth.
Speaker Change: relevant marketing campaigns like our Miller Lite All-Stars campaign that we've got, our Coors Light Leagues Cup, which is attracting new Hispanic drinkers into our portfolio. And so, you know, we're obviously...
Gavin Hattersley: And so, you know, we're obviously planning to, to, to execute and retain as much of that share as we possibly can, given that we're now out of the toughest share comps. From an industry point of view, look, I think my comments that I made earlier are what we believe, right, that there was a lot of noise in Q2 for some weeks, but overall, it sort of bounced out of where we were expecting, where it's been for the last couple of years.
Gavin Hattersley: And, you know, from a shipment point of view, that was a very deliberate strategy. We didn't overship. We shipped what we wanted to ship in the first half so that we didn't have any inventory challenges going forward.
Speaker Change: where it's been for the last couple of years. And, you know, from a shipment point of view, that was a very deliberate strategy. We didn't overship. We shipped what we wanted to ship in the first half so that we didn't have any inventory challenges going forward.
Operator: Our next question comes from Eric Sousa with Morgan Stanley. Eric, please go ahead.
Speaker Change: Our next question comes from Eric Sewer, fellow with Morgan Stanley . Eric, please go ahead.
Eric: Morning, thanks for the question. First, maybe you could come back to share of throat. Spirits have obviously been struggling in the US for, you know, over a year at this point. As you look forward and in light of the macro environment, how are you thinking about share of throat and spirits versus beer? Do you think beer could continue to sort of outperform spirits, at least in the short term? And then maybe come back and talk a little bit about the performance of your recent innovation from the past few years. It looks like it has simply flowed quite a bit. Some of the earlier packages seem to be struggling a bit. That was a very nice contributor over the past few years. So how are you thinking about innovation?
Eric Sewer: As you look forward and in light of the macro environment, how are you thinking about share of growth and spirits versus beer? Do you think beer could continue to outperform spirits, at least in the short term?
Speaker Change: And then maybe come back and talk a little bit about performance of your work.
Speaker Change: Recent innovation from the past few years. It looks like simply
Speaker Change: You know, it was slowed quite a bit, some of the earlier packages seem to be struggling a bit. That was a very nice contributor over the past few years. So how are you thinking about innovation and contribution?
Gavin Hattersley: Thanks for those questions, Eric. You know, taking your first one, look, I think beer in the classic sense of beer remains down, but it has sequentially improved its dollar share of total alcohol. So, definitely, we're seeing an improvement in classic beer. If you add, you know, the RTD spirits into that which beer suppliers put in, then yes, overall, beer is gaining share against spirits. So definitely tracking in the right direction from an overall total alcohol point of view. If you look at our innovations, you know, let's start with Simply. You know, I think we should just stand back for a second.
Speaker Change: remains down, but it has sequentially improved the dollar share of total alcohol. So definitely seeing an improvement in plastic beer. If you add
Speaker Change: You know, the RTD spirits into that, which beer suppliers put in, then yes, total overall beer is gaining share against spirits. So definitely tracking in the right direction from an overall total alcohol point of view.
Speaker Change: If you look at our innovations, you know, let's start with simply, right? You know, I think it's, let's just stand back for a second.
Gavin Hattersley: And, you know, we're pleased with the fact that we built a brand that is over $100 million from nothing in just two years, right? And so we're pleased with that performance. Consumers, though, as we've learned in this space, and that's why we focus on the flavor category in totality, they do have a little bit of a treasure hunt mentality.
Speaker Change: And, you know, we're pleased with the fact that we've built a brand that is over $100 million from nothing in just in just two years. Right. And so we're pleased with that, with that performance.
Speaker Change: Consumers, though, as we've learned in this space, and that's why we focus on the flavor category in totality, they do have a little bit of a treasure hunt mentality. So, you know, keeping innovation, flavor innovation in particular, is really important to keep pace with this flavor consumer.
Gavin Hattersley: So, you know, keeping flavor innovation in particular is really important to keep pace with this consumer. And, you know, given that Simply is in one out of every two households in the United States, our focus right now is continuing to drive trial because when consumers try this brand, they love it. And so trial is important.
Speaker Change: You know, given that Simpli is in one out of every two households in the United States, our focus right now is continuing to drive trial, because when consumers try this brand, they love it. And so trial is important, strong marketing and sales programming is important for us.
Gavin Hattersley: Strong marketing and sales programming is important for us. And, you know, I'd point out that the brand is performing really, really well in Canada. You know, we've achieved over a 10% share of the flavor RTD category up there, and that's in large part driven by Simply Spiked. If you look at the other innovation I talked briefly about, about Kariman, you know, it's performing well in its early days. Madrid is the superstar of our innovation.
Speaker Change: And, you know, I'd point out that the brand is performing really, really well in Canada. You know, we've achieved over a 10 share of the Flavor RTD category up there, and that's in large part driven by.
Speaker Change: If you look at the other innovation, I talked briefly about Kariman, you know, it's performing well early days.
Gavin Hattersley: It's a top 10 brand. You know, we recently launched it in Canada and Bulgaria. It's early days, obviously, but we're very encouraged by the results that we're seeing in those two markets. And it continues to grow in double digits despite the competition that's come into the United Kingdom. So I'm feeling good about that.
Gavin Hattersley: We've launched from an innovation point of view, Happy Thursday, which is tapping into a new consumer. We think we are the first to market there, and again, early days, but from a flavor point of view and what the consumer is looking for from a bubble-free perspective, encouraged by the start. And then, you know, another brand that we've grown from nothing is ZOA. You know, Again, I think that one's been around for about three years. And obviously, this is a completely new space that we've got into, so lots of learning for us in the beginning.
Speaker Change: We've launched from an innovation point of view, Happy Thursday, which is tapping into a new consumer. We think we're first to market there, and again, early days, but from a flavor point of view and what the consumer's looking for from a bubble-free perspective.
Speaker Change: Encouraged by the start. And then, you know, another brand that we've grown from nothing is ZOA.
Speaker Change: Again, I think that one's we've had around for...
Speaker Change: for about three years. And obviously, this is a completely new space that we've got into. So lots of learnings for us in the beginning, but
Gavin Hattersley: But, you know, we now think we've got a fantastic liquid. We've got a great brand. We've got packaging that works really well. And we've got a very powerful spokesperson who's driving this brand forward. It's a top 10 brand on Amazon.
Speaker Change: We now think we've got a fantastic liquid, we've got a great brand, we've got packaging that works really well, and we've got a...
Gavin Hattersley: It's attracting new drinkers into the energy category, and we think it's got a right to win in certain distribution channels. And that's what we're going after. So, you know, collectively, I'm pleased with the progress that we're making on innovation. And we've built some real powerhouse brands in a very short space of time. And now our job is to accelerate that performance. So thanks for that question, Eric
Speaker Change: Collectively I'm pleased with the progress that we're making on innovation and we've built some real powerhouse brands in a very short space of time and our job is to accelerate innovation.
Speaker Change: That performance. So thanks for that question, Eric.
Operator: Thank you. We have no further questions until this concludes our call. Thank you, everyone, for joining us today. You may now disconnect your lines.
Speaker Change: Thank you. We have no further questions and so this concludes our call. Thank you everyone for joining us today. You may now disconnect your lines.