Molson Coors Beverage Company (TAP) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Strong Performance in EMEA & APAC: Significant contributions from favorable net pricing, premiumization, and brand volume growth in these regions.
• Increased Net Sales Revenue: For the first half of the year, net sales revenue increased by 4.2%, with underlying pretax income and earnings per share also seeing substantial growth.
• Successful Core Power Brands: Coors Light, Miller Lite, and Coors Banquet retained approximately 80% of their peak share gains, with Coors Banquet showing impressive growth.
• Premiumization and Innovation: Above premium portfolio constituted over 26% of total net brand revenue, with significant progress in premiumization across various markets.
• Strong Financial Performance: Generated $505 million in underlying free cash flow for the first half of the year, with significant cash returned to shareholders.

Pessimistic Highlights

• Slight Decline in Consolidated Net Sales Revenue: Reported a minor decrease of 0.1% in consolidated net sales revenue.
• Impact of Pabst Contract Brewing Volume Exit: The termination of the Pabst brewing contract is expected to reduce financial volume and net sales revenue, despite its mix benefits.
• Challenges in Above Premium Trends in the U.S.: Acknowledged the need for improvement in the performance of above premium brands and innovations in the U.S. market.

Company Outlook

• Maintaining Full Year Guidance for 2024: Despite expecting slower trends in the second half of the year, the company reaffirms its guidance, indicating confidence in achieving top and bottom line growth for the third consecutive year.
• Strategic Investments and Cost Savings: Continued investments in business capabilities and cost savings initiatives to support long-term sustainable profitable growth.
• Focus on Premiumization and Innovation: Plans to drive growth through robust revenue management, premiumization, innovation, and efficiency improvements.

Q & A Highlights

• Q: Can you provide more details on the expected volume deleverage impact in the second half and any offsets to mitigate margin impact? (Bonnie Herzog, Goldman Sachs)

  A: Expect higher COGS in 2024 due to volume deleverage and mix, with cost savings and the exit of low-margin Pabst contract brewing volume helping to offset some impacts. Marketing spend in the second half will be lower compared to the first half. (Tracey Joubert)

• Q: How has the monthly progression of brand volumes in the US been through the quarter, and how do you view industry performance for the rest of the year? (Drew Levine, JPMorgan)

  A: April and May were relatively soft, with improvement in June. The industry's performance in Q2 is a continuation of previous trends, with no significant shift in consumer behavior. (Gavin Hattersley)

• Q: What is your on-premise strategy, particularly regarding kegs and draft? (Bill Kirk, ROTH Capital Partners)

  A: The on-premise channel is performing slightly better than off-premise, with kegs remaining an important part of the strategy for building brands. (Gavin Hattersley)

• Q: Can you discuss the performance of Blue Moon and Peroni and plans for driving growth in the high-end of the business? (Rob Ottenstein, Evercore)

  A: Acknowledged the need for improvement in premium brands in the U.S. New campaigns, packaging, and innovations for Blue Moon and onshoring production for Peroni are steps towards revitalizing these brands. (Gavin Hattersley)

• Q: How are you adjusting for consumer pack shifts in shelf resets, and what was the thinking behind launching a new brand in Romania? (Michael Lavery, Piper Sandler)

  A: Gained more SKUs and pack formats in resets to adjust for consumer trends. The launch of Caraiman in Romania was based on identifying a market gap and has shown promising early results. (Gavin Hattersley)