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    Molson Coors Beverage Co (TAP)

    Q1 2024 Earnings Summary

    Reported on Jan 10, 2025 (Before Market Open)
    Pre-Earnings Price$63.56Last close (Apr 29, 2024)
    Post-Earnings Price$62.50Open (Apr 30, 2024)
    Price Change
    $-1.06(-1.67%)
    • Expansion into beyond beer and above-premium brands is driving growth, with successful products like Simply Spiked and Happy Thursday, and moves into the non-alcoholic space contributing positively to revenue.
    • Confident in delivering full-year guidance despite industry challenges, with supply chain efficiencies outperforming expectations and contingency plans working better than initially projected.
    • Improving market conditions in Central and Eastern Europe are leading to increased volumes, as consumer confidence grows due to lower inflation and energy prices.
    • Management expresses increased caution about industry trends due to weak performance in early April. The CEO stated that the first two weeks of April were "pretty grim" from an industry standpoint, leading the company to be "more cautious" since the Consumer Analyst Group of New York (CAGNY) conference. They also mentioned that April has been "choppy" and that more data is needed to reach conclusions.
    • The strong Q1 performance may not be sustainable, as it was boosted by over-shipments and shipment timing, which the company expects to correct in the coming quarters. The company shipped approximately 750,000 hectoliters above consumption in Q1, compared to only 100,000 hectoliters over in the prior year. Management expects this over-shipment to come back over the next nine months, potentially leading to lower income for the remainder of the year.
    • Persistent inflation, higher interest rates, and cautious consumer behavior may negatively impact demand. Management acknowledged that "inflation is proving to be a little more sticky" and "interest rates are higher and staying for longer," resulting in "cautious behavior from consumers". This economic environment may pose challenges despite the company's confidence in their plans.
    1. Guidance Outlook

      Q: Why does guidance imply lower income despite positive factors?

      A: Although Q1 shipments exceeded expectations due to strong supply chain performance surpassing contingency plans , the company expects shipments to align with consumption over the next nine months, especially in the back half of the year. This normalization impacts underlying income projections despite favorable price/mix, flat MG&A, and significant shelf space gains.

    2. Market Share Concerns

      Q: Is the loss of share in Coors Light and Miller Lite a concern?

      A: Management remains confident in maintaining share gains, viewing recent fluctuations as temporary due to choppiness in Q2 data. They anticipate that the 13% extra shelf space for Miller Lite and Coors Light, and 20% extra for Coors Banquet, which most retailers have yet to implement, will drive volume growth as resets complete between April and July.

    3. Industry Weakness

      Q: Are current industry weaknesses transitory or structural?

      A: The company is more cautious about industry trends following weak April performance, citing factors like consumer confidence and cautious behavior due to inflation and interest rates. However, it's too early to conclude if weaknesses are structural, and a clearer picture will emerge after the summer sales period.

    4. Cautious Tone vs. Prior Optimism

      Q: Has your outlook changed since prior upbeat comments?

      A: Management acknowledges increased caution given recent industry volatility and the first two weeks of poor April results. Despite this, they remain confident in delivering their guidance and long-term growth algorithm.

    5. Strike Impact

      Q: How is the strike affecting costs and operations?

      A: The contingency plan is exceeding expectations, and supply chain is outperforming weekly. Costs related to the strike are not material, and the company does not expect significant impact on costs for the rest of the year.

    6. Capital Allocation

      Q: Will you adjust capital allocation given stock pressure?

      A: The company employs a sustained and opportunistic approach to its five-year share repurchase program, using models to ensure value-accretive decisions. They will continue to allocate capital effectively, considering stock performance.

    7. Marketing Spend

      Q: Will you adjust marketing spend amid softer volumes?

      A: The company plans to maintain its marketing spend to fuel brand momentum, confident in their acceleration plan and the health of their brands. With over half of marketing spend now digital, they can adjust tactics quickly to maximize value.

    8. On vs. Off-Premise Performance

      Q: How are on-premise and off-premise performing?

      A: In the U.S., on-premise continues to outperform off-premise. In the U.K., on-premise remains strong, but off-premise faces challenges due to increased promotional activities and a significant excise tax increase, which the company has not followed.

    9. Shelf Space Gains

      Q: How will shelf space gains impact shipments?

      A: The significant shelf space gains are expected to positively impact volumes as resets are completed, mostly between April and July. Inventory levels are healthy to meet the increased demand, and shipments in Q1 were deliberately increased to prepare for this.

    10. Retailer Enthusiasm

      Q: Are retailers giving more merchandising space to beer?

      A: Retailers are highly confident and excited about the company's plans, allocating unprecedented additional space to their brands. However, the overall beer category space is expected to remain largely unchanged, with shifts occurring within existing allocations.

    11. Above-Premium Strategy

      Q: Do you plan M&A to drive above-premium growth?

      A: The company focuses on internal development for beyond beer growth, expanding into flavors with brands like Simply and Happy Thursday, and into non-alcoholic beverages. While they have made some acquisitions like a stake in Blue Run, they believe significant progress can be achieved without major M&A.

    12. Blue Moon Ambitions

      Q: What's the long-term plan for the Blue Moon brand?

      A: Committed to reinvigorating Blue Moon despite challenges in the craft segment, the company has launched new campaigns, updated packaging, and introduced Blue Moon non-alc, which is performing well and providing a positive halo effect. Early signs of these efforts are positive.