Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Molson Coors Beverage Co (TAP, Financial) reported a 5.2% growth in underlying pre-tax income and a 7.9% increase in underlying earnings per share for the second quarter.
- The EMEA and APAC business segments contributed significantly to the results due to favorable net pricing, premiumization, and brand volume growth.
- The company generated $505 million in underlying free cash flow for the first half of the year and returned $564 million to shareholders through dividends and share repurchases.
- 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.
- Molson Coors Beverage Co (TAP) is on track to deliver its 2024 guidance, which calls for top- and bottom-line growth for the third straight year.
Negative Points
- Consolidated net sales revenue was down 0.1% for the second quarter.
- The exit of Pabst's contract brewing volume reduced second-quarter financial volume by 580,000 hectoliters and first-half financial volume by over 900,000 hectoliters.
- The company expects higher costs per hectoliter in the second half of the year due to ongoing inflationary pressures and volume deleverage.
- Marketing spend is expected to be lower in the second half of the year compared to the first half, which may impact brand momentum.
- The US shipment timing and the exit of Pabst's contract brewing volume are expected to result in volume deleverage in the second half of the year.
Q & A Highlights
Q: Can you unpack the volume deleverage impact in the back half and provide more color on any offsets to mitigate the impact on margins? Also, how should we think about marketing spend levels moving forward?
A: We expect higher COGS in the second half due to volume deleverage and mix, including the exit of Pabst. Premiumization adds COGS but is margin accretive. Inflation is moderating, and our hedging program helps offset costs. Marketing spend will be lower in the second half compared to the first half, but 2024 marketing will be up meaningfully from 2022 levels.
Q: Can you talk about the monthly progression on brand volumes in the US through the quarter and how performance has been in July?
A: April and May were tougher, but we saw improvement in June. Overall, Q2 was a continuation of existing trends, with consumers shifting within brand portfolios rather than between brands. Shipment timing and the exit of Pabst will impact volumes in the second half.
Q: What is your on-premise strategy, particularly regarding kegs and draft?
A: The on-premise is performing slightly better than off-premise. Kegs remain an important part of our on-premise strategy for building brands like Miller Lite, Coors Light, and Blue Moon. We focus on maintaining a strong presence in this channel.
Q: Can you discuss the performance of Blue Moon, Peroni, and other above-premium initiatives?
A: Blue Moon is a key brand, and we are committed to turning it around with new packaging, campaigns, and innovations like Blue Moon non-alc. Peroni's onshoring in the US will ensure consistent supply, increase pack formats, and improve margins, allowing for better marketing and execution.
Q: Are you seeing any sequential changes in consumer appetite for your categories, and how does this impact your business?
A: Consumer trends have been consistent, with value-conscious consumers engaging in channel and pack shifting but not brand shifting. We are monitoring economic conditions across markets, with some signs of improvement in consumer demand in Central and Eastern Europe and resilience in the UK.
Q: How prepared is the company for a potential light recession in the US, and how resilient is the beer category within total alcohol?
A: Our pricing strategy is balanced between net pricing and mix benefits. We are well-prepared for economic fluctuations, with a focus on maintaining strong brand performance and leveraging our premiumization strategy.
Q: How did the spring shelf resets impact your market share, and do you expect to retain the space gained?
A: We gained about a 13% share of space for our core brands in large format stores, which we expect to retain. The resets have improved our holding power and reduced out-of-stocks, contributing to our strong market share performance.
Q: Can you provide more details on the Romanian brand launch and the strategy behind it?
A: Caraiman was reintroduced to fill a market gap and has shown strong early performance with 150,000 hectoliters sold in a few months. It adds incrementality to our core portfolio without significant cannibalization.
Q: What is your read on industry volume in the US year to date, and how are you thinking about it for the full year?
A: Industry volume has been consistent with trends from the past few years. Our shipment strategy was deliberate to avoid inventory challenges, and we expect to maintain strong performance through effective execution and marketing.
Q: How are you thinking about share of throat between beer and spirits, and what is the performance of recent innovations like Simply?
A: Beer is gaining share against spirits, particularly with RTD spirits included. Simply has grown into a $100 million brand in two years, and we continue to drive trial and innovation to keep pace with consumer preferences. Other innovations like Madrà and ZOA are also performing well.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
