www.morganstanley.com/researchdisclosures for important disclosures, and if you have any questions, you can reach out to your Morgan Stanley sales rep. In October, Molson Coors announced its acceleration plan to build upon the success the company achieved with its revitalization plan over the past four years, with significantly improved top-line trends even before the Bud Light situation emerged in April of this year. So joining us today, we have Tracey Joubert, Molson Coors CFO. Thanks so much for joining us. Thanks, Eric. Good to be here. Great. Let's start by looking back at the progress under the Revitalization Plan. Could you just recap what the key pillars of that program were, and how you'd assess the company's progress against each of them? Sure. So, we embarked on this Revitalization Plan, the sort of end of 2019, and basically, there were three strategic pillars. The first pillar was to build on the strength of our core brands. And so if we have a look at, at, that in particular, we're talking about brands like Miller Lite, Coors Light, Coors Banquet, and in the U.S., we've had huge success, with those brands. You know, they, they've taken segment share for a number of years, but coming into this, this year, as you said, even before, you know, the first of April, you know, Miller Lite was, was gaining industry share. You know, Coors Light was doing well, and that's really on the back of the platforms that we had put behind those brands. So keeping consistent with the messaging, you know, Miller Lite being it tastes like, like Miller time, Coors Light, made to chill. So really good success around the core brands in the U.S. But it's not just the U.S. In Canada, our Molson trademark has been growing industry share. In Central and Eastern Europe, in Croatia in particular, we've got a really big brand there called Ožujsko, that's been growing and taking share. And then Carling in the U.K. is still a top brand. So across our geographies, you know, our three largest markets has been growing revenue, volume and share. So from a core point of view, that was, you know, one of the pillars. The other two strategic pillars were around aggressively growing our above-premium portfolio and expanding beyond beer. Both those, the two together, actually, is sort of adds to our premiumization efforts. So in the above-premium space, you know, we've got huge success on brands like Madrí in the U.K., which is our innovation brand. It's probably the most successful innovation that we've had coming out of that geography, certainly in everyone's memory at Molson Coors, so really successful brand there. Then also, brands like Simply Spiked, which, you know, 2021, 2022, 2023 was the largest innovation, the best innovation coming out of flavors. And so that above-premium, you know, focuses on brands like that and innovation. Then beyond beer, we've truly become a global beverage company. We changed our name back in 2019 to Molson Coors Beverage. And if you look at some of the spaces that we've gone into in beyond beer, it's spaces like full-strength spirits, where under the Coors Spirits Company, you know, we have three brands, a couple of varieties, but we've got Five Trail, which is our own whiskey brand. We've got Barmen, which is our bourbon brand, and then a couple of months ago, we acquired a whiskey company called Blue Run, which is just a beautiful brand. It plays in that super premium space in whiskey. So we've, you know, expanded into the full-strength spirits. And then we've also invested, and we this year made a larger investment in the energy space with a brand like ZOA. So those are the three sort of strategic pillars. And then in order to invest behind those, we had cost savings coming out of the Revitalization Plan, which enabled us to invest in our brands, do a couple of little acquisitions and increased investments as those I've just spoken to, but also invest in capabilities in our breweries and in our people. So really laid a great foundation, as we now move into the Acceleration Plan. Great. So that leads well into my next question. You know, when I heard the Acceleration Plan in October, it really struck me as more of an evolution than any sort of strategic change, kind of doubling down on what's been working for you over the past several years. First, is that a fair characterization? And second, you know, sort of, what are the key areas that you expect to build on and really accelerate over the coming years? Yeah, I mean, that is a good characterization. You know, I think if you change your strategy every year, it's probably not a strategy. So the fact that we're building on the success of our revitalization program is exactly right. So the pillars don't really change. We're gonna continue to grow our core brands, take share with our core brands, and aggressively grow the above-premium and expand beyond beer. So, you know, as I look at it, I mean, I've mentioned those three pillars, but you know, going forward, as I've said, we expect to continue to grow core, not just in the U.S. You know, obviously 2023 has been a really good year for us from a premium segment and as well as economy. You know, we've been growing our brands in the economy segments as well. But we're also going to premiumize. We're also going to expand the above premium, and we're also going to, you know, expand and scale beyond beer... So if I look at you know, 2024 and beyond, in addition to you know, the core brands, we. Look, you know, we, our, our, our share gains have really been stable over the last 30 weeks, with Miller Lite, Coors Light. We're also seeing Coors Banquet growing. So we're gonna really build off those share gains. We're also going to focus on the above premium. So if I think of brands like Blue Moon, you know, Blue Moon is the second-largest tap handle in the U.S. It's the largest craft brand, and we've got a lot of great news coming out of Blue Moon. We're launching Blue Moon Non-Alc. So we're launching it right now. Be ready for Dry January. It's a great brand. And, you know, we're looking at packaging, refreshing the packaging, et cetera. We're scaling Peroni. So really excited about our partnership with Formula One and Ferrari. So we'll be scaling Peroni. We've also got Peroni Zero Zero. And then also really focusing on our flavored alcohol beverages, which also play in above premium space, like Simply Spiked. You know, Simply Spiked, Arnold Palmer Spiked, and then from the spirits side, I've spoken about our spirits business. And then, energy is a really good big space and playing and continuing to scale and support our ZOA brand. Great. So, drilling in a bit on the U.S. market and your largest brands, Coors Light, Miller Lite. As we said, they're already on an improving trajectory before April 1. Could you talk a bit about the strategy to grow those brands going forward, and what gives you confidence in the ability to grow those brands in 2024 once you start to cycle the competitive disruption in April? Okay, good. So again, let me stress that our share has been stable for the last 30 weeks. So we believe that this is structural, and we believe it's gonna stick. Now, what are we doing around that? So we have spoken about, in the summer and the fall, we had 50 retailers resetting their shelf space, and that is unprecedented because normally the big shelf resets happen in spring. But with the momentum that the retailers were seeing and with the sort of proactiveness from our sales team and our distributors, we were able to get more shelf space in the summer and the fall. And just with those 50 retailers that we spoke about, we... Between Miller Lite and Coors Light, we increased our shelf space with those 50 by between 6% and 7%. Again, most of the resets will happen in the spring, and we expect to continue to see gains of space as well in the spring. We're already having those discussions. We've been having discussions with retailers, and again, we expect you know, further gains in space from the spring resets. In addition, you know, we're doing a lot to make sure that we target and retarget the new drinkers that are coming to our brands. And so whether that be through sort of targeted media, whether that be through you know, digital, we're making sure that we can retain those new drinkers. Then working with our distributors, making sure that we continue to gain space, whether that be, you know, displays or whether that be, you know, cold space or whether that be on shelf. We'll continue to show retailers, you know, the momentum that we've got and how it's really important for us to have our fair share of space with the momentum that we're seeing. So those are the types of things we're doing. I mean, supporting that is, you know, we had our national distributor conference back in September, and we showed our distributors our brand plans for our brands, and the excitement was overwhelming. They are. Distributors love momentum, and they are 100% fully supportive of our brands. So we're gonna be working really closely with our distributors to make sure that we not only retain the space that we've got, retain the drinkers, but continue to gain. Great. And then in the initial planning for the spring resets, and I imagine those discussions are further advanced than they were even, you know, even a month ago. Yes. Are they shaping out in terms of space gains? Is it sort of in line with the gains that you saw in the fall? Is it, is it more? Is it less? Yeah. So I mean, I can't talk to the specifics because there is still negotiations going on, but what I can tell you is that we do expect to continue to gain space with the spring reset. Good. So then, zooming out, I think some investors were surprised that you called out an improvement in the U.S. beer market back in October, as one of the factors behind your 2023 guidance increase. So in the data we see, you know, it does look like the industry has somewhat improved since earlier this year, but volumes are still running below the, you know, call it -1% long-term trend. So first, you know, what are you seeing in terms of industry performance more recently? And second, you know, what do you think's been driving the weaker industry performance earlier this year, and what are you kind of expecting for industry trends in 2024? Yeah. So that's really good. You know, when we reaffirmed our guidance on, I think it was the second of November, we reaffirmed the high single-digit range on the top line, but towards the higher end of that. And that was because the industry was healthier and was still declining, but at a lower rate than what we had seen when we gave our August guidance. So if you look at Q3, you know, with Circana, it says Q3 beer industry is down about 1.3%. Q2 was down, I think it was 2.5%, and Q1 was down 2.7%. So we've been seeing an incremental, you know, improvement, although the beer industry is still weak. So, we're seeing, you know, the same thing. In terms of, you know, why it was so weak, I think if you go back to the beginning of the year, we have seen the hard seltzer decline much quicker at a higher rate than what we had originally expected, I think what a lot of people expected. You know, we had the really bad weather on the Pacific Coast, so that did impact volumes for sure in that geography. And then, you know, in Q3, if you remember last year, everyone took much larger price increases, so we had that load in going in last year, and so we're cycling that. So I would say that those are some of the bigger drivers of the weakness that we had seen. But again, you know, sequentially improving. I think the important thing is, Molson Coors share, we have nearly... We've had a nearly full 2-point gain, 2 percentage point gain, of industry share, and so that's what we are focused on, is, you know, continuing to gain share and, you know, make sure that we're maintaining that share as well. And you guys have been calling out, you know, some signs of consumer, you know, changed consumer behavior in the U.S. I think it was either late last year or early this year, you know, with some consumers buying larger packs to, you know, maximize value, and some consumers going to, you know, singles and small packs to, you know, minimize the dollar outlay. So what are you seeing more recently with respect to consumer behavior, whether it's in terms of package or channel or price tier or brand mix? Yeah. So we still see continued premiumization in the beer category, albeit at a slower rate than what we've seen before, and particularly in the growth areas like RTDs and spirits. We are seeing that premiumization. From a consumer point of view, I think it differs. I mean, in the U.S. is very different to some of our other markets, like in Central and Eastern Europe, where the consumer is a lot more challenged from a disposable income point of view. But in the U.S., we do continue to see that premiumization. We do see the growth areas. From a pack point of view, we are still seeing some bifurcation from a pack size. So we're seeing in the higher income households, we're seeing the consumer seeking value and moving, shifting towards larger packs. In the lower income households, we are seeing consumers shifting from the medium-sized packs to single serve or the lower sized packs. So we're definitely seeing a you know a pack mix shift. From sort of store visits, retail visits, we're seeing more buyers, more visits. We're seeing higher receipts, and that's really driven a lot by the pricing. So we are seeing that you know that continued, but we're seeing a lower number of buyers, and so that's impacting you know units and volume. We haven't seen significant trade down you know at this stage. You know, having said that, our economy portfolio is growing and doing nicely, but I think some of that is you know shifting consumer purchase shifting from some brands into ours. From a channel point of view, we're really seeing the on-premise and off-premise, really aligned. You know, we're seeing the same dynamics. Good. And then, you put out the target of increasing your, your global above-premium mix from about 28% to about a third over the next several years, and so that about half of that growth is expected to come from beyond beer. So can you talk a bit about the building blocks of, you know, how you bridge that from, from a brand perspective? You know, Blue Moon, Simply, and, you know, what, what other, you know, kind of big building blocks there are there? Sure, sure. So, you know, as I said at the beginning, you know, one of our core strategic pillars in the Revitalization Plan and now, you know, extending into the Acceleration Plan, is to aggressively premiumize the portfolio. So going back to, you know, the end of 2019, our above-premium share of our brand revenue was around 23%. At the end of 2022, it was 28%, and our medium-term target is to get to thirty, as you rightly say. And about half of that growth is gonna come from beyond beer. So, the growth is gonna come from both, you know, beer and non-beer. So let me talk a little bit about beer. So in the beer category, Blue Moon is obviously a focus. Again, it's, you know, the largest craft brand. It's a really important brand for us. And so, we are focused on turning that brand around. You know, I've spoken about the Blue Moon Non-Alc that we're launching, the repackaging. And then, we also are changing Blue Moon. We launched Blue Moon Light Sky a couple of years ago. It did really well, but people don't understand what Light Sky stands for, so we're relaunching that under Blue Moon Light. So you know, people understand it's a light beer, more seasonal beer. So we're doing that from a Blue Moon standpoint. Peroni, as I mentioned, we're gonna scale Peroni. We're really excited about that brand. The whole sort of Italian style, Italian heritage, now with our Formula One partnership is, and Ferrari in particular, really excited about that. So we're going to be scaling Peroni. And then, and I don't want, again, to forget about our magnificent brand, Madrí in the U.K. So still a you know a long runway for that brand. It's growing really well, and we're going to continue to invest behind that brand to continue the growth. So that's really looking at the beer side of it. From the beyond beer, we look at beyond beer in sort of three categories. One is the flavored alcohol beverage, and so that will include brands like Simply Spiked. We've got a new innovation called Happy Thursday, which is a non-carbonated, non-bubbly, sort of fruit-flavored, fruit-forward drink that we're launching now called Happy Thursday. So it's gonna a lot of innovation in the sort of flavor space. And then, spirits, you know, I've spoken about our spirits and how we've acquired this wonderful brand called Blue Run. So we'll continue to look at that. And then, you know, the energy sort of better for you space is something that we're really excited about as well. It's a really big. There's a big market for that. It's you know a big category, and so we're going to continue to you know invest behind our ZOA brand right now. Good. Then, last week, Molson Coors announced a number of moves to, really optimize the commercial structure in the Americas. Mm-hmm. Can you just give us a quick recap of what those moves were? Not every person, obviously, and then, but bigger picture strategic goals behind that. Now, now, Michelle has said that these, these weren't. This isn't a cost-cutting program, that you're actually increasing investment behind the Americas commercial team. And sort of the follow-on to this would be, so should we expect to see an increase in your overall MG&A as a result of that? Or is it more reallocating funds from, you know, non-working to working? Yeah. So, you know, we created the new American commercial organization under Michelle St. Jacques. It's been running for about eight months now. Now, with the launch of our Acceleration Plan, we felt it was the right time to maybe realign the resources, to build on that Acceleration Plan. And in particular, we've got an accelerator unit that we've created under, you know, Michelle's responsibilities. And that accelerator unit is really gonna build on the Revitalization Plan, but also fuel growth and develop and enhance a lot of the capabilities. So it will look after things like analytical commercial analytics and insights, category management, media and digital management. So a lot more capabilities enhanced under that umbrella. Some of the functions that were under sales will move into that a more centralized, really focused accelerator plan. And then we also are going to be scaling up our direct support of our distributors. So that's where we are going to be increasing investment. So yes, Michelle is correct. This is not a cost savings exercise. We're actually going to increase investment, particularly behind direct support for our distributors and also scaling up support on our non-alc. So, you know, additional resources going into the non-alc space. So that's where the investment comes in. You know, in terms of MG&A, there will be some increased investment, but we're not expecting to see a significant change in our MG&A expense line. Good. And then, looking at cost of goods, obviously, spot prices for a lot of your inputs are down from their highs for, you know, over a year now, but you guys have a really, robust hedging program. So how are you thinking about inflation in terms of your commodity basket next year, net of the hedges? And then, you know, are there any other buckets that you would, call out that you see as, you know, particularly inflationary or deflationary? Yeah. So our longer-term algorithm, you know, we talk about low single digit growth on the top line and mid-single digit growth on the bottom line, both in constant currency. And bottom line, we're talking about pre-tax income. So you would expect to see margin expansion. Now, some of that is coming from, you know, premiumization and our top-line growth, but the other part is coming from, you know, the sort of COGS line. Now, we are expecting to see inflation continue, and it differs by market. Again, in our Central and Eastern European market, inflation is still very, very high, much higher than what we're seeing in North America. And so we've got a lot of levers that we can pull to mitigate some of that. And some of these levers we've already been investing in our breweries. So we talk about some of the capabilities that we've built in our breweries, and that could be things like adding flavor capability, where before we had that done by a co-manufacturer, we've now brought that in-house. And so, you know, we're not sharing margins with co-manufacturers. It's a lower cost. We've also installed like variety packing capabilities, and that reduces costs. That was also done by a co-man. That reduces costs, and it also reduces things like freight. So, an example I like to use, if you think about when we were using a co-manufacturer to do our variety packing, you know, we would have a co-man doing the flavor, bringing it to a distributor. We would then, you know, sort it out, and then send it out to a co-man, a co-packing. They would then repackage it, send it back to the distributor, and then send it back to our warehouses or our breweries, and then we'll send it out to a distributor. So, you know, we're moving the product around five times, whereas now we're doing everything in-house, the flavors and the variety packing. So now it's just one sort of logistics leg, and so that's saving us on freight as well. So, you know, we, we've done a lot to mitigate the inflation, but we've also done a lot in terms of brewery efficiency, production efficiencies. We've also got cost savings programs, which we've always got. That's just a way of life at Molson Coors. So with our programs like World-Class Supply Chain, you know, we, we look at eliminating waste and water usage, et cetera. So we've got those cost savings programs, and then also there's a large contract brewing arrangement, which comes to an end at the end of 2024. That's long been a drag on our margins, and so that will go away, but also free up capacity, particularly in the summer, the peak summer production season, where we can now use that capacity for our own brands, like Miller Lite Coors, like, where there's long runs, we don't have to do changeovers. So that helps from a COGS point of view as well. So that's the kind of things that we've been doing in terms of, you know, reducing our COGS. And then we have seen some commodities come down, price of commodities come down, but we've got a hedging program, which typically we hedge our commodities anywhere from 1 to 3 years. And so you'd expect, going into 2024, that we do have some hedges from 2022 and 2023. But really, we hedge on an opportunistic basis. We don't programmatically hedge, so we operate within guardrails, but we never 0 hedged or 100% hedged. So we do have opportunities still, you know, to play in the market when we see commodities come down. But really, the hedging program is to try and eliminate, you know, big volatility, big spikes in the commodity prices. So, you know, we'll still have that. We're really happy with our hedging program. We think it's served us well. And again, you know, we have enough flexibility to be able to adapt, and not have to layer on when prices are really high. So all of those things, you know, are gonna help from a COGS point of view, but also help from a margin expansion point of view. So moving on to, you know, sort of the longer-term picture. Back in October, you unveiled the long-term targets: low single-digit revenue growth, mid-single-digit underlying pre-tax income growth, both on a constant currency basis, and high single-digit EPS growth from that 2023 base. So can you talk a bit about the, you know, sort of the longer-term building blocks, you know, how that breaks down between, you know, price and mix and versus volume or geographically, you know, U.S. versus international? And then, you know, sort of where in the P&L you expect to see the leverage. Yeah. So that is a longer-term, you know, target, so it could differ from one year to the next. In some years, our top line might be driven by rate. In other years, it might be driven by volume. So, you know, we've spoken about, this contract brewing volume coming out, and that's obviously gonna be a headwind from a volume point of view, but accretive to the margin, you know, as I've just discussed. So it really depends. I mean, you know, we've... At our Strategy Day, you know, Gavin spoke about, we expect the beer industry to be sort of flat to down 1%. We expect pricing to revert to historical levels of, you know, up 1%-2%. But where we're gonna be driving our top line is through things like the premiumization, you know, that I've spoken about. So that's, that's really important to us, you know, it, transforming our portfolio. From a, from a, you know, COGS point of view, I've spoken about that. You know, premiumization, again, you know, is gonna drive some higher COGS, but it's all margin accretive. So the- those new, categories that we play in, whether it be spirits or the energy, that is at above-premium margins. And so even though the COGS might be higher, you know, it's all margin accretive. And so, so that's sort of that, that plays into the algorithm to get to the mid-single digits, bottom line growth, pre-tax income growth on a constant currency basis. And then we've got the EPS at the high single digits. You know, our. We announced at our Strategy Day that our board approved a up to $2,000,000,000 share buyback over the next five years. And so, you know, that share buyback is obviously gonna be, you know, a major contributor to the EPS being up high single digits. So should we expect those buybacks, you know, now that you're at, you know, kind of low 2s on leverage, should we expect those buybacks to be more, you know, kind of regular and consistent, or are you still, you know, gonna be opportunistic with respect to that? Yeah, both. Both. You know, we're gonna have some systematic buys as well as opportunistic buys. So we've got enough flexibility, both with the significant free cash flow that we generate, as well as the program that we're laying out. We're gonna do both. There's gonna be systematic, and there's also gonna be opportunistic buys. Okay. In the remaining time, I wanted to come back to a point you brought up earlier in terms of the growth and the improvement. It's not just in the U.S.- Mm-hmm. It, it's easy to overlook Canada and the UK. But, you know, your performance there has really been the strongest in recent memory and frankly, my 10-plus years covering you guys. Mm-hmm. So, you know, looking at the business outside the U.S., you know, sort of how do you plan on sustaining and building on that momentum, whether it's Madri and the U.K., or whether it's, you know, the, the share finally turning, in Canada? Yeah, yeah. So again, you know, across all of our geographies, we're taking our large markets, we're growing revenue, share, and volume. And Canada and the U.K. are no exception. So in Canada, we've taken, I think, 2 full percentage points of share. I think in the latest quarter, it's up to 2.5. And that's on the back of our Molson trademark, as well as Coors Light, so really big brand in Canada. And then Miller Lite, which is actually an above-premium brand in Canada, is seeing growth over a fairly long period as well. So, you know, continue to focus on that, continue to innovate in Canada as well. So we've got, you know, the flavors up there as well, Simply Spiked, you know, Topo Chico, et cetera. As I said, the seltzer brands in Canada, you know, are not seeing the same sort of decline as what we see in the U.S. So Canada will continue to build on the core brands as well as innovation in the above-premium space. And then, in the U.K. in particular, you know, continue to fuel Madrí. Again, it's such an amazing innovation and really successful. We'll continue to invest behind that brand. We think it's still got a lot of runway. And then, Carling is still a top brand in the U.K., and so, you know, continue to invest behind that brand, whether it be behind soccer, we've got women's soccer, men's soccer. You know, it's really an important brand for just like here with Miller Lite and Coors Light, football occasions, drinking occasions, same thing with Carling in the U.K. Good. And then just coming back to, your above-premium in the U.S., Simply Spiked has had a great first year last year. You know, really built on it this year with expanded distribution. Peach has been nicely incremental. But it's, it's a segment that's sort of notorious for churn and consumers going after the new, new thing. So I guess, what gives you the confidence and the sustainability of, of that as a building block for your above-premium growth? Yeah, I mean, you know, one of the great things about partnering with Coke on, on Simply is that Simply was a brand that everyone knew. We didn't have to build the brand from the ground up. I mean, one in every two households in the U.S. has Simply Juice in their refrigerator. So, it just... It was, you know, made sense. Let's just build off this brand. Now, you know, what's gonna continue growing that brand is innovation and flavors. And, you know, 2021, 2022, 2023, with new flavors introduced, you know, that's been the best innovation in that category for all three years. And so we'll continue to innovate around flavor. So, that's really important. And I forget what the second part of the question was, but- I think that was- Okay. That was the main, the main question. Okay. And then just wrapping up, bringing it all together, you and Gavin have both been very confident in the company's ability to grow the top line next year off of this year's much higher base. You know, how dependent upon that is, you know, beer industry performance? You know, is there, is there a number that you need in terms of beer industry growth or declines in order to get there? Or how much of this is, you know, within Molson Coors's control? Yeah. So, you know, what we considered when we, when we put this long-term algorithm in place is we, we did consider that the, the beer category would be flat to down 1%. We considered pricing, as I say, returning to historical levels of up 1%-2%, but then really our top line being driven by premiumization, and, and that's through innovation as well as the beyond beer. So that's the really important part of, of this, of the growth algorithm, is, is the transformation of our portfolio. And again, not just, you know, in the U.S., but, but in the U.K. as well, where already, the above-premium portion of our, of our, global brand revenue is, is above 50%. So our global ambition is to get to, you know, the third, which is gonna drive a lot of that, a lot of the top line. So that's, that's the sort of thing that's been built into our algorithm. Great. Well, with that, we're coming up against time here, so just wanna thank you again for joining us. Thank you. And, you know- Okay. Happy holidays, and best of luck next year. Same, same with you. Thanks very much. Thank you.