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    Molson Coors Beverage Co (TAP)

    Q2 2024 Earnings Summary

    Reported on Jan 10, 2025 (Before Market Open)
    Pre-Earnings Price$51.13Last close (Aug 5, 2024)
    Post-Earnings Price$54.41Open (Aug 6, 2024)
    Price Change
    $3.28(+6.42%)
    • Molson Coors has successfully retained approximately 80% of their peak share gains in core power brands, with the total portfolio up over 1.7 points of volume share compared to the second quarter of 2022, reflecting strong brand performance and effective marketing.
    • Innovation is driving significant growth, with Simply Spiked becoming a $100 million brand in just 2 years, and new products like Madri showing promising results in international markets.
    • Strategic initiatives to improve margins and competitiveness, such as bringing Peroni production onshore in the U.S., will ensure consistent supply, enable different pack formats, and increase margins to reinvest behind the brand, enhancing their position in the premium segment.
    • Molson Coors is facing challenges in the premiumization space in the U.S., with key above-premium brands like Blue Moon and Peroni underperforming; the company admits they have work to do to revitalize these brands. 
    • The company expects volume deleverage in the second half of 2024 due to shipment timing and the exit of low-margin Pabst contract brewing volumes, which will increase COGS and may pressure margins; they anticipate higher COGS in the second half compared to the first half. 
    • Molson Coors plans to lower marketing spend in the second half of 2024 compared to the prior year, which might impact their ability to sustain brand momentum and retain market share gains achieved in their core brands. 
    1. Guidance and Margin Impact
      Q: Guidance implies H2 deceleration; impact on margins?
      A: We expect higher COGS in 2024 versus 2023, with the second half higher than the first, driven by deleverage and mix. Premiumizing our portfolio adds to COGS but is margin accretive. Inflation is moderating but continues, and material conversion costs linked to inflation indices tend to lag. Our hedging program has longer-term hedges from '22 and '23 rolling off this year and next. We've invested in breweries to drive efficiencies and cost savings to offset COGS inflation. Contract brewing volume exiting, which is low margin, will help margins despite the volume impact.

    2. Volume Trends and Outlook
      Q: How are U.S. volumes trending and industry outlook?
      A: April and May were tougher, but we saw improvement in June. Overall, Q2 is a continuation of previous trends, with consumers shifting within brands to singles or larger packs. We can't predict quarters based on a few weeks' data, so we'll see how Q3 turns out. In the U.S., we're not seeing significant changes; value-conscious consumers engage in channel and pack shifting but not brand shifting.

    3. Marketing Spend Strategy
      Q: Why is marketing spend lower in H2 vs. H1?
      A: Our MG&A will be lower in the second half versus the first. In H2 of 2023, we spent an incremental $100 million in marketing, evenly split between Q2 and Q3, to drive brand momentum. Typically, we spend more in the summer, so you can expect lower year-over-year spend, particularly in Q4. However, we expect 2024 marketing to be up meaningfully from 2022, with no pullback on marketing.

    4. Shelf Space Gains and Market Share
      Q: Has increased shelf space boosted market share?
      A: We secured about a 13% share of space increase for our core brands in large format stores, becoming the biggest winner in space allocation. We've retained 80% of the share gains, and it gets easier from here as we move past our toughest comps. We expect retailers to make only minor adjustments going forward.

    5. Price/Mix Contribution
      Q: Can you break down the 4% price/mix increase?
      A: In the Americas, over half of the 4.1% increase comes from net pricing, with the balance from mix, including the exit of Pabst volume. We expect pricing to land in the historical 1%-2% increase level for the full year. More Pabst volume exiting in Q3 will be mix favorable.

    6. Performance of Above-Premium Brands
      Q: What's being done to improve Blue Moon and Peroni?
      A: We recognize the need to improve in the U.S. premiumization space. For Blue Moon, we've launched new packaging, a new campaign, and repositioned Blue Moon Light, which shows promising early signs. For Peroni, we're shifting to domestic production in the U.S., ensuring consistent supply, expanding pack formats, and improving margins to reinvest in marketing. Awareness and distribution are still low, but we have high expectations.

    7. Innovation Performance
      Q: How are recent innovations contributing to growth?
      A: We're pleased with Simply Spiked, building it to over $100 million in two years. Consumers have a "treasure hunt" mentality, so continuous flavor innovation is important. Madri is a standout, now a top 10 brand, recently launched in Canada and Bulgaria, growing double digits despite competition. We're also encouraged by other innovations like Happy Thursday, tapping into new consumer segments.

    8. Market Share Expectations
      Q: What's your view on retaining market share gains?
      A: Our core brands grew 2.5 points of case share in Q2 last year, and we've retained 80% of that. Compared to Q2 2022, our total portfolio is up over 1.7 points of volume share. We're planning to execute and retain as much share as possible, now that we're past the toughest comps.

    9. Consumer Behavior and Resilience
      Q: Are you seeing changes in consumer demand?
      A: In the U.S., we haven't seen significant changes; value-conscious consumers continue channel and pack shifting but not brand shifting. In Central and Eastern Europe, reduced CPI is easing pressure on disposable income, translating to increased market demand. In Canada, performance is pleasing, gaining market share as we execute our revitalization strategy.

    10. On-Premise Strategy
      Q: What's your on-premise strategy regarding kegs?
      A: On-premise in the U.S. is performing slightly better than off-premise. Kegs are and will remain an important part of our on-premise strategy to build brands like Miller Lite, Coors Light, and Blue Moon. While changes occur, sometimes between keg sizes, kegs are essential to how we continue to build our brands.

    11. Adjustments for Consumer Pack Shifts
      Q: Did shelf resets address consumer pack shifts?
      A: We introduced more SKUs and pack formats into convenience stores, grocery, and large formats. While we didn't capture all current consumer trends, we've improved holding power for both large and small packs, reducing out-of-stocks.

    12. New Brand Launch in Romania
      Q: What's behind the new brand launch in Romania?
      A: The brand is one we've had before; our innovation team found a market gap and relaunched it. It's adding nice incrementality without significant cannibalization, achieving 150,000 hectoliters in just a few months, which is meaningful in that market size.

    13. Volume and Shipment Planning
      Q: Is the gap between financial and brand volume wider in Q3?
      A: Yes, we shipped ahead of demand by 1.1 million hectoliters in the first half, which we expect to reverse in the second half, mostly in Q3. We have about 1 million hectoliters of Pabst volume remaining, with over half exiting in Q3.