Molson Coors Beverage Company (TAP) — Q2 2024 Earnings Call Transcript

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. 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 the earning slides which are posted to the IR section of our website and provide detailed financial and operational metrics. Today's discussion includes forward-looking statements. Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in our most recent filings with the SEC. We assume no obligation to update forward-looking statements, except as required by applicable law. Reconciliations for any non-US GAAP measures are included in our earnings release. 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. Also, share data references are sourced from Circana in the U.S. and from Beer Canada in Canada unless otherwise indicated. Further, in our remarks today, we will reference underlying pretax 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.

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. 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. 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 pretax 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 compelling valuations amid the strong performance of the business and our confidence in our long-term algorithm. Contributing meaningfully to our results was our EMEA & 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 pretax 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. 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 a 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. We did this to ensure we had healthy inventories during the peak summer season. As a result, excluding contract volumes, STWs exceeded STRs by about 750,000 hectoliters in the first quarter and by about 350,000 hectoliters in the second quarter, and we continue to expect this will essentially fully unwind in the third and fourth quarters with more weighting to the third quarter. Another factor impacting our results is the continued exit of Pabst contract brewing volume as we approach the termination of the agreement at year-end. This reduced second quarter financial volume by 580,000 hectoliters with declines accelerating from the first quarter. This reduced our first half financial volume by over 900,000 hectoliters, which represents a decline in Pabst contract volume of over 50% from the first half of 2023. To put a final point on it, Pabst had a negative 3.2 percentage point impact on both our second quarter and first half Americas financial volume on a year-over-year basis. And while Pabst is a near-term headwind to total volume and net sales revenue, the mix benefits related to its exit, along with favorable global net pricing and premiumization in EMEA & APAC, drove an increase in consolidated net sales revenue per hectoliter of 4.2% for both the quarter and for the first half. 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 dividend and share repurchase program. 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. 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 brands. In the U.S., Coors Light, Miller Lite and Coors Banquet second quarter combined volume share is down 0.5 share point of industry versus a year ago when we saw our peak share gains. However, these brands remain up 2 full share points compared to the second quarter of 2022. This means that we retained approximately 80% of our peak share gains on our core power brands. 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. 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, Coors Light 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. In fact, in Ontario, Coors Light and Molson Canadian continue to be the number one and number two brand, respectively. In EMEA & APAC, strong results in Central and Eastern Europe have been supported by Ožujsko in Croatia, which has gained nearly 2 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, Caraiman in Romania, reaching about 150,000 hectoliters since March. Carling's brand equity continued 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 30. Our premiumization progress is at different stages across our markets, and we have had success in EMEA & APAC, Canada and Latin America. In EMEA & APAC, our above premium share of net brand revenue continues to be over 50%, up nearly 10 percentage points from the full year 2019. This improvement is primarily due to the very successful launch of Madri, which continued to grow revenue double digits in the second quarter. It is the number three lager in the on-premise in the U.K. in terms of value. In the Americas, our above premium share of net brand revenue was over 21% for the 12 months ended June 30, which is up nearly 2 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 Seltzer and Vizzy. Also contributing to the mix is Latin America, where more than three quarters of our net brand revenue is above premium. 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. 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. This starts with the Blue Moon family performance, and we feel good about our new campaign in packaging, our repositioning of Blue Moon Light as well as our line extensions into non-alcoholic. It's early, but we believe we are moving in the right direction. We are committed to continuing to innovate and scale in 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 Simply Spiked 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. And while we have seen some softening on our original pack as we launched into new flavors, with the Simply brand in one out of every two households in the U.S., we believe the Simply Spiked brand family has more runway. We have exciting plans for Peroni. By onshoring 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. 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, 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.

Thank you, Gavin. We reported another strong quarter of financial performance and continue to expect we will achieve our goal of growing the top and bottom line 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. These investments have driven substantial cost savings, which helped to offset inflationary pressures and support long-term sustainable profitable growth. In recent years, this has included adding flavor production and co-packing capabilities, expanding and diversifying our supplier base, building slim can capacity in our can plants 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 multiyear, multi-hundred million dollar modernization of our Golden, Colorado brewery, which is nearing completion. 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. We also commenced a new multiyear project in the U.K. to increase our brewing and packaging capacity, which is necessary in part due to the continued growth of Madri. 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. In the second quarter, our cost per hectoliter increased 2.9%, which was driven by the Americas business, which was up 4.1%. This is largely due to ongoing inflationary pressure as well as volume deleverage, in part due to the reduced Pabst contract volumes 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 behind our brands. 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. It's our deep marketing capabilities that have enabled us to meaningfully improve our return on marketing investment since 2019 and supports where 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. As such, we are generating a dividend yield of 3.2% as of August 1. Also, 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. Utilizing a sustained and opportunistic approach, we repurchased 4.6 million shares for a total cost of $260.7 million in the quarter. 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 plan in just the first three quarters. 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 MillerCoors 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 8-year €800 million note at a fixed rate of 3.8% and used the proceeds to pay down our €800 million note upon its maturity in July. Now I'd like to conclude with our financial outlook. We are reaffirming our 2024 guidance. As a reminder, the key metrics call for low single-digit net sales revenue growth on a constant currency basis, mid-single-digit underlying pretax income growth on a constant currency basis, mid-single-digit underlying earnings per share growth and underlying free cash flow of $1.2 billion, plus or minus 10%. 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 U.S., excluding contract volumes, 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 STWs were behind our STR by about 400,000 hectoliters. Since we currently tend to shift to consumption for the year, we expect this to reverse in the second half, mostly in the third quarter. At the same time, our contract with Pabst continues to wind down, recall that we expected the impact for the year from the Pabst contract termination to be approximately 2 million hectoliters or about 3% of America's financial value. There is about 1 million hectoliters remaining that will come out of our system in the second half of the year, with over half of that expected to exit in the third quarter. These U.S. shipment trends are expected to result in volume deleverage in the second half of the year. Recall that we had a volume leverage benefit on a consolidated basis, up about 60 basis points in the comparable period in 2023. For some perspective, on a consolidated basis, we estimate that our fixed costs in 2024 will comprise approximately 20% of our total cost. 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 deleverage. We expect SG&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 market investment to support the momentum in our brands as well as higher incentive compensation. As we look to the longer term, we remain confident in our growth algorithm, as we have multiple levers to achieve it. From our 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. With that, I'd like to open it up to your questions.

Hi. Thank you. Good morning, everyone. I guess I had a question on your guidance, which you did maintain in terms of full year on all metrics, which 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, how should we think about the volume deleverage impact in the back half? And possibly provide a little more color on any offsets do you have to mitigate the impact on margins? 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 really how we should think about your spending levels moving forward, as I think about your ability to continue to hold onto some of these share gains since 2022? Thank you.

Good morning, Bonnie, and yeah, thanks for the question. So, as we look at the volume deleverage 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. This is all driven by the deleverage and as well as mix. So we spoke about the deleverage impact from our shipment timing as well as the exit of Pabst. But also, as we premiumize our portfolio, that does add COGS, although it is margin accretive. We have said that we expect to see continued inflation, although it is moderating. Some of the things that are driving the inflation are we do have material conversion costs, which are generally linked to inflation indices and they tend to lag. In addition, we've spoken about our hedging program. Generally, our hedges are longer term, so anything up to 2 years and we do have some hedges that we put in place in '22 and '23, which will roll off this year and next year. In terms of helping to moderate some of the COGS inflationary 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. In terms of margin, with the contract brewing volume coming out, remember that is at a very low margin for us, so that is 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 season where we need the capacity and taking out some of that volume will not only just impact efficiencies, but tend to lead to reduced waste. So that will drive our COGS down as well. 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. And if you recall, in the second half of 2023, we anticipate an incremental $100 million in marketing to really drive the strong momentum in our brands. This is evenly split between Q2 and Q3. Typically, we spend more marketing dollars in the summer. So you can expect lower year-over-year spend, particularly in Q4. Just remember, we expect 2024 marketing to be up meaningfully from 2022. So there's no pullback on marketing. We'll continue to invest behind our brands, and we'll ensure that we've got the right view to drive the momentum.

Thank you.

Thanks, Bonnie.

Hey, good morning. This is Drew Levine on for Andrea. Thanks for taking our question. 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 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 has been a bit better. And in that context, how you're thinking about the industry performance for the rest of the year? And then just secondly, maybe, Tracey, on the brand volume performance for the U.S. in the quarter, any way to contextualize the holiday load-in timing impact? Thank you.

Thanks, Drew. Good morning and thanks for the question. Look, as you rightly said, 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 certainly, 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 4th holiday, it's just a continuation of what we've been seeing for a while, right? And from a consumer point of view, not trading down between or up between brands but more tax shifting within the brand portfolio to singles or to larger pack sizes. I think as we look going forward, and I think if Q2 taught us anything, it's that you can't make a prediction on the 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. Tracey, the second part of the question?

Yeah. I mean, just in terms of contextualizing, so if we exclude our contract brewing volumes, we deliberately shipped ahead of demand in the first half of the year. That was about 1.1 million hectoliters that we shipped ahead of demand. If you compare that to the first half of 2023, we actually shipped behind demand by about 400,000 hectoliters. So that just gives you some context in terms of our domestic shipments. And then if we add the Pabst shipment in, we had approximately 2 million hectoliters this year of Pabst coming out of our system. We have about 1 million hectoliters remaining for the back half of the year, most of that coming out of Q3.

Thanks, Drew.

Hi. I wanted to ask about your on-premise strategy, specifically regarding kegs and draft. How do the on-premise and off-premise channels differ for you in the U.S.? What is the role of kegs in your on-premise strategy? It seems like many in the vertical prefer cases over kegs for on-premise. I'm curious about your draft strategy moving forward.

Thanks, Bill. Good morning to you. Yeah, look, I mean, from our perspective, the on-premise in the U.S., which I assume your question is directed at, is performing slightly better than the off-premise in the quarter. Given how important it is to building brands, it's an area we focus on meaningfully, whether it's our core brands of Miller Lite and Coors Light or whether it's Blue Moon, and kegs are an important part of that strategy. Changes occur on-premise, sometimes it's between keg sizes. But kegs are and will remain an important part of our on-premise strategy and an important part of how we continue to build our brands.

Hey, Gavin. You guys have done a really nice job, obviously, with Banquet and Coors Light and Miller Lite. But I think probably you are a bit disappointed with Blue Moon, Peroni and some of those above-premium initiatives. Can you talk to us maybe a little bit about what's working, what's not working in terms of driving the high-end of the business and maybe what you might do differently going forward to rebalance the portfolio for growth going forward? Thanks.

Thanks, Robert, and good morning to you. Yes, I'll take the compliment 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're seeing the benefits of that. 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, APAC business; and 75% of our volume in Latin America is in the above premium as well. But you're right, 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. 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 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 promising initial traction on Blue Moon non-alc as well. We're 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. Regarding Peroni, we believe the brand could be big. We've made changes, which we've made very clear about—we're shifting to domestic production of Peroni in the U.S. This does three things for us. The biggest challenge we've had with Peroni has been consistent supply; bringing it onshore and incorporating it into our supply chain network, which is operating very well and effectively now. It'll give us a consistent supply of fresh Peroni to our distributors and retailers. This also allows us to increase the different pack formats that we have available in the U.S., which we haven't had with Peroni. That's going to allow us to much better compete in the U.S. And it gives us more margin, because we're eliminating a long part of the supply chain. This will allow us to reinvest behind the brand from a marketing and execution point of view. We think it has a lot of runway; the awareness is still fairly low and distribution is limited. I like our plan; we've started it, and our expectations for Peroni are high. Thanks for that, Robert.

Hi. Good morning, everyone. Gavin, you had spoken to trends, just kind of tracking your expectations at the overall category level or something of the sort. I wonder, as Wall Street is a bit more concerned about the consumer—are you starting to see any sequential changes in the consumer appetite for your categories? Does that help or hurt your business on a relative basis? I wonder if you could just comment on perhaps what you're seeing in July when it comes to overall consumer engagement with the category with your brands. Thanks for any perspective there.

Thanks, Chris. Look, from an industry point of view, I won't rehash my remarks on the second quarter, other than to say we had some noise; different weeks performed differently. But overall, it's not too dissimilar to what we've experienced over the last few years. From a consumer health point of view, let’s run around our markets for a second. Starting with the smallest—our Central and Eastern Europe market, we've been talking about how the consumer there has been challenged for some time. We're starting to see changes; the reduction in CPI is putting less pressure on consumer disposable income levels, and that started to translate to an increase in market demand in the first half. We'll watch that carefully, but it's promising. In the UK, consumers remain resilient. The weather in June has been well documented by all our competitors. But the economy is improving with inflation slowing down, and wages are continuing to rise. We'll watch carefully how that translates into consumer demand. In Canada, the industry is performing similarly to the U.S.; overall consumer spending was a little lower in the second quarter, but inflation continues its downward trajectory. Our performance in Canada is very, very pleasing, and we're seeing benefits from revitalization. In the U.S., we’re not noticing anything terribly different from what we've seen before. Value-conscious consumers continue channel and pack shifting, but not brand shifting from a value perspective. Addressing your July question—don't judge a quarter on a few weeks' trends. We'll see how Q3 plays out. We’ll know whether it’s a continuation of trends or not.

Hi, good morning. This is Victor Ma on for Rob Moskow. Thanks for the question. So, 4% price mix in Americas 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 mix benefits from Pabst? Can you also maybe comment on how prepared the company is for a scenario where you do have, I guess, a light recession in the U.S., and just the resiliency of the beer category within total alcohol? Thanks.

Thanks, Victor, and good morning to you. Look, from a pricing point of view—my comments on net pricing were for the consolidated results. This applies similarly to our Americas division; net pricing made up a little over half the increase, with the balance coming from mix—whether that was brand pack mix or Pabst coming out. Thanks, Victor.

Hi, thanks, operator. Good morning, Gavin and Tracey. My question relates to the U.S., Gavin, and I guess kind of twofold—the anticipation around shelf sets and more shelf space gains. Can you give us insight in terms of how that's turned out? Has it helped in terms of market share? Do you think the space you've gained can be held? Additionally, looking at the depletion in the U.S. for the first half—was it more or less in line with your expectations? I understand that the market share for certain seems like it is, but I'm curious if the overall volume has come in relative to what you were expecting at the start of the year.

Thanks, Bryan. Great question. From a spring reset perspective, I think we said we expected about a 13% share of space increase for our core brands in large format stores. We got the premium space; Coors Light imports won as the biggest, while craft continues to fill the pinch in space. Going forward, we were the clear winners from what we've seen. From a full perspective, last year saw an unprecedented percentage of retailers executing resets. This year, we don't expect that based on our data. There should be minor tweaks, but nothing meaningful. We don’t expect meaningful changes; it's usually minor adjustments based on new items or eliminating poor performers. That said, our data shows we've held most of our core share gains against tough comps this year. We've retained 80% of our share gains, and it gets easier from here on.

Hey, good morning, everyone. This is actually Bryan for Peter Grom. Thanks for taking my question. Can you hear me?

Yeah. We can hear you. Loud and clear, thanks.

Hey guys. Sorry about that. Just two quick housekeeping questions for me. First one, I 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 brewing volume coming out in 3Q? 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. Thanks guys.

Thanks, Bryan. Tracey, wouldn't mind taking the second part of the question. The first part, from a pricing perspective, we've been saying for quite some time that we believe pricing will land around that historical 1% to 2% increase level, and that's where it is holding at the moment. That will translate into the full year. From a mix point of view, you are correct; we do have more Pabst volume to come out, which will favor mix. We do not intend to give any guidance from that perspective but these are just the inputs that go into our decisions. Tracey, I think the other question was regarding shipments?

From the financials, net to volume point of view, we shipped ahead of demand about 1.1 million hectoliters in the first half of the year. We expect that to reverse in the second half of the year, with most of that coming out in Q3. From a Pabst exit point of view, we anticipate another 1 million hectoliters will exit our system in the second half of the year, over half of which is expected to occur in Q3.

So to summarize, Bryan, yes, most of it will take place in Q3.

Thank you and good morning.

Good morning.

Two quick ones. Just a follow-up on the shelf reset question. I know some of the consumer pack shifts have been a bit more recent and perhaps difficult to plan for. But in the resets, were you able to modify the sets at all to adjust for how consumers are moving to more single cans or bigger packs? Is it a better set given that you've had some chance to reshuffle a bit? And then second, regarding the Romanian new brand launch, what was the thinking behind launching a brand new product? Obviously, you saw Madri go really well when it was new to the world as well. Was that some of the inspiration or simply that there wasn't something else in the portfolio? Just how do you think about that launch?

Thanks, Michael. Look, from a shelf reset point of view, we certainly got many more SKUs and pack formats into both convenience stores and in large format. I'm not saying we got all the current consumer trends in, but we certainly made an impact. Given the extra space we gained, our ability to hold larger and smaller pack sizes is much stronger than before. To put it another way, we have far fewer out-of-stocks due to our improved holding power. As for Caraiman in Romania, it’s a brand we've had around for a while. Our innovation team found a gap in the marketplace, and we launched it. It hasn't cannibalized our existing portfolio and has added incrementality to the overall core portfolio. We've had substantial success in just a few months—150,000 hectoliters in several months is significant volume in that market size.

Great, thanks. Good morning. I just wanted to try to get at this differently in terms of the industry backdrop in the U.S. I understand you said it clearly this year: intentional over-ship to ensure you weren't in an out-of-stock situation, but the data we all received shows industry volume down about 3% year-to-date. I know that's not all-inclusive, so I was curious about your read on industry volume in the U.S. year-to-date and your thoughts for the full year. Additionally, it would be helpful to confirm that the expectation for share would still be in line with a second half of 2023 type level for what you're able to retain if that's still a good way to think about it. Thanks.

Thanks for the question, Lauren. I'll address the second part first. Our core power brands—Coors Light, Miller Lite, and Coors Banquet—gained 2.5 points of case share in Q2 last year, our highest share gain in a year. We have retained 80% of that. Compared to Q2 2022, our total portfolio is up over 1.7 points of volume share, and we're very pleased. We are managing to hold onto share, as anticipated, after cycling the most challenging comps. The share comes from our execution through shelf resets, increased distribution, displays, features, and strong marketing campaigns attracting new drinkers into our portfolio. Regarding industry volume, my comments made earlier still stand; there’s been noise in Q2. Overall, it balanced out to align with our expectations—consistent trends we've seen for the last couple of years. We didn't over-ship; we shipped what we planned in the first half to avoid inventory challenges moving forward.

Good morning, thanks for the question. First, maybe you could revisit share growth. Spirits have been struggling in the U.S. for over a year at this point. As you look ahead, how are you thinking about share growth, especially spirits versus beer? Do you think beer could outperform spirits, at least in the short term? Next, could you talk a bit about performance from your recent innovations from the past few years? It seems like Simply has been struggling a bit—what was a strong contributor—how are you thinking about innovation contributions?

Thanks for those questions, Eric. On your first point, beer remains an important category, and sequentially, we're seeing improvements, particularly in classic beer. If you include the RTD spirits into that, which beer supplies are enhancing, overall beer is gaining share against spirits. On innovations—let's start with Simply. We're pleased with how we've built a brand that’s over $100 million from nothing in just two years. Consumers in this category act with a treasure hunt mentality, so flavor innovation is crucial. Keeping consistent innovation in flavors will drive trial; strong marketing and sales programming is essential. Simply is in one out of every two households in the U.S., so focus remains on driving trial. Additionally, our Canadian performance is impressive, with a 10 share of the flavor RTD category. Other innovations are also performing well, Madri being our superstar. It continues to grow in double digits in new markets. We introduced new products, including Happy Thursday, which targets new consumers. Overall, we’re optimistic about our innovations moving forward.