Molson Coors Beverage Company (TAP) — Q3 2025 Earnings Call Transcript

Thank you, operator, and hello, everyone. Our discussion today includes forward-looking statements within the meaning of U.S. federal securities laws. For more information, please refer to the forward-looking statements disclosure in our earnings release. In addition, the definitions of reconciliations for any non-U.S. GAAP measures are included in our earnings release. Please note that with the exception of earnings per share, all financial metrics are in constant currency when referencing percentage changes from the prior year period. With me on the call today are Gavin Hattersley, former Chief Executive Officer, who retired October 1, but remains with the company in an advisory capacity until year-end. Rahul Goyal, Chief Executive Officer and Tracey Joubert, Chief Financial Officer. Today, Gavin would like to share some opening remarks before passing to Rahul to provide an initial high-level view of his vision going forward. Tracey will then wrap up with a brief review of the quarter and our 2025 outlook. A more detailed presentation of our quarterly performance, including financial and operational metrics and drivers, is available in our earnings release and earnings slides, which were made available earlier today on the IR section of our website. Upon the conclusion of our prepared remarks, we will take your questions. And as always, we ask that you limit yourself to one question, and then if needed, return to the queue. With that, I'll pass it to you, Gavin.

Thank you, Traci, and hello, everybody, and thank you for joining the call. I am pleased to be here today for what is my last earnings call with Molson Coors. It has been an incredible journey, and I could not be prouder of this team and the strong foundation that we have built. This includes our iconic brands across the world, our leading capabilities from supply chain to marketing, a dramatically improved balance sheet, and our strong free cash flow generation. And while I'm retiring during a difficult time in the industry, I am confident in the company's ability to return to growth. So with that, it is my great pleasure to introduce Rahul who took over the role of CEO on October 1. During my six years as CEO, I worked closely with Rahul, and his deep strategic insights, institutional knowledge, fresh perspectives, and proven ability to deliver, which are particularly important in these dynamic times, make him in my view the right choice for the job. And while he has only been in role for about a month, he has certainly hit the ground running. To share more about this, I'll pass the call to Rahul.

Thank you, Gavin. It has been a true privilege to work with you for so many years, and I look forward to building on our many accomplishments and continuing to support the strong culture you have built that makes Molson Coors so special. Now clearly, these are dynamic times, and we, like many staples companies, have been affected by macro-related factors that have pressured consumption behavior. In the U.S., these macro impacts have had a disproportionate effect on lower-income and Hispanic consumers. And within there, these consumer segments have driven a reduction in the number of buyers as well as spend per trip, with a continued shift to singles in the third quarter. In Europe, the macro environment has also contributed to continued industry softness, pressuring demand across our regions. But we continue to believe that the incremental softness in the industry this year is cyclical, and we believe that we are well positioned with a healthy balance sheet, strong free cash flow, and great brands that serve a wide range of consumer occasions and preferences. This all helps us to navigate these near-term cyclical headwinds while investing in our business to support long-term growth. I know everyone is eager to hear more about my vision for the future, and there will be more details to come. Today, I would like to provide a high-level view of our strategic priorities and how we plan to adapt in these challenging times, improve our commercial performance, capitalize on opportunities, and ultimately return to top and bottom line growth. I want to assure you that we are moving with a sense of urgency and with a clear purpose. In my first 30 days, we have already begun to implement structural changes, both in terms of leadership and operations to put us on the path to success. At the highest level, it begins by focusing on our portfolio to build strong and scalable brands in both beer and beyond beer. This entails prioritizing our investments to build on the strength of our core and economy beer portfolios and to transform our above-premium beer and beyond beer portfolio. In beer, we already have a strong core portfolio with iconic global brands and regional market leaders. They are the majority of our business, and we intend to continue to put strong commercial pressure behind that. For Miller Lite and Coors Light, this means new campaigns and high-profile sports and music alliances that build on their strong brand health and support our ambition for share growth for each brand. For Banquet, we intend to capitalize on its impressive success by leaning even more into fueling its strong momentum and to continue to bridge the sizable distribution gap with Coors Light. Recall that Banquet is only in just over half the buying outlets of Coors Light, and not only is Banquet an important growth driver in our U.S. business, but it offers learnings that we believe can be applied more broadly across the portfolio. We also plan to selectively increase our focus on certain economy brands like Miller High Life and Keystone Light, which are big brands with loyal consumer bases. We firmly believe that all price segments matter. And while as an industry, we are not seeing trade down at the brand level in today's environment, more than ever, economy is an important segment. We continue to see big opportunities in above premium. While we have had strong premiumization success in markets outside the U.S., we meaningfully under-indexed in above premium in the U.S., and we plan to lean in even harder to change that in both beer and beyond beer. In beer, it's no secret that we think Peroni has great potential. It's only been two quarters since we fully onshored Peroni and activated our commercial plans, and we are already seeing good progress with brand volume up 25% in the third quarter. With expected increases in media investment next year, including programming for the Olympics, and with only about one-third of the distribution of the other major competitors, we see significant runway ahead. We also remain committed to stabilizing Blue Moon, and to be frank, we haven't seen the success we would like. Recent innovation with non-alc and high ABV brand extensions have been encouraging, while the core Blue Moon Belgian White continues to be challenged. We will be looking closely with a fresh commercial perspective at what we can do differently to best ensure that this big and important brand supports our premiumization objectives. While beer is our roots and at the core of our business, you can also expect us to step up our focus on beyond beer because we believe we can win here. Not only does it help to premiumize our business, but it also creates value for our customers by appealing to a wider range of consumer preferences and serving more occasions. In flavored alcohol, we already have big brands, and some have been rechallenged recently. But Topo Chico is a great example of how, with the right commercial road, we can improve trends by focusing investments on the markets where the Topo Chico brand most strongly resonates. Through thoughtful innovation, we achieved positive dollar share gain in the third quarter in these regions. We also recognize we have debts, including RTV spirits, and we intend to fill that. In non-alc, we are focused on building scale, and we are off to a great start. We believe our partnership with Fever-Tree in the U.S. provides a strong base from which to grow our total non-alc portfolio. In fact, Fever-Tree volume has been performing strongly, and it has been very well received by distributors and retailers, and we are excited about the opportunity to significantly grow the brand in the years to come. This is just the beginning of our non-alc efforts, as we see opportunities to enter some other interesting areas. So we are making the infrastructure investments in people and systems that help to support the development of this business into something meaningful over time. Now to achieve our commercial ambitions, we are taking a fresh look at our approach to commercial execution and identifying opportunities to optimize our cost structure to fuel reinvestment in the business. On the commercial side, creating value for our customers and consumers remains at the forefront of all that we do. We believe we can be even more effective at this by focusing ownership of this business even closer to the market. We intend to do this by deploying marketing and G&A investments based on specific market dynamics and portfolio priorities. This should help to increase our speed of decision-making, agility to execute, and ensure greater accountability and return-oriented mindset at the local level of our business. On the cost side, as announced last month, we are implementing a corporate restructuring plan of our Americas business unit, designed to create a leaner, more agile organization while advancing our ability to reinvest in the business. This entails reducing our Americas salaried headcount by approximately 400 positions or 9% by the end of the year. This includes hundreds of salary positions that were already open due to headcount for our transition efforts earlier this year and those who may be granted voluntary severance as part of this restructuring. We intend to redeploy some of these savings to step up our investments behind key brands, commercial capabilities, and in supply chain and technology that support ongoing productivity and efficiency. We will continue to be disciplined stewards of our capital, using a dynamic capital allocation approach, balancing investments in M&A to fill portfolio gaps while continuing to return cash to shareholders. We'll be sharing more on capital allocation in the near future. But today, let me be very clear on two things. First, we seek scalable deals that we expect to be accretive to both top and bottom line and are prudent from a balance sheet perspective. Second, we remain committed to our dividend and to our share repurchase program as we continue to view our stock as a compelling investment. There is a lot of work to do, but we see a clear path forward. Results will take some time, but we are moving with a sense of urgency. We're confident we have the right brands and the plans to be successful. I look forward to updating you on more of the details of strategy and financials and operational objectives in the coming months. With that, I will pass it to Tracey, who will talk about our financial performance and outlook.

Thank you, Rahul. Third quarter consolidated net sales revenue was down 3.3%. Underlying pretax income was down 11.9%, and underlying earnings per share was down 7.2%. On an underlying basis, the key quarterly drivers were largely as expected. The U.S. beer industry was down 4.7% based on our internal estimates. Our U.S. volume share was down 40 basis points based on our internal estimates, including relatively better share performance in the on-premise channel compared to the off-premise. Contract brewing was a 450,000 hectoliter or 3 percentage point headwind to the Americas financial volume. Excluding contract brewing, U.S. STWs outpace STRs, resulting in a nearly 2 percentage point benefit to Americas financial volume in the quarter. EMEA and APAC volume continue to be pressured across all regions by ongoing soft market demand and a heightened competitive landscape. The Middle East premium remained innovative, which was within the expected price range, although at the higher end. Marketing was up, while G&A was down largely due to lower incentive compensation as compared to the prior year. While our discussion today, as typical, has been on an underlying basis, we also recorded a non-cash partial goodwill impairment charge of $3.6 billion as well as non-cash intangible asset impairment charges of $274 million in the quarter, which I'll discuss in detail in today's earnings release and 10-Q. I wanted to address the execution of our share repurchase spend during the quarter. Restrictions under our policies have prohibited us from executing under the repurchase plan during the open trading window following last quarter's earnings because we were in possession of material non-public information regarding our CEO search. We expect our regular quarterly trading window to open tomorrow, and we want to stress that we remain fully committed to our share repurchase plan and continue to strongly believe our stock is a compelling investment. With that, let's discuss our outlook. We are reaffirming our 2025 guidance, but we now expect to come in at the low end of the prior range for our key metrics. These key metrics and ranges are as follows: Net sales revenue to decline 3% to 4% on a constant currency basis. Underlying pretax income to decline 12% to 15% on a constant currency basis, underlying earnings per share to decline 7% to 10%, and underlying free cash flow of $1.3 billion, plus or minus 10%. Before we get into the details, I remind you that the impact of the global macro environments are multifaceted and difficult to predict. While we have included in our guidance our best estimate of some of these factors, external drivers that significantly impact our actual results, either up or down. Starting with the top line, we now expect lower year-end U.S. distributor inventory levels. Year-to-date, U.S. STWs largely caught up to STRs in the third quarter. However, given lower 2025 volumes impacted by industry performance, we now anticipate year-end distributor inventory to be lower compared to year-end 2024 on an absolute basis. The year-end days of inventories will remain relatively consistent and at what we view as healthy levels entering the new year. For the fourth quarter, we expect the U.S. STW trend to trail the U.S. STR trend excluding contract brewing. All of the top line drivers remain unchanged. We continue to expect U.S. industry volume to be down on average 4% to 6% for the second half of the year while being mindful of comparisons versus the year ago period, which was somewhat softer earlier in the third quarter before becoming more difficult into year-end. We will cycle 1.9 million hectoliters of contract brewing volume in the Americas in 2025 related to Pabst and Labatt and will cycle the remaining 300,000 hectoliters in the fourth quarter. We continue to expect an annual net price increase of 1% to 2% in North America in line with the average historical range and mix benefits from cycling contracts brewing from 2024 as well as from premiumization in both business units. Moving down the P&L, we expect COGS to be negatively impacted by volume deleverage, including the lower expectations for year-end U.S. distributor inventory. The Midwest Premium pricing has continued to increase. Our guidance assumed a price range of $0.60 to $0.75 per pound, implying for the full year, Midwest Premium costs will exceed the prior year by $40 million to $55 million, with most of the increase occurring in the second half of the year. As you can see on Page 18 of our earnings slides, the price trended at the upper end of this range in the third quarter and was slightly above it in October. Therefore, we expect increases to be at the high end of that range. As for MG&A, we continue to expect it to be down slightly for the year due to lower incentive compensation, which is largely offset by higher non-alc infrastructure costs as well as the Fever-Tree one-time transition and integration fees in the first half of the year. Again, those one-time fees were approximately $50 million and will be recovered through net sales over the next three years, which began in the second quarter of this year. In closing, we remain committed to improving shareholder value and look forward to sharing more about our strategic plans and long-term objectives in the coming months. With that, we will take your questions.

Great. Just two questions for me, one for Rahul and one for Tracey. First, Rahul, you've been in the role for about 30 days at this point, and recognizing you've been with the company for some time. But just as you step into the CEO role, I would love to get your perspective on what you see as the biggest opportunities and challenges ahead? And then, Tracey, I just was hoping to get some color on the implied improvement for the fourth quarter embedded in the top line guidance, just given the commentary on tougher category comps and now expecting to ship behind in Americas. Can you just walk through the building blocks for 4Q as you see them today?

Thanks, Peter. If you look at the last 30 days, my focus and our priority has been on two fronts. One is listening to our people and our customers. If you look at our business, right, I come from the perspective that we have a strong foundation. We've got great brands, a healthy balance sheet, but we have great opportunities. If you look at our performance this year, the majority of our share losses have been in a few areas, the economy category or the flavor category, but we've got co-brands that are pretty strong. We need to find a way to make them stronger. In above premium, we have great opportunities with the portfolio we have. Peroni is doing really well. We have some work to do in Blue Moon. Again, on the beyond beer strategy, I think this year Fever-Tree has been a great addition to our business. So if you look at this imbalance, I’m pretty excited about a number of things we have going, but recognize the challenges we have in some other parts of our portfolio and want to really get behind it. The piece I'll leave you with is we're definitely moving with a sense of urgency and pace. I recognize the volatility in the category this year, but we also recognize the things that we can work on within our team. I'm looking forward to it, Peter; it's been a quick 30 days, but definitely moving with pace. Tracey, do you want to take the second one?

Thanks, Peter, for the question. In terms of Q4, we are expecting better top line performance in our EMEA, APAC, and Canada business units. In addition, we are lapping softer comps from contract brewing in the U.S., so that's a big driver. Those two are the big drivers of our top line performance. As that also translates to better bottom line performance as well, we will have lower G&A in the fourth quarter, really driven by the lower incentive compensation.

Congratulations Gavin on your career and best of luck. Just from an inventory perspective, I think the message today is that you expect them to be lower in 2025 on an absolute basis, but closer to historical average on a days' inventory basis. I just wanted to check this. Does that mean if the category improves a little bit next year from the current lows, you would be entering 2025 with low inventory, say, lower than average if the category expansion picks up just a little bit? I'm just conscious beer distributors often use year-end to clean up inventory and perhaps they're feeling more anxious about that even more this year. I just want to touch on how you would see your inventory position going into next year. Also, listening to the prepared remarks from Rahul, thank you for all that, is it fair to say that you don't see this massive need to reinvest in the business as is typical when you enter a new leadership position and that with restructuring and sustained commitment to some of the strategies that you've laid out as you evolve into new strategies, you don't see that? Or do you see a business that perhaps is a bit under-invested in this opportunity going into next year on top of the soft year? Thanks on the inventory and the investing piece.

Thank you, Chris. If you look at distributor inventories, the way we look at it is we have a pretty healthy position. You've seen what's happened to the category this year. Going into the end of this year and getting ourselves into next year, we believe days of inventory is in a good place. In terms of our capacity to pivot and ensure we have the right level of supply in Q1, we feel good about it with our brewery network and infrastructure. Remember, we're lapping certain events, like the Fort Worth strike, earlier this year, so we feel pretty positive about our position as we close out this year and prepare for the following year. Regarding your question about reinvestment, I'd share with you a couple of comments. I know you are likely looking for clarity on what 2026 looks like. I'm committed to making sure that we build our brands. If you look at our category, we need to champion it. We'll be leaning into delivering on that. Our balance sheet and cash flow are also priorities. We're committed to returning cash to shareholders while also finding ways to deploy capital to fill some gaps in our portfolio for growth.

I was hoping you could give us a little more color on the pressures facing the beer category. Why do you believe it's cyclical versus structural? What is your expectation for category growth this year? Do you expect the category to recover next year? If so, what do you think will be the drivers of this? Where do you see the biggest areas of opportunity and risk next year?

Thanks, Bonnie, and good morning. I think I'll break your question into a few pieces. If you think about the pressures on the category pre-2025, the last few years, our category has been in the minus 3 range. This year, we've been in the minus 4% to minus 6%, and that's what we shared at the end of Q2. This year, every quarter, every month has been pretty volatile, but we probably end up in that range. Our internal estimates suggest that we're in the minus 4.7% range in terms of category health. There are structural issues that we've spoken about in the industry, whether it's health and wellness or generational change. However, this year, there are macro issues affecting the beer category, whether it's economic impacts, tariffs, immigration. Thus, we still believe that this year's issue or going into next year is cyclical. Once we get through some of these macro issues, we should get back to the pre-2025 levels. We definitely have so much opportunity to really lean into our business. While we've done well with premiumization outside the U.S., we're under-indexed in the U.S. The areas where we've had share losses this year are around flavors and economy, and that’s why you see our focus there.

This is Drew Levine on for Andrea. Rahul, you just noted the expectation that the industry could return to pre-2025 levels. You also mentioned in the prepared remarks that results will take some time to see. Could you provide any more context on whether you think the company could return to low single-digit organic sales growth if the industry remains down in that 3% range? You also talked about being willing to deploy the balance sheet and cash flow to fill portfolio gaps. Under Gavin, it was described as a string of pearls approach. Given where the industry is, should we be on the lookout for anything a bit more sizable?

Yes. Thank you. Just a couple of comments on your questions. With the industry being where it is, we still see the pathway for delivering growth on both the top and bottom line. If you look at this year, we are facing category challenges, but also dealing with COG issues due to inflation, which has impacted us. Looking back, I believe our strategy can get the business back to low single-digit growth. Our core brands remain strong, and we have work to do on our economy brands. There's a significant runway in the above premium in both beer and beyond beer. Deploying capital wisely for M&A opportunities that are accretive will also be part of our strategy moving forward.

Good morning, Gavin, Rahul, Tracey, thanks very much for the question. I also wanted to ask two questions regarding the balance sheet. Molson Coors has done a better job this time around in preparing the balance sheet to weather downturns or structural cyclical headwinds. But I would like to inquire about Tracey; this quarter, you moved into a relatively big bond maturity that's coming in the next 12 months. How should we think about addressing that as we contemplate '26? Second is just on the impairment itself. Rahul, understandably, you have to go through impairment testing, but in the context of cyclical versus structural, this would lead us to consider it more structural. Could you clarify the relationship between the impairment charge and the overall industry outlook?

Thanks, Peter. So yes, we do have some debt coming due in 2026. As with all our debt, we will review that as we get closer to the due dates. The important thing is that we remain focused on maintaining our leverage ratio, as Rahul said, in alignment with the target of being below 2.5x. We are currently in that range and will ensure we remain below 2.5x as we assess our next steps.

Thank you, Peter. You're absolutely right. We took the impairment charge to goodwill of about $3.6 billion in Q3. Several factors impacted this decision, including this year's performance and outlook on our business. Other factors involved include discount rates, risk premium, and frankly, the multiple. We believe we can get this business back to top and bottom line growth, and we remain undervalued in the context of our current market cap. We need to ensure we do right by the business and remain prudent.

Rahul, I was hoping to get a little bit more insight into your vision for the business. You mentioned portfolio gaps a couple of times. Do you think the gaps are related more to regions, categories, or specific brands? Should the company's focus become more narrow, or should it broaden to include new regions/categories?

Thank you, Bill. I'm looking forward to sharing more about our plans and how to think about them. I would break it down into three different ways. One is about the portfolio. We have a well-diversified portfolio in the U.S. and Canada, and even in Europe. We do believe all segments matter. There are specific parts of the portfolio where we see gaps that we need to fill, such as the flavor category and the beyond beer category. While we are committed to the markets we are in, we need to ensure we are winning and filling portfolio gaps. Execution closer to the market is also critical to success, and ensuring we have capabilities to thrive and deploy capital wisely is a priority. So the focus is on winning in our existing markets rather than identifying entirely new opportunities.

Rahul, I wanted to ask about your experience working with building partnerships with Coca-Cola, Fever-Tree, and on some of the non-alc initiatives like ZOA. Should we expect more initiatives like that from you? Or do you still see the opportunity for more traditional acquisitions going forward? Regarding the restructuring, you indicated that most of the charges, $35 million to $50 million, will be realized in Q4. Can you provide some sense of the savings on a run rate basis going forward? When should we expect those savings to flow through?

Thank you, Filippo. Let me address the portfolio and partnership comments first, and then I'll let Tracey help on the restructuring. Our primary focus remains beer as it's the foundation of our business. We want to leverage partnerships like Coca-Cola and Fever-Tree to scale brands effectively. We still believe there are ways to deploy capital sensibly to augment our portfolio. As for the specifics, partnerships offer capital-efficient growth, and we're open to both partnerships and acquisitions based on what's best for the business. Tracey, do you want to add context here?

Thanks, Filippo. Regarding cost savings, we haven't provided specific targets as we're still finalizing the details around this restructuring. However, we expect charges in the range of $35 million to $50 million, which will be future cash expenditures over the next 12 months, primarily related to severance payments and post-employment benefits. It is important to note that a meaningful amount of the headcount reductions was from the elimination of open positions in 2025, so we wouldn't expect to see the benefits fully realized in 2026. We plan to redeploy some of the savings to invest in our brands and commercial capabilities to drive both productivity and efficiency.

Great. I have two follow-ups regarding your recent discussions. On the restructuring, you spoke about making the Americas organization faster and more nimble. How specifically will that restructuring enable you to achieve increased speed? Regarding your discussion about the portfolio in beer versus beyond beer, I want to get a better idea of the balance of investments in your perspective. Clearly, beer is a bigger business, and investments to drive premiumization seems core to your vision. Do you see beyond beer as the bigger growth driver moving forward?

Thank you, Steve. To address both of your questions, the restructuring is about ensuring that leaders overseeing areas such as U.S. sales, marketing, and Canadian leadership have decision-making authority that is close to the market. We need to pivot quickly and be regionally focused to manage the challenges in the current landscape. Decision-making at a local level will drive speed and accountability. For our investment balance, we will continue to maintain marketing pressure behind our big brands while also building up our beyond beer portfolio. Beer will remain core, but our goal is to ensure the beyond beer segment is substantive enough to impact our total enterprise positively. I appreciate your questions, Steve.

Congrats, Gavin and Rahul. I want to focus on your economy brands, specifically High Life and Keystone. Can you touch on why you think those might not have been winning? Is it an innovation issue, a pricing issue, or lack of marketing? What should we expect to see moving forward? On the goodwill, I know you touched on how the assessment process has affected this year's results but seems to reflect an outlook ahead too. What is that balance?

Thank you, Michael. When it comes to the economy portfolio, we're looking through a consumer lens. The consumer sentiment has shifted, and ensuring we have a portfolio that meets their needs in various locations is crucial. Brands like High Life and Keystone have loyal consumer bases, and we believe maintaining strong marketing and innovation is key to their success. Our regional strategies will be essential as the market remains very local. For the goodwill, the impairment charge reflects this year's performance as well as broader market conditions and future outlook. We must remain prudent as we work toward recovering our business's value.

Congratulations to you, Rahul, and to Gavin, and best of luck. I would like to understand your mandate from the Board. How much freedom do you have to affect change? Is everything on the table, or is the Board's mandate more about staying the course?

Thanks for your question. The Board is very focused on maximizing shareholder value. There are no sacred cows, and I have the freedom to pursue strategies that drive value for our shareholders. While there are challenges in the category, we are also keenly aware of the opportunities in our portfolio. We plan to be aggressive and prudent in our pursuit of growth, so we’re driving the company's agenda forward.

Congratulations to you both. I wanted to talk about the level of investment in capabilities. You've mentioned needing the right marketing pressure behind brands, but looking at the organization more broadly, do you see areas needing investment? Where do you need to build out capabilities from here?

Thank you, Eric. I would break the capabilities into three broad buckets. First is our supply chain, where we need to focus on CapEx to drive right ROI and build out infrastructure capabilities, like variety packing and flavor production at our breweries. Second is commercial capabilities; improving our market share versus being category captains is essential. Lastly, in technology, we need to constantly innovate and leverage tools like AI in our operations. Overall, we need to evaluate our investments in light of productivity, efficiency, and trending behind our top and bottom line growth.

Rahul, can you pull together some themes around your assessment of the company's cost structure, particularly regarding supply chain and brewery optimization? At a time when volume outlook is challenging, do you see your fixed cost structure appropriately sized? Also, do you see additional productivity as enabling higher investment levels or as a drag on margins?

Thank you, Kevin. We constantly look for ways to improve our brewery network. Our transportation costs and the seasonality of the business are key considerations. I don’t believe we need to close any breweries, but we should ensure we’re limiting capital wasted. While we’ll evaluate our fixed costs, we’re focused on ensuring our cost structure fits the current market. Regarding productivity, I don’t expect a spike in investments; I believe we need to be prudent and ensure we’re returning positively on our marketing and production investments.

Hey, everyone, congrats all around. I wanted to follow up on the restructuring aspect. It sounds like the steps you've taken might be modest compared to what we see at companies struggling in a more complex environment. Should we expect more significant action, or do you believe things are in place now?

Thanks for the question. We are keen to explore all avenues for reducing costs and increasing efficiencies. While the steps taken have addressed some immediate needs, we’ll consistently evaluate the whole business to ensure we’re set up well for any headwinds we face as we transition into 2026 and beyond. We’re focused on ensuring productivity is at the forefront of our actions moving forward.

I want to revisit your recent comments regarding deploying marketing based on market dynamics and portfolio priorities. What were you doing before? Is that not the standard process?

Thanks, Lauren. I think while we have done some of this, we need to react faster to external market dynamics. We have strong national brands, but their performance varies regionally. We need to be sure we deploy resources more effectively, enabling accountability and decision-making close to our customers. This will be essential for our success moving forward.

I'd like to come back to the cyclical pressures you mentioned. What are you seeing in terms of consumer sentiment for your consumers in Q3? Are there any internal surveys or analytics you could share regarding consumer behavior? How does that affect your confidence in describing these pressures as cyclical?

Nadine, my response has many layers. The beer category has shifted over the years, owing to a variety of factors. This year's challenges, encompassing tariffs and economic factors, drive the pressure we see. We believe we are well-positioned once some of these macro issues stabilize, which would improve sentiment.

I'm trying to summarize the commentary on regional execution versus national marketing for your brands. Given the multiyear share losses of Coors Light and Miller Lite, would you say that national marketing is effective? Should we focus more on improving regional execution?

We certainly think there's room for improvement in how we market our brands, particularly at the national level. Upcoming campaigns will be important for Miller Lite and Coors Light, and we'll be utilizing them more while exploring regional executions to capture localized opportunities.

Rahul, should we expect more bolt-on M&A or a push into beyond beer as a larger part of capital allocation strategy as we look to the future?

Thank you, Gerald. We do have an extensive beer portfolio, but there's a need to fill gaps in the beyond beer space. Priority will indeed be given to beyond beer acquisitions for M&A; however, we remain open to strategic beer acquisitions that can enhance growth.

Regarding the Midwest premium, we've seen pricing increase significantly, hitting an all-time high in October. We have an extensive hedging program in place to manage pricing fluctuations and are committed to monitoring the commodity closely. As it stands, the volatility in the market remains a cautionary note, and we are focused on mitigating the impact of this pricing on our projections for the year.