Hey, good afternoon, Robert Ottenstein here from Evercore ISI's Global Beverage and Household Products team. We're obviously very thrilled today to have Gavin Hattersley, the CEO of Molson Coors Beverage Company. A lot of ground to cover, let's get right into it. Gavin, you know, what I'm gonna try to get at today, you know, overriding theme is obviously a lot of disruption in the U.S. beer industry. You're benefiting from that, I think what investors would love to know is to what extent you can just change the overall trajectory of your business longer term, taking advantage of the current disruption? I think the good news is that you had already started to do that even before all of this happened, and specifically, even before the Bud Light controversy, Coors Light, Miller Lite seemed to be on a little bit better footing. I was wondering if you can kind of, you know, discuss about what you did to, you know, put Coors Light and Miller Lite on a better footing, pre the Bud Light controversy, and then how that strategy is developing today? Yeah. Thanks, Robert, and thanks for having me on. You know, you're right. Our core brands are healthy. They've been healthy for some time now. They were healthy coming out of 2022, and they were really healthy coming out of Q1. You know, we had a good first quarter. We felt really good about where Miller Lite and Coors Light, in particular, were. That obviously is before the current situation, which is obviously in front of us. You know, if you go back, I mean, the combination of Miller Lite and Coors Light has been growing share of premium lights every quarter now for more than eight years, nearly nine years now. You know, it's all the collective efforts since we made our changes several years ago, when we launched our revitalization plan back in September of 2019, you know, we've built on their strength. We prioritized that, we prioritized our core portfolio, and I think that's positioned us well. You know, our marketing team has done a really good job of ensuring that Coors Light and Miller Lite have really clear, differentiated brand positionings with, you know, Coors Light owning refreshment and Miller Lite owning beer taste. You know, each of these brands is resonating with consumers. They're really in culture and, you know, they're doing that in a different way, that allows really clear swim lanes for each brand. Yeah, you're right, we had healthy brands coming into this situation, and, you know, we've still got healthy brands. You know, given that you had that momentum, you have more of an opportunity. Are you doing anything differently? Just, again, just focused on Coors Light and Miller Lite to take advantage of the, you know, the current opportunity. Robert, at the risk of being compared to Taylor Swift again, I would tell you that our approach and our strategy is not changing. You know, remember when we had our earnings call for Q4, and we had it again in Q1, we were very clear about the fact that we were gonna increase our marketing investment, particularly in Q2 and Q3, during the peak selling season, and sort of leaning into that brand health of Miller Lite and Coors Light. You know, we presented many of those brands to our distributors last year in September. You know, we've built our brands very deliberately over the past few years and we've seen the progress because of that. You know, Coors Light and Miller Lite, as I said, were healthy. They grew NSR in 2022. They combined to do it again in the first quarter, and that tells us that our strategy is working. You can expect us to continue to lean into that same strategy. Right. You know, given the opportunity now, does it make sense to double down on that strategy? You know, if you were gonna spend X, budgeted X, why not spend 20% more given, you know, this is a momentum business, right? Beer is a momentum business. Why don't you just kind of, you know, increase that momentum to keep this going? Well, I'd answer that in two ways, Robert. I mean, we had good and strong plans for Q2 and Q3, right? We're gonna lean into those plans as we were planning to do. There is a point where, you know, you can lean in too much. You know, I think we've become really much better at marketing effectiveness and understanding what's working and what's not, and what's too much and what's too little. You know, you can overdo something, right? I mean, if you're showing a commercial three times in a baseball game, I'm not sure there's much benefit to showing it four times. You know, we have our plans and we're going to execute against those plans, and we think they're robust. Great. Great. Miller Lite, Coors Light are working. If I look at some of the other brands, Blue Moon, Peroni, Sol, Vizzy, for instance, they're not doing as well as I would think they could do. You know, particularly Blue Moon and Peroni, which are fabulous brands, fabulous liquids. Do you have the opportunity now to maybe double down on those? Maybe had you already planned to, but, you know, Given, you know, the extra dollars that you're gonna be getting, at least for now, can you put some of that to work to improve the trajectory of those brands? You know, Robert, I, our plan's obviously broader than just, our core portfolio. Although, you know, in line with our revitalization plan, our core portfolio is always the area that we look at first, and I'm really glad we did that, you know, over the last three and a half years. Expanding our portfolio in the above premium space and beyond beer has also been a core part of our, in terms of our revitalization plan. We had plans against both of those other two, you know, strategies as well. We are and have been leaning into brands like Peroni, for example. You know, we've got, we're leveraging the partnership that Peroni's got with the Formula One racing team on 0.0%. We're leaning into that. We've just launched Peroni 0.0%, which will give a nice halo to the Peroni mother brand. We are investing behind Blue Moon and Blue Moon campaigns, and not obviously gonna share details on this call about some of the areas that we're gonna lead into with Blue Moon over summer. I mean, Blue Moon has been a little bit affected by the, you know, tough conditions out in the West Coast. It has got a strong foothold on the West Coast. As the weather was so difficult in the first part of the year, Robert, you know, Blue Moon, you know, suffered a little bit because of that. You're right, it's a great brand. It's got great equity, you know, it's got great presence in the on-premise and we'll leverage that. All right. If we kind of stand back and just focus on the beer area, and you're doing stuff beyond beer, and we'll get to that later, Gavin, but, you know, craft kind of had a nice 10-year run. It's kind of peaked out, not really growing much. Hard seltzer was a rocket and came down, you know, almost just as fast as it went out. Who knows what's gonna happen with the RTD business in general? Probably some growth, but, you know, when you think of the beer business broadly defined, you know, over the next five years, you know, where do you see that going? You know, you're really kind of getting into the position, potentially, of a. You've always been, really kind of taking the lead in terms of, you know, developing the core category. Are there any things that you can do to, you know, drive the core beer business category that maybe you hadn't done, given that, you know, the focus should be on, you know, presumably core beer, given that some of these other, you know, craft and seltzers kind of petered out now? Yeah, Robert, look, I mean, obviously, beer's been around for, I don't know, 1,000 years. It's a huge category. It's the alcohol of moderation. In Q1, it actually took share of total alcohol. While hard seltzer is down, it certainly helped the beer category. It's a big segment, right? I mean, I know it's down, you know, a certain percentage, but it's still a big space. It's still sort of settling down into that sort of 8% of the total beer category. It's, you know, been very helpful from a category point of view because it's much more sessionable than craft, right? That was always the challenge with craft, not necessarily sessionable, and it's brought new drinkers into the category. You know, flavor's also a very positive momentum driver for the category that appeals to younger legal age drinkers, and that's an area that we're leaning into strongly with Simply Spiked Lemonade and Simply Spiked Peach. To your point about premium beer, you know, we see we've been a little bit of an outlier there, Robert, if you remember. We've always felt that core beer is important and premium lights are really important, and we think they're gonna continue to be a strong segment within beer at the same time as flavor is. I would expect us to see continued premiumization, and we'll be leaning into both of those spaces. Okay. Let's touch on the beyond beer space. You made a number of forays there. One of the more notable was the ZOA, this is kind of an old can of the ZOA, and this is a new one that I'm drinking now. Very, very different. Can you talk a little bit about what you've learned from that process? You know, are you still excited about ZOA? What are you doing to drive further excitement with the consumer? Look, I mean, as you rightly say, we've made lots of forays into beyond beer, and I think it's safe to say we've learned a lot. We're pleased with the results that we've got so far. You know, directly to answer to your question around ZOA, yeah, we're excited about it. I mean, this is a massive category. We think we've got a brand that we can really do something with. We're gaining distribution. You highlighted the packs there and did a nice job of advertising how bright and vibrant that new pack is, Robert. We like it, we're excited about it, and we've got plans behind it. You know, on the flavor side, as I referred to in your last question. It's a growing segment. We're outpacing industry growth. Our partnership that we have has been important, and, you know, through that partnership, we've brought, you know, Simply and Topo Chico to life in both the U.S. and Canada. We talked about, when was it? April, expanding our partnership with Coca-Cola Company, with Peace Tea. That's another addition coming to the shelves later on in the year. We've been successful with these brands. I mean, Topo Chico Hard Seltzer is now the number three hard seltzer in the segment, and in FABs, as I said, Simply Spiked has been a massive success since its launch in the summer of last year. It's the number one new innovation of the summer. It was also the number two new product launch in total beer for 2022. As I said on the previous question, both Simply Spiked Lemonade and Peach are top 10 growth brands. Excuse me. It's fair to say this brand has over-delivered on our expectations, and there's lots of runway ahead. Yeah, we've got lots of other offerings in this space as well. I mean, Arnold Palmer Spiked continues to drive strong growth in RT. It's growing double digits every year for the last three, I think. It's up over 20% year to date. RTD Spirits, we've just launched Topo Chico Spirited, which is our first foray into the spirits world. We're gonna put, you know, meaningful media, retail, and sampling behind that brand. We've got Coors Whiskey Company. You know, we launched that about 18 months ago, we're in around 20 states, I believe. We started off with only one SKU. We've added three limited offerings to that, and this spring, we just launched a new brand, Barmen Bourbon. You know, we've established production, distribution. We've learned a lot. We're learning how to drive awareness, and like the margins for sure. We're building relationships with the chain spirits buyers, which is different to the beer buyers. You know, we're pleased with our progress in beyond beer, and we think there's an opportunity for us to extend our distribution and our portfolio in this space. That's the plan, Robert. Great. Great. Just looking at kind of the four-week scanner data, Coors Light volume up 20%+, Miller Lite up 15%+. Would it be fair to say... That's the scanner data. Would it be fair to say that you're actually doing even more when you bring the on-premise in? Well, look, I mean, obviously, these trends are existing in the on-premise as well. I think we'll probably be in a better place to give you more detail on that, Robert, at our upcoming earnings call. You know, certainly the trends in the on-premise are positive for us as well. You know, scanner data is directional. We'll give you an update on that, come Q2 earnings. Well, I would think they're doing even better on-premise than off. You know, the bigger point, though, is, right, is up 15%, up 20%, you know, versus trend line of flattish to down a little bit. This is a dramatic change in the business. What I'd like to get you to kind of think about, reflect on is: How is your brewery infrastructure reacting to that? How is your supply chain reacting? You've done a lot of investment in Golden. You consolidated in Canada. There was some talk at one point of, you know, kind of cross-border logistics to optimize North America as a whole. Just really love to get your thoughts on how your brewery footprint and how your supply chain is reacting, and are you able to fully capture all the increased demand without incurring sort of like special overtime costs and additional costs that you wouldn't normally have? Great question, Robert. The one thing you forgot to mention was obviously the positive leverage that comes out of this. You know, significant extra costs, I would say no. You know, we've always got plans heading into summer to ramp up production. You know, we always bring in summer seasonal workers. We expand shifts, expand overtime. We do that as a matter of course, and of course, we're leaning into that right now. Because of the increased volumes, obviously, we've got the impact of positive leverage as opposed to negative leverage. You know, I have been, and I've been fairly consistent on this, super proud of how our supply chain team has reacted pretty much on a dime, right? You know, they've become used to dealing with any number of different challenges over the last three and a half years, and obviously, this is a different kind of challenge. You know, our breweries ramped up production pretty much from day one, and you know, they're holding their own. We always see a drop-off in the inventories coming out of Memorial Day and also coming out of, or we'll see it coming out of July the fourth, and we'll see it coming out of Labor Day as well, Robert. That happens to us every single year. In terms of outside of that, I think our supply chain teams are doing a nice job keeping pace. That's not to say you're not gonna find out of stocks, right? We always have some level of out of stocks with our distributors. You know, there might be a particular situation in a particular area with a particular distributor that might be driving lower days. From a national point of view, our teams are doing a nice job keeping pace with this extra demand. That's partly because we came into this year with higher inventory levels, and we came out of Q1 with higher inventory levels. Really worked well with our distributors to build inventory, because, you know, we've had challenges of a different nature every year for the last 3.5 years. We wanted to make sure we were in a good shape from an inventory point of view. Obviously, we didn't for a minute think that this was a possibility. Our teams are doing a nice job of keeping pace. Yes, we've invested behind our breweries. We always, as I said, have plans coming into summer. We've also been clear that our contract brewing relationship is coming to an end over the next 18 months or so, and a decent chunk of volume is coming out in the back half of this year, and then the rest of it will come out next year. Of course, that gives us flexibility to utilize some of that capacity, which we might have been making different decisions about. It certainly gives us the opportunity around the shoulders to make slightly different decisions and run Miller Lite and Coors Light and some of our other brands. As you say, we do have the insurance of the two new breweries in Canada if we need it to do that. I mean, obviously, we don't have unlimited capacity, Robert, we just don't. We're in reasonable shape at the moment. We're in good shape. Our supply chain is doing well. I mean, the breweries, you know, at this point, they're pretty automated. I'm guessing there's not a lot of incremental costs, except for cost of goods sold. Obviously, you have more inputs that you need. Just kind of going through the cost structure, Gavin, you know, what... You know, obviously, you need more of the raw materials. Any supply issues there? Then in terms of your sales force, you know, what's the split between salary and commission? Just trying, you know, to understand the, you know, how this can flow through the income statement. Robert, I think the best way for me to answer that question is, you know, the positive benefits of leverage. There was a quarter last year, I think it was Q2, where we had the opposite effect of this, right? We had a fairly, a significant down quarter from a shipments point of view. You know, as you look at our business, it'll work roughly the other way around, right? There, we're certainly experiencing the positive benefits of all this extra volume that's flowing through our system from a leverage point of view. Other than that, you know, the sort of costs of our business, don't really change that much from a sales point of view. We don't provide splits from a base and an incentive point of view, Robert. I can't help you with that. The best way to look at our business is through the lens of what happens when we have, you know, meaningful shifts in volume. You know, for the past few years, those have tended to be negative, and this is a positive, but it works both ways. In your relationship with the distributors, is there anything there that's volume driven? Do you get operating leverage or deleverage just in terms of the terms with the distributors and what you pay them, or is it kind of a straight amount per case? Yeah, look, our cost structure with our distributors wouldn't vary from a volume point of view, Robert, so there's no up or down there. Okay, great. We've talked in the past, and we haven't talked about it too much, just changing topics for a bit, on the international potential of Coors Light, Miller High Life, you know, particularly outside of Europe, and there were a lot of initiatives that you had been working on a number of years ago. We haven't heard much about that recently. Are those initiatives still happening, or have you kind of just really redirected the focus of the international business now? No, not at all, Robert. I mean, It's a focused brand for us. Unlike the U.S., where it's a core brand, outside of the U.S., it's an above premium brand. It's one of the focus brands that we have in our above premium strategy. It's currently having a tremendous performance in the U.K. and Ireland, and you're right, we probably should talk more about it, right? It's performing really well in a couple of export and license markets, and we're expanding its footprint. Across some of the export and license markets in which we operate. The Miller brand family, our focus is actually on expanding MGD. We've obviously had some tough comps, given our decision to exit the Russian business right at the beginning of the war. Also operates in the above premium space. We have expanded into some other export and licensed markets where we see potential for growth. Yeah, our global brands are performing really nicely outside of the U.S. in an above premium space. You know, I don't think I alluded to it on this call, I think it was the previous one, but, you know, in Madrid, we've got an above premium, brand new innovation in the beer category, which, you know, certainly is gonna be our best new brand launch in the European business, maybe ever. It's already, you know, one of I think it's in the top five above premium brands in our total portfolio around the whole world. It's growing very strongly. It's passed brand Budweiser on and off combined. It's bumping up against Stella Artois in the on premise. We're very excited about that brand. Whilst obviously the U.K. is our primary focus with that brand, it's certainly something we can look at beyond that as well. There's a lot of exciting activity in our European business as well. Circling back to the U.S., you know, we haven't talked that much in many of the calls on the economy brands, or the so-called value brands. You know, if you look at the trends on Keystone Light, Miller High Life, you know, those brands have gone from, you know, being pretty flat to down, to also being up, right? You know, that is a sector where actually, you know, your major competitor, Busch Light, had been doing pretty well. It's gone, it's gone south now, but Busch Light had been doing well because they had actually tried to invest in the brand and build out that brand, which is something that most of the brewers had not paid much attention to on the economy side. They'd made, you know, all their investment, obviously, on the premium. Given kind of the change of the landscape now, Gavin, is there anything specifically that you're thinking or now doing in terms of Keystone and Miller High Life to take advantage of the current disruption? Yeah, Robert, look, I mean, we've always said all segments matter, right? That's been a mantra of ours for a long time now, right? There is a drinker that, you know, wants their brand, and they happen to be in the economy space. So, you know, again, I think we've got a strong and focused economy segment. You know, we haven't seen any trade down, but, you know, I've also been clear about the fact that if we did see trade down, I think we've got a really solid four priority brands which consumers can come to: Keystone Light, Miller High Life, Icehouse, and Steel Reserve Alloy Series being the four. Again, we're benefiting from the fact that... I think it was 2021, where we had that SKU reduction primarily or almost entirely in the economy space. It's certainly made it easier for us to keep up with demand now from a simplification point of view, but it's also allowed us to really focus in on those four priority brands. Yeah, but Busch Light's had a, you know, it's had a strong run. They've had some great marketing campaigns, but our economy portfolio has been doing well. In Q1, those four brands grew NSR. Yeah, we're seeing recent strength behind Keystone Light and Miller High Life, and that's a result of the focus that we've put on those priority brands. Great. Great. What I'm, I think I'm hearing from you is that you're already in a good trajectory. You've already, you know, you've got plenty of capacity. You don't have to step up advertising very much. You know, it sounds like the operating leverage here is really gonna be pretty tremendous, and it sounds like you're gonna, like, let most of that fall to the bottom line, 'cause I'm not hearing anything about, you know, additional, I mean, spending plans. You talk about lean in, but that's a fairly gentle term. Would it be fair to say that, you know, most of the windfall here is likely to go to the bottom line? Robert, I'm not gonna, you know, get into providing guidance on this call. That's not guidance! That's just sort of a high level, sort of, you know, which way the wind is blowing question. Yeah, look, I mean, as I said, we had strong plans behind marketing. We plan to increase meaningfully in Q2 and Q3. We can always be. We've, we're consistent about this, that we're flexible from a marketing point of view. We could lean in if we, if we chose to, and because, as I said, we shifted 50% into the digital space, we could, you know, we can dial in or dial out depending on what's working and what and what's needed. I will be in a great position come Q2 earnings, which I think is in that first week of August, to give an update. We'll be pretty much through summer. I mean, obviously, we'll have a few weeks of August left, but we'll have a really good understanding. We're already starting to get an understanding of the stickiness of this. You can see it in the scanner data yourselves, Robert, as the fact that our market share gains are holding. Yeah, I think we've got great plans. You know, the pushback or the concern that obviously people have is that your competitors are gonna have to promo their way out of things, and there's mixed views on whether that's happening or not. You know, they say that basically they're just playing with their own game plan that they had at the beginning of the year, and it just happens to be timed for, you know, the summer. Others people beg to differ. You know, what does the promo environment look like to you I mean, we've started the summer really, at this point. Is it more promo than, you know, pre-pandemic? Is it more promo than usual? Are you starting to get concerns there? Love to get your thoughts on that, Gavin. Thanks, Robert. Look, I mean, I think the first point I'd make is that promotion activity is not as broad as what you might conclude based on what you might see or hear in the media. You know, obviously there was some well-publicized promotion activity around Memorial Day. I think it's fair to say, if you look at Circana, that we held our market share gains that we've had over the last eight to 10 weeks. You know, as far as our pricing decisions go, you know, it's we're gonna do what we always do, which we, you know, we make that decision on a brand-by-brand basis, we look at it by SKU, we look at what's right for our brands, and making sure that we take into account the impact of anything on brand perception or brand health. You know, we'll take all of those factors into account as we decide how we wanna price our brands. Great! Gavin, I'm gonna give you a few minutes to sort of summarize things and maybe, I don't know, pretend that you're talking to your board of directors, and, you know, that there's this pesky person on the board saying, "Look, Gavin, you know, it's better to be lucky than smart. In a way, you guys have been lucky. What are you gonna do that's smart to really capitalize on this, you know, for the long term for investors?" Let me kinda throw that out there and just kinda give you a few minutes to address that and summarize things. You know, Robert, I'm gonna answer that by saying, you know, we launched our revitalization plan three and a half years ago, right? We had a very clear objective with that revitalization plan, is that we wanted through the five pillars that we put in place, we wanted to drive the top line and the bottom line of our business. You know, it's fair to say that we've had some challenges over the last three and a half years, some of them potentially of our own making and many of them not. Despite all of that, our strategy is working. We're executing against it, we delivered top and bottom line growth last year. Our guidance is for top and bottom line growth this year, and our revitalization plan is designed to make that a sustainable, consistent, you know, sort of algorithm for our company, driving top and bottom line growth at the same time. You know, lucky, it was a very conscious decision of ours to increase inventory at the end of last year in Q1, because we felt based on all the negative that had happened to us over the last three and a half years, that it wasn't inconceivable that, you know, we'd face another bump or rock in the road. Now, as it happens to be the case, it's been on the positive side. You know, I think we've put ourselves in a great position with our inventory levels, working with our distributors to make sure that we can meet this unprecedented demand that's out there, and as I said, our brew is doing a great job on that. You know, that leads us to, you know, we've got a strong balance sheet. We've worked very hard over the last three and a half years to delever our business. We've got below three times at the end of last year. We're, you know, we've got that goal out there to get to the two and a half times level, and that gives us optionality. You know, we're not gonna deviate from our string of pearls M&A approach. You know, I would be telling the board, we can have conversations around what capital allocation priorities and decisions that we wanna make. You know, I feel like our strategy is working. It's had the right focus areas with core and above, premium and beyond beer and building capabilities. I'm feeling really good about our ability to execute against that, Robert. Terrific, Gavin. Thank you. Really appreciate the time today, and best of luck through the summer season. Thank you. Thank you so much.