Good morning and welcome to the Molson Coors Beverage Company second quarter fiscal year 2025 earnings conference call. With that I'll hand it over to Tracey Mangini, Vice President Investor Relations. Thank you operator and hello everyone. Our discussion today includes forward looking statements within the meaning of U.S. federal securities laws. For more information please refer to the forward looking statements disclosure in our earnings release. In addition, the definitions of or reconciliations for any non-U.S. GAAP measures are included in our earnings release. Our quarterly performance including financial and operational metrics and drivers is detailed in our earnings release and earnings slides which were made available earlier today on the IR section of our website. We will focus our prepared remarks on what we believe is top of mind for you and that is the industry, how we're responding, capital allocation and our financial outlook. Please note that given the current environment, we are providing a more detailed than typical review of our 2025 guidance drivers. We will then take your questions and as always we ask that you limit yourself to one question and then if needed return to the queue. With that I'll pass it over to you Gavin. Thank you, Tracey. Hello, everybody, and thank you for joining the call. During the second quarter, we continued to execute against our strategic plans to support our long-term growth objectives and to return cash to shareholders while navigating a challenging and volatile macro environment. As a result of the uncertainty around the effects of geopolitical events and global trade and immigration policies, consumer sentiment in the U.S. has remained at relatively low historical levels. This has continued to pressure consumption trends. These macro impacts in the U.S. have had a disproportionate effect on the lower income and Hispanic consumer, and within beer, these consumer segments have driven a reduction in the number of buyers as well as spend with a shift to singles in the second quarter. In addition, while less impactful, certain regions of the U.S. experienced some severe weather conditions during the quarter, which had a notable impact on the important Memorial Day weekend. These factors have resulted in a much softer U.S. beer industry so far this year than we had previously expected. Recall our guidance issued on May 8 that assumed the U.S. industry would improve for the balance of the year from down approximately 5% in the first quarter to levels closer to that of the last several years, which averaged down around 3%, but in the second quarter, the industry continued to be down around 5%. Further, the Midwest premium pricing, which is a component of our aluminum cost, has been indirectly impacted by recent U.S. tariff announcements, causing another substantial and unexpected spike in the second quarter. For perspective, and as you can clearly see on slide 19 of our earnings deck, in July, the Midwest premium jumped to $0.68 per pound, an increase of over 180% since January. As a result of these macro drivers and, to a lesser degree, lower than expected share performance, we are reducing our top and bottom line guidance for 2025. We now expect net sales revenue to decline 3% - 4% on a constant currency basis as compared to a low single-digit decline previously. The range assumes U.S. industry volume will decline between 4% and 6% for the second half of the year. We now expect underlying pre-tax income to decline 12% - 15% on a constant currency basis as compared to a low single-digit decline previously. The range includes for the second half of the year incremental costs specific to the Midwest Premium of $20 million - $35 million, which assumes a respective price per pound of $0.60 - $0.75. This is partly offset by lower expected incentive compensation given the change in outlook. As a result, we now expect underlying earnings per share to decline 7% - 10% as compared to low single digit growth. However, we are reaffirming our underlying free cash flow guidance of $1.3 billion ± 10% as we expect higher cash tax benefits and favorable working capital to offset the guidance decline for underlying pre-tax income. Tracey will speak to our guidance in more detail in a moment. First, I want to stress that we continue to view the incremental softness in the industry performance this year as cyclical, driven by the macroeconomic environment. This belief in our view is clearly demonstrated by the execution of our share repurchase program, well ahead of our original expectations. While U.S. consumer basket sizes are smaller in the current environment, the percent of alcohol in those baskets has remained the same and legal drinking age consumers continue to engage with beer at similar levels across all generations and compared to historical levels, it's the occasions that are left. Recognizing this, our strategy was built to develop a portfolio that appeals to a wide range of preferences and captures more occasions. As we navigate these macro pressures, we are continuing to execute this strategy and prudently invest behind our business to build and strengthen our core power brands, to premiumise our business in both beer and beyond beer, and to develop and leverage our capabilities and partnerships to support profitable growth in the U.S. Our core power brands, Coors Light, Miller Lite and Coors Banquet have retained the unprecedented shelf space gains achieved in spring of 2024. Collectively, they commanded a 15.2% volume share of the industry for the first half of the year. Recall that three years ago these brands collectively commanded 13.4% of the U.S. industry and what's clear in the scanner data and as shown on slide 20 is that these brands have held most of their share gains from the last two years through the second quarter. Banquet in particular has been a strong performer. After 16 consecutive quarters of share growth. It was a top five volume share growth brand in the quarter, and given it's in only about half the buying outlets of Coors Light, we believe there is significant distribution runway ahead. In fact, Banquet gained over 15% distribution in the first half of this year, growing across every channel and on top of over 15% growth in the same period last year. In Canada, despite a challenging industry backdrop, the Molson family of brands with its deep Canadian roots posted another quarter of volume share gains, while Coors Light, which is proudly locally produced, held its number one light beer position in the industry. In EMEA and APAC, the industry in the UK has remained highly competitive, and in the Central and Eastern European region it continues to experience softness related to escalating global, local, political, and economic tensions. Our brands like Carling in the UK and Ožujsko in Croatia remain segment leaders in their respective markets, which we intend to continue to support with targeted commercial plans. Turning to premiumization, as we have said for several quarters now, in the U.S. there has been a shift to value-seeking behaviors, but it has been focused on pack size rather than on brands. Despite the pressure on the consumer, the industry continues to premium out, albeit currently at a slower pace. We remain committed to our premiumization plans, which are focused on both beer and beyond beer. Over the last few years, we have talked a lot about our premiumization successes outside the U.S. in EMEA and APAC. It's been fueled by a hugely successful innovation, Madrí Excepcional, which we believe still has significant runway both in its initial market of the UK and through recent geographic and brand extensions. In fact, in the latest 12 weeks as of June 14, Madrí Excepcional had overtaken Peroni to become the number two brand in the World Lager segment and number four beer overall in terms of value across total trade in the UK. In Canada, premiumization has been led by the ongoing strength of Miller Lite and our flavor portfolio. In the U.S., our largest market, we under index in the bulk premium, which makes it a big opportunity. Our Peroni plans that began in the second quarter are starting to show positive results, with the brand growing volume double digits in the last 13 weeks through July 27, supported by continued growth in chain and on-premise placements. While smaller for now, we are encouraged by our innovations. Blue Moon Non-Alc continues its rapid growth, and we are seeing growing placements for our new higher-ABV brands, Blue Moon Extra, Simply Bold, and Topo Chico Max Margarita. These higher-ABV brands not only support our push to expand in C-stores but are particularly timely given current value-seeking behaviors. While these innovations are helpful to their respective brand families, we recognize the challenges of our big flagship brands and are focused on stabilizing them. For example, with Blue Moon, we have completed the pack size conversion to 12 from 15 packs. This was a near-term volume headwind, but it's very positive for margin in the on-premise, which is a big channel for Blue Moon. We saw dollar share trend improvement during the second quarter, and in the third quarter, we have been ramping up a new national advertising campaign with comedian Colin Jost. There is Non-Alc Fever-Tree, which is now our highest NSR per hectoliter brand aside from full-strength spirits. While we began to consolidate Fever-Tree into our financials in February, we only completed the distribution network transition in June, and the incoming distributors are very excited about the opportunity to significantly expand Fever-Tree's presence across both existing and new channels and buying outlets. It's early days, but the brand has already contributed meaningfully as the key driver of positive brand mix in the Americas. While Fever-Tree is already the world's leading supplier of premium carbonated mixers, with the number one tonic and the number one ginger beer by value in the U.S., we believe we can accelerate its growth in the U.S. over time by leveraging the scale and strength of our distribution network combined with our marketing capabilities. Now, before I pass it to Tracey, I'll sum it up to say it's been a difficult start to the year, but we view beer as resilient, and amid a challenging macro backdrop, we are focusing on what we can control to position our portfolio and our business for long-term success. That means keeping our core power brands healthy, continuing to premiumize in the major and APAC in Canada, and successfully executing our plans in the U.S., leveraging our deep capabilities across our organization to support premiumization and focused innovation, supply chain efficiencies and commercial effectiveness, and utilizing our enhanced financial flexibility to prudently invest in our business and return cash to shareholders. With that, I will pass it to Tracey. Thank you, Gavin. We are very pleased with the health of our balance sheets and our strong cash generation, and this is particularly important during a challenging macro environment as it allows us to continue to invest behind our brands to help ensure their long-term health, to continue to make capital investments that support our growth initiatives and cost savings plans, and to not only pay what we view as a competitive dividend but also execute a meaningful share repurchase program as we continue to believe our stock is a compelling investment. In fact, we have raised the quarterly dividend each year since 2021, and we have actively executed our current share repurchase plan. Since it was announced in October 2023, we have repurchased 9.4% of our Class B shares outstanding. It's an up to five-year $2 billion plan, and we have utilized almost 55% in under two years. For perspective, if we had executed it on a straight-line basis, we would have only utilized 35% of the plan so far. With that, let's discuss our financial outlook. First, the impacts of the global macro environment are multifaceted and difficult to predict, and while we have included in our guidance our best estimate of some of these factors, external drivers may significantly impact our actual results, either up or down as it relates to tariffs. As we have previously said, while we are a global business, our products are generally made in the markets in which they are sold and with locally sourced ingredients, so we don't expect a material direct impact from the known tariffs on our input cost. That said, tariffs do have indirect impact like the recent spike in the Midwest Premium pricing. While our extensive hedging program can help to mitigate some of the impact, due to the guardrails of our program, we are never fully hedged. Further, given its opaque pricing and at times limited liquidity, hedging the Midwest Premium can be difficult and expensive, and for these reasons the Midwest Premium is one of the commodities for which we currently have the least amount of hedge coverage. With that, let's discuss the drivers of the guidance Gavin outlined. Our top-line guidance range now assumes the U.S. industry is down 4% to 6% for the second half of the year. Our price mix assumptions are unchanged. We expect an annual net price increase of 1% to 2% in North America in line with the average historical range. We expect mixed benefits from cycling contract brewing from 2024 as well as from premiumization. We expect to grow above premium net brand revenue in EMEA and APAC and Canada as well as make progress on our U.S. above premium initiatives. Fever-Tree and the consolidation of ZOA are incremental to the top line, but we are also cycling the divestiture of the smaller regional craft breweries in the third quarter of 2024 and more significantly 2024 Pabst and Labatt's contract brewing volume. As these contracts terminated at the end of last year, we expect the related Americas contract brewing headwind to be 1.9 million hectoliters in 2025. In the first half we cycled over 1.1 million hectoliters and we will cycle over 450,000 hectoliters in the third quarter. Last year we had higher than typical first half inventory build related to the Fort Worth strike which ended in mid-May. As a result, FDWs outpaced STRs by 1.1 million hectoliters in the first half of last year. This year SDWs outpaced STRs by 800,000 hectoliters in the first half. Year on year we had an approximate 300,000 hectoliter shipment timing headwind in the first half that we expect to reverse in the second half, mainly in the third quarter. Note that we did have some shipment trend catch up to STRs in the second quarter which had an approximate 150 basis point positive impact on U.S. financial volume in the quarter. We had previously not expected to build higher than last year. Given the tackling of the Fort Worth strike, we were able to ship further ahead of STRs than expected due to the softer than anticipated industry demand. For a detailed review of these U.S. shipment trends, please refer to Slide 21. Moving down the P&L, we expect mixed benefits from lower contract brewing and increased premiumization as well as productivity improvements and cost savings to now be more than offset by higher volume deleverage given the industry volume trends as well as higher Midwest premium costs for the full year. This would result in Midwest premium costs exceeding the prior year by $40 million- $55 million. We now expect MG&A to be down slightly for the year as we now anticipate lower incentive compensation due to the adjusted outlook for this year. Also, and to a lesser degree, the Fever-Tree one-time transition and integration fees were less than expected, totaling approximately $30 million in the first half of the year. These fees will be recovered through net sales over the next three years beginning in June. As for marketing, our plans are unchanged. We intend to continue to put the right commercial pressure behind our key brands and innovations including our core power brands Peroni, the Blue Moon Family, Madrí, and our non-alk portfolio. While marketing investment was down in the second quarter cycling up spend in the prior year period, we expect it to be up in the third quarter due to the timing of our commercial plans and lower spend in the same period last year. As a result, we expect marketing investment in the peak summer months to be consistent with prior year period levels. We are also slightly adjusting our net interest expense outlook. We now expect $225 million plus or minus 5% as compared to $215 million plus or minus 5% previously. This is driven by lower cash balances, including the impact of higher share repurchases as well as foreign currency impacts. Lastly, we are reaffirming our underlying free cash flow guidance of $1.3 billion ± 10%. In closing, with a strong global brand portfolio, healthy balance sheet, and strong cash generation, we are confident in our ability to navigate these challenging times while supporting the long-term health of our business and brand. We are committed to protecting and growing our underlying free cash flow while making prudent capital allocation decisions that support our growth initiatives and allow us to return even more cash to shareholders. With that, we will take your questions. Operator. hank you. We will now begin the question and answer session. If you would like to ask a question today, please do so now by pressing Star followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press Star followed by two to withdraw yourself from the queue. Our first question today comes from Peter K. Grom with UBS Investment Bank. Please go ahead, Peter. Thanks, Operator, and good morning, everyone. I wanted to touch just on the updated guidance. Can you maybe just unpack the moving pieces a bit more clearly? The top line is a bit pressured here, which we can see in the data. Can you maybe just unpack the profit headwinds and specifically, you know, aluminum and kind of the Midwest premium? As we look out to the back half of the year, h ow does the kind of updated guidance impact the second half performance? I guess related, you know, still early, but are there any implications that we should consider today as we look out to fiscal 2026? Thanks. Thanks, Peter, and good morning. Appreciate the question. Look, from an updated guidance point of view, I would put it on three things that we did not anticipate the last time we spoke. One is the industry did not get better as we were expecting it to. We had expected it to navigate back to where it's been for the last few years of around down 3% and it didn't, and certainly consumer confidence and the macro environment. Whilst we continue to believe very strongly that in a cyclical, we're not seeing any signs of that changing in the balance of the year, and it certainly didn't in the second quarter. That was probably the biggest driver. Obviously, we did not expect the dramatic increase in the Midwest premium of 180%, and we've talked a lot about that, and Tracey can get into more detail on the difficulty of hedging and forecasting that. That obviously played a pretty significant negative role in our Q2 and balance of the year assumptions. Frankly, our share performance did not meet our expectations. The first two I would characterize as somewhat out of our control, and the third one is within our control. Our share performance wasn't what we had expected. It stayed relatively the same as it did in Q1, and we had expected an improvement. Our estimate about share performance was a little better than what you might see in Tokana and so on because our on-premise performance is better. We estimate we lost about 50 basis points of share in the second quarter, and we've made the same assumption for the balance of the year. Obviously, we're working very hard to change that. From a guidance point of view, we've seen little change in our share performance from a sort of second half, and I think that covers the second half. From a longer-term point of view, Peter, we still believe, as we said in our remarks, and I think the environment supports that, is that the current industry decline is cyclical. Consumer confidence will turn, I don't know when, but it will turn, and the Midwest premium will revert back to the mean from these extreme moves that we've seen, both of which have had a pretty negative impact on our business this year. We've got a very strong balance sheet. We deliver really strong cash flow, as you heard from Tracey, and updated guidance did not change that. We continue to be very pleased with how we've retained the majority of our market share on our core brands. Coors Banquet is on fire. Our non-alc strategy is coming together with the acquisition of Fever-Tree, and all of that is incremental in the second half, and we'll still have incrementality obviously next year as well. It provides a nice halo effect to Peroni. Our plans kicked in in the second quarter, and brands are doing very well, and Canada is holding its own from a market share point of view, and Molson Canadian is doing well, Miller Lite's doing well, Coors Original's doing well as we head into next year. When you look at EMEA and APAC. Our premiumization strategy is doing very nicely, led by Madrí Excepcional and frankly others. If you look towards the balance of the year this year, contract brewing headwinds become less and less as we head towards the end of the year in the fourth quarter. I don't think we've got any real headwinds from a PABS point of view to speak of. We obviously still have the FIFA headwind, and then next year that all goes away, right? We'll have no headwinds from contract brewing. Tracey spoke about the shipments in the back half of the year, and whilst we did get some of that into the second quarter, which we weren't anticipating, given the performance of retail sales, we do get the rest of it primarily in the third quarter. In Marion APAC, we're expecting to perform better from a top line point of view as we head into the back half of the year, given the environment. Tracey, did I forget anything? No, I think you covered it all for us. Thanks, Peter. Thank you. Our next question comes from Chris Carey with Wells Fargo Securities. Chris, please go ahead. Hi, good morning. I wanted to follow up on a couple areas there. One is just a clarification, Tracey. The impact from Midwest premium increases that you're expecting for the year, have you seen any of those increases in Q2 or is that all in the back half of the year? I just say that in the context of the Americas, inflation in the quarter was fairly paltry. I just wanted to confirm that piece and how we think about the aluminum inflation perhaps more on a 12 to 18 month time frame. Then just following up on the overall category, I think there are certainly a number of reasons why we may view what's going on cyclically. A lot of categories in consumer are dealing with sluggish trends. The question I would have though is volumes in the beer category have been soft going back to 2022. Obviously the category leader dealt with a pretty substantial headwind. Nevertheless, I wanted to just test that confidence level around this being cyclical versus perhaps changing in consumption and habits and how you reconcile or get comfortable with that concept amidst a category that's been a bit softer over the past few years. Thanks on those. Appreciate it. Thanks, Chris. If you didn't mind taking the Midwest premium one, I'll talk a little bit more about the category and our belief in it. I think from a consumer confidence point of view and the impact that had on consumers in a number of different ways, Chris, took place towards the back half of January and early February r ight? It is clear that consumer confidence took a hit at that time and frankly hasn't recovered. We continue to believe that over time that will change. It could be sooner rather than later or it could be at the same time period next year. The items that have been impacting the overall alcohol category, like, I've often heard GLP once talked about, we don't have a lot of data that suggests that that's having any meaningful impact on the alcohol category or our category at this point. The other item that gets talked about is D9. I think the impact of D9 does vary by market and in some markets it's not sold and in others it carries strong restrictions. That is certainly an area that we continue to monitor. The impact of that, I think consumer confidence has had a disproportionate impact, as I said, across some consumers, differently to others. We believe that that is cyclical. Tracey, do you want to add anything on Midwest Premium? Yeah, hi Chris. Look, I mean no one expected the Midwest premium to increase 180% from the beginning of the year. For us, even though we are somewhat hedged because it is such a difficult, it's not transparent, it's expensive to hedge. It is a commodity that we, you know, the least amount hedged. As it equates to the balance of the year, we are expecting an incremental $20 million- $35 million of Midwest impact for the balance of the year. That's around $0.60 - $0.75 a pound. Our full year impact is between $40 million and $55 million. Again, that's just the Midwest premium. From a rest of a commodity point of view, our hedging program is very extensive and we expect very little impact from tariffs. These indirect impacts, specifically the Midwest premium, are just a problem because it is so difficult to hedge and it just doesn't follow normal market dynamics. To tie a bow on the industry, Chris, I mean our acceleration plan strategy is designed to address some of the areas where we believe that there is an opportunity. Our Beyond Beer strategy, from both a non-alc beer point of view and also from a non-alc point of view, has a fairly close tie-in between Fever-Tree from a mixer point of view and alcohol. That is an area that we're leaning into and feeling really good about the initial progress that we've made on Fever-Tree. Our innovation strategy and our brand portfolio strategy are designed to address consumers' changed consumption habits and differing occasions. Thank you. Our next question comes from Andrea Faria Teixeira with JPMorgan Chase & Co. Please go ahead. Thank you, operator, and good morning, everyone. Kevin, I appreciate your comments on the consumer confidence but potentially improving. Now I'm curious to see if you're seeing any green shoots because all we hear from your peers and retailers is that obviously with inflation hitting harder in the second half of tariffs, we could see things getting worse before they can get better. Can you comment on the exit rate for consumption in North America and Europe? I know from your slide, and I appreciate the details there, you're still running STWs against STRs at a higher level. I was hoping to see if you can help us with the cadence as we incorporate your new guide. Do you want to talk about shipments perhaps? I'll just talk about how we're seeing the consumer health by market. You know, in the U.S., Andrea, candidly we have not seen an improvement in overall consumer confidence or behavior. We have not seen that yet. We are continuing to see value conscious consumers engaging in some channel and pack shifting as we've seen previously, certainly buying more singles and large packs and less of those mid packs. That certainly has continued. We obviously serve a very broad set of consumer demographics across many income levels with our portfolio, and we think we've got a portfolio that meets everybody's needs. No, we haven't seen much change. The environment is impacting all consumers in one way or another. We do see the Hispanic consumer is disproportionately impacted by the overall macro environment. If you look north of the border in Canada, inflation has eased over time, but consumers up there also remain cautious about spending and ongoing concerns around housing and food costs. While interest rates have stabilized, I think there is a more global concern around trade tensions and tariff related impacts. Whilst Canada beer industry volumes or trends have been somewhat similar to the U.S., they perform slightly better. In the UK, the consumer confidence index remains negative. We did see a little bit of an improvement in May. I think it's just a more broader optimistic view of the overall economy in the UK, but overall sentiment I think I would say remains cautious. In Central and Eastern Europe, certainly that consumer is probably being impacted more than most given the significant political and socioeconomic issues that are impacting the Central and Eastern European markets. That's sort of a run through of our markets and how we're seeing consumer confidence. Tracey, the shipments. Yeah. In terms of the first half of the year, our shipments did outpace our sales to retail by about 800,000 hectoliters in the first half. Years was about 1.1 million hectoliters. There's about a 300,000 hectoliters to reverse each in the second half of the year. Most of that will be in Q3, and as always, you know, we plan to ship to consumption, so we expect that to, you know, converge. As I say, mainly in Q3. Thanks Andrea. Thank you. Our next question comes from Bonnie Herzog with Goldman Sachs. Please go ahead, Bonnie. Thank you. Good morning, everyone. I just had a quick question on pricing and then the promotional environment. I guess given the pressures on the category and consumers, how are you thinking about pricing for the remainder of the year? Also, what about the promotional environment? Are you seeing signs of levels increasing recently, and how do you expect that to play out? Thank you. Thanks Bonnie and good morning. It's quite common to see heightened competition with strong promotional activity during the summer, and you see that easing up in the shoulder months. We've seen that in prior years, and we're seeing that again and again. We just take a strategic approach to how we evaluate the competitive environment from an overall pricing point of view. The historical average, as we've said before, ranges in that 1% to 2% range, and we expect that to fall within that range again this year. Whilst we have seen the impact of the economy, consumer confidence, having consumers searching for value, any trading seems to be coming in channel and patch shifting, not necessarily in segment trade down. Thanks Bonnie. Thank you. Our next question comes from Filippo Falorni with Citigroup Inc. Please go ahead. Hi, good afternoon everyone. I wanted to follow up on the margin question. The Midwest premium for the second half, if I take the call it $20 million- $35 million incremental Midwest premium cost, is still a relatively small headwind to margin. Tracy, can you talk about the other drivers of a big margin contraction that is embedded in your guidance in terms of volume deleverage, SG&A for the back half of the year? Just to follow up on top line, Gavin, you mentioned the on-premise is performing better than what we see in truck channel data. Can you give us a perspective of how July played out relative to your expectation, including the on-premise business? We see still soft trend especially around 4th of July in truck channels. I'm curious about the total company and total industry trends including on-premise. Thank you. Thanks, Filippo. Tracey, you'll handle the margin one. I'll just quickly deal with July and the on premise. I mean, look, from a July point of view, as I, as we say every time on these calls, right, we've only got a few weeks of the following quarter in the books, so let's see what happens for the balance of the quarter from an overall industry and our performance point of view, from an on premise point of view. I know we've talked a lot about Blue Moon over the last couple of years and we are starting to see improvement in the on premise. Blue Moon Belgian White STR trends improved, you know, 6 points in Q2 versus Q1, which is very encouraging given that brands are built and expand from the on premise out. We're pleased with that. Peroni is obviously playing a role in that as we implement the plans we've talked about for a while now, which kicked off in Q2. That's been a positive catalyst for us as well. Coors Banquet just remains on fire as it gains distribution both in the on premise and the off premise. I would say that those are the three brands that are having the most positive impact for us in the on premise. Tracey, do you want to get into that a little bit more? From a margin point of view, we don't specifically give gross margin guidance, but just to note, the underlying gross margin% has improved in each of the last two years. A couple of things as we look at 2025: we've spoken about the top line in terms of the COGS. We do have the deleverage headwind driven by the contract brewing which we've discussed. We also have higher premiumization which drives higher COGS across our business units. We have spoken about the Midwest premium, and although we do have productivity improvements and cost savings, these are more than offset by the deleverage and premiumization as well as the Midwest premium. Thanks Tracey. Thank you. Our next question comes from Robert Edward Ottenstein with Evercore ISI. Rob, please go ahead. Great, thank you very much. Gavin, a pretty pessimistic view on second half volumes for the industry, and I'm assuming that July was pretty bad. This is, you know, in the face of, I think, easier comps, you know, given how bad the weather was last year. I guess what I'd l ove you to help us think through. Assuming that does play out the way you're guiding to, what are the impacts on the industry and how can the industry address that? Are you starting to see pressure, for instance, on shelf space? Not for you specifically, but for the beer industry as a whole. As retailers start to look at the fall and shelf set changes and into next year and how you may be combating that, any impact on not just yours, but industry, brewery footprint, the potential for some sort of consolidation of volumes and maybe doing a reverse, doing more contract brewing instead of letting contracts go, actually maybe bring more in to keep brewery utilization going given the high fixed costs of breweries and dependence on volume. I would love to get your thoughts on industry action, your reaction to these unprecedented volume declines. Thank you. Thanks, Rob. Yeah, a lot of questions in there, so let me try and tackle them off. From a comps point of view, no, July had easier comps, but the rest of the year did not, if you remember correctly. Yes, there was poor weather and the industry was pretty tough in July of last year, so the comps are a little softer in July going forward. They're not. They're actually, you know, the industry improved quite nicely heading into the balance of the year from about August onwards. The comps don't get easier from an industry point of view, they get tougher. Obviously, we built that into our thinking as we put the guide out there. From a shelf space point of view, look, from our point of view, we obviously had a significant uptick in 2024. In both the spring and in the fall of 2023, we held onto those gains, and so we finished 2024 significantly higher than we did in 2023. Again, in the spring of this year, we held onto those shelf gains, and Coors Banquet, again, was a particularly strong beneficiary of that. We gained strong double digits. We're not expecting to see significant activity for the fall of 2025 based on what we're seeing and what we're hearing. Frankly, we would know if it was different by this time. Where retailers have made shelf changes to accommodate other brands, they've made them in the flavor space and the craft space primarily. I would say they haven't painted in the traditional beer space. From a brewery footprint point of view, obviously our capacity utilization varies by season. In the summer, we're fully utilized, and in the shoulder periods, not necessarily. I would tell you that removing taps from our system is very, very helpful. It has allowed us to remove a lot of complexities. It's allowed us to free up capacity in the summer. It certainly helped our decision to onshore Peroni, which we have now completed, and it's completely onshored. Obviously, we see a big opportunity for Peroni, and we're starting to see that benefit coming through in the second quarter. I've often said and look forward to seeing in the future that Peroni can, there's no reason why it can't be as big as its other European competitors, and we certainly gained meaningful share versus our European competitors in the second quarter now that our plans have kicked in. It has allowed us to tidy up our footprint by closing a couple of smaller breweries. We were able to tidy that up and it certainly allowed us to bring Yuengling and our Yuengling relationship into our business and produce in a couple of breweries and then expand further with Yuengling when the time is right. As it relates to the brewery footprint, we're pleased with our brewery footprint and I think that covers off on all of Rob's points. Thanks, Rob. Thank you. Our next question comes from Eric Adam Serotta with Morgan Stanley. Please go ahead, Eric. Great. Good afternoon. Good morning everyone. Wanted to first ask you, Gavin, in terms of recent market share trends. Clearly t he off premise trends at least have weakened vis a vis your largest competitor. I know you called out better on prem trends, but are there any changes to your marketing or go to market strategies that you're implementing or contemplating in light of what seems like a resurgent competitor, at least for two of their main brands? For Tracey, a couple of housekeeping items. Could you help quantify how much the incentive comp reversal was? Was that all in the second quarter? In terms of the free cash flow, how much of the bridge between the earnings reduction and their free cash flow reiteration is the cash tax and working capital, and all else equal, will the working capital benefits reverse next year or are these sustainable? I know there's a lot there, but thank you. Thanks, Eric. Let me see if I can answer that. Look, I think from an overall share point of view, I think I'd start by saying that total Molson Coors share trends in the U.S., now specifically the U.S., has improved each quarter since the third quarter last year. Right. Q3 we were down about 100 basis points. Q4 we were down about 70. Q1 was down about 60, Q2 was a bout the same. If you peel back the envelope as to where we are losing that, it's Simply itself that is the biggest part of that decline. We are seeing some improvements in Topo Chico. It's not enough to offset the declines that we're seeing on Simply and Vizzy. From an economy portfolio point of view, that's roughly about another third of the decline. Obviously, our two focus brands in there, Miller High Life and Keystone Light, are showing better trends than the number of tail brands that we still have in that segment. Core, right, we talk and I have talked a lot about our core share retention because it's factually correct. We have retained 180 points of the share that we gained in 2022, and it is meaningful. Banquet continues to be the star of the show there. It's up another 20 basis points in Q2, and it remains one of the fastest growing major beer brands in the U.S. In fact, it grew in all 50 states plus Washington, D.C. in the first half of the year. We are very pleased with Coors Banquet's performance. As we head into Q3, we're focused on driving our Miller Lite 50th anniversary campaign. We're going to execute strongly behind our NFL alliance presence. We have a relationship with a number of NFL teams, so you'll see us in all channels. We'll see incremental media pressure, particularly in our Great Lakes geography. We're going to be executing against our Coors Light college programming with our ESPN GameDay partnership, and we're going to continue to put the accelerator down on Coors Banquet's momentum with the Start Your Legacy program. From a premium point of view, I've talked a lot about Peroni and Madrí. From a Blue Moon point of view, we are working very hard to change the trajectory of that brand, and we are, as I said earlier, seeing green shoots starting to show up in the on-premise, and we're seeing good performance behind our innovation, particularly Blue Moon Non-Alc. From a higher-ABV point of view, obviously our strategy behind Blue Moon and Simply and Topo Chico in the convenience stores is something we're putting effort behind starting in the second quarter. Big important brands for us. It's a top priority for us in both premium, and we remain very committed to turning it around. Anything you want to say? Yeah. Eric, common incentive compensation that we accrue for incentive comp throughout the year, and then, you know, based on our adjusted outlook for our, you know, our guidance, we have reversed a large portion of what we had accrued in the first half of the year in terms of the free cash flow. Look, the cash tax benefits that we've got as well as the working capital largely offset the profit shortfall. If you recall when we had our Q1, we did cut our capital spend by about $100 million. You know that gives us the free cash flow of around $1.3 billion plus or minus 10% as we have guided to. Thanks, Tracey. Thank you. Our next question comes from Peter Thomas Galbo with BofA Securities. Please go ahead, Peter. Hey, good morning Gavin and Tracey. Thanks for all the detail in the deck. Very helpful. Tracey, I just wanted to go back maybe to Filippo's question, particularly around the volume deleverage piece. I think it was about a 300 basis point impact in the first half and I know that you kind of gave some high level commentary on what it would be for the year, but was just hoping to unpack that a bit more as we think about the second half and the year. Specifically how we should think about the volume deleverage impact. Thanks very much. Yeah, so in terms of our outlook for the year, what we have said is that SDWs outpaced the FTRs by about 800,000 hectoliters in the first half of the year. We always plan to shift to consumption, and so there's going to be about 300,000 or so that we will reverse in the second half of the year, mainly in Q3 because last year for the first half we did ship more than we then retail by about 1.1 million hectoliters. The difference between that is about 300,000 hectoliters, which we expect to reverse. Because we plan on shifting to consumption, we expect most of that to converge by the end of the year, but mainly in Q3. Thanks, Tracy. Thank you. Our next question comes from William Joseph Kirk with ROTH Capital Partners. Please go ahead, Bill. Good morning everyone. My question, since pre-COVID, since 2019, you have more market share than you did. Your earnings per share are much better than they were, but the stock price doesn't really reflect those improvements. I guess the question is if you aren't getting credit for market share gains and profit growth in your current categories, does something need to strategically change? When underlying COGS per hectoliter are up mid single digit or more, why only take a 1 to 2% price increase? Thanks, Paul. Look, from your first part of your question, I mean obviously, and we've said this before as well, we believe that our business is a very attractive investment at these levels, and we continue to demonstrate our belief by buying back significantly ahead of the authorized board program. From an overall category point of view, I'm very pleased with our acquisition of the U.S. business of Fever-Tree, and the integration is going well, and our volumes are exceeding our expectations from a business case point of view. Our distributors are excited about it, and it really does give us a nice footprint from a non-alc point of view, and we believe a halo effect to our other non-alc activities. I was all sick and pricing out of pricing. Yeah, I mean look, Bill, we obviously look at pricing from a—every single market is different, every state is different, every brand is different. We obviously take any number of factors into account, not only input cost but, you know, also consumers' behavior and receptivity to price increases and so on. We've got a very robust revenue management program, and we will and continue to do what we think is best for our brands and in every single market. Thank you. Our next question comes from Robert Moskow with TD Cowen. Please go ahead. Robert. Hi, thanks for the question. In the past couple of years the productivity gains at Molson Coors have been substantial and helped offset a lot of the negative impact from volume deleverage. Now it looks like the volume deleverage is accelerating, and you've had to call down your guidance, Tracey. Gavin, at what point do you have to take another look at your asset footprint both in terms of manufacturing and distribution, and is it with volume declining at this pace, will you have to take another look at that and maybe make more reductions? Thanks. Thanks, Robert. From a capacity point of view, we're pleased with our brewery footprint. We have obviously really strong utilization from a capacity point of view. In the summer months, we've removed contract brewing from our system completely, which is why we have that headwind and have had the headwind all year. That obviously starts to tail off as we head into the back half of this year. Not much more I can say than what I said earlier, Robert. Removing contract brewing from our system has proven to be very helpful. It's allowed us to take a lot of complexity out of our system. It's allowed us to change things from a shift configuration point of view, from a line point of view, from a temp free labor point of view. Overall, from a brewery footprint point of view, it's been very positive for us and it's allowed us to bring Peroni in, which, as I said, is growing very nicely. We hope to have that brand as a big brand in the future. It's allowed us to support our Yuengling partnership, where we've had a very successful launch in Illinois this year. We're pleased with our brewery footprint ideas s ummary. Thanks Robert. Thank you. Our next question comes from Michael Scott Lavery with Piper Sandler & Co. Please go ahead. Michael. Good morning. Thank you. I just wanted to come back to the guidance update and the EPS bridge. Midwest Premium has gotten a lot of attention, but as you've called out, the math, it's maybe 1% to 2% of the 10% or 13% cut to EPS growth outlook, and you've got some stepped up buybacks as well. What are the missing pieces? I guess if you've said what's new is Midwest Premium, the category trends, and then your share expectations, is it just all of that and the operating deleverage that we've covered a bit, or is there other inflation we should have our eye on as well? You mentioned the interest expense change that's also quite modest. I mean, help us maybe figure out if there's any other moving parts here or if just the top line flow through is that significant. Hi Michael. Yeah, so look, there is some marketing timing. We do expect to spend similar levels of marketing in our peak summer selling season as last year. That's one thing. The other thing is remember our EPS is not in constant currency, so we do have foreign exchange impacts to it. As the dollar weakens, that'll certainly be a tailwind. The other thing that goes into it is tax. We have kept our effective tax rate guidance at the same level as what we had previously, but those could be two items that do impact our EPS. Just probably to call out that, although marketing was down in Q2, we do expect it to be up in Q3 because of some of the timing of our commercial plans and also cycling lower spending in prior year. Thanks Tracey. Thank you. Our next question comes from Lauren Rae Lieberman with Barclays Bank PLC. Please go ahead. Great, thanks. Good morning. I know you talked about the softer U.S. share performance in the release. I was just curious to kind of talk a little bit more about that, given the competitive premium light space these days. Are there any specific regions in the U.S. where you're seeing underperformance? I know you said the guidance for the second half assumes these share trends kind of are consistent. You just commented on marketing. I was curious about plans to defend share in the second half and beyond. Is there a point where you'd consider addressing pricing? Is it a matter of more marketing or is the view more like don't overspend into a soft market backdrop? Thanks. Yeah, thanks, Lauren. Look, I mean, we're obviously very thoughtful about how we spend our marketing and we turn it over quite carefully, but certainly we're seeing really pleasing momentum in a number of our brands. Without wishing to repeat myself too much. Right. I mean, we're seeing strong momentum behind Coors Banquet, Peroni, and we've got our non-alc portfolio coming in. We're spending more money behind it. Madrí Excepcional in our other markets has performed very well. Notwithstanding the current overall macro environment, which we, as I said, believe is cyclical, we're going to continue to invest behind our brands so that, you know, when the tide turns, they're in the best position that they can be. I talked a little earlier on about some of the areas that we're focusing in on. Our so-called power brands, you know, not only Coors Banquet, but also Miller Lite and Coors Light. We're going to continue to support those. You can be assured that we turn over every marketing and sales dollar carefully for effectiveness before we spend it. Thank you. Our next question comes from Carlos Alberto Laboy with HSBC Global Investment Research. Please go ahead. Yes, good morning, everyone. Can you come back, please, to the c ash offset that you mentioned earlier? You mentioned tax benefit. There was another one. If you could expand on both of t hose, please. It would be helpful. Yeah. For our free cash flow, you know, we've received some cash tax benefits this year as well as some working capital improvements. That has enabled us to keep our free cash flow guidance at the $1.3 billion plus or minus 10%. Those are the two items that we mentioned in particular. The biggest driver there, obviously, is the benefit coming out of capital. Right. Capital deductibility from one big, beautiful bullet point of view. Yeah. Thank you. Our next question comes from Nadine Sarwat with Sanford C. Bernstein & Co. Please go ahead. Yes. Hi, everybody. Thank you for taking my question. I know we've talked a lot about the U.S. so I'd actually like to turn attention to EMEA and APAC. Your financial volumes were down close to, and I know you called out weakness in a number of the markets, but could you provide perhaps some additional color by region? You know, how is the UK business doing versus your other markets? How do you view this segment performing over the remainder of this year specifically? Thank you. Thanks, Nadine. Look, I mean the market in the UK continues to decline. Declines in both channels. We have seen a little bit of a category improvement, Q to date, starting to see some trend improvement in our share trajectory. That has been aided by the benefit of the Easter shift, which moved out of Q1 and into Q2. I know you live in the UK, so you will know that the weather has been particularly good in the UK. We are expecting those figures to show a somewhat greater decline once we've got June data in because I think we're lapping a big football tournament from last year. There is that going on. Competition in the marketplace remains intense, frankly. Despite the increase that we've seen in promotional frequency in the off-premise with our largest brand, it does remain challenged given the actions of some of our competitors, which we have chosen not to follow. We're seeing some of our competitors in that space price consistently 20% lower than Carling on shelf. That certainly challenged us from a main brand point of view. On the dry volume growth, it continues, it's up again mid-single digits in Q2, and we're going to continue to put the right level of commercial support behind those brands. If you look across the water into our Central Eastern European business, there's no doubt that the overall beer industry remains sluggish in this market. It's driven by another decline in consumer confidence that began at the end of 2024. We'd seen some improvement, and those factors that are driving that are well understood and well known from a global political point of view and local social and economic tensions that exist there. We have seen higher promotional activity across most of the markets. We have had some challenging customer negotiations as well, which are now in our result. All of those factors impacted our volume performance in the first half of the year. We continue to remain optimistic about the growth potential for our Central Eastern European businesses. We're putting investments behind our national power brands, and we're supporting the recent launches that we have in the above premium space. We launched Madrí Excepcional in Bulgaria last year, and we launched it in Romania this year, and both of those are doing very nicely. We launched Ožujsko in Hungary, which is doing well. Innovation in the beyond beer space with, for example, Aspall's Poppin Wild Cider in Serbia, Bulgaria, Montenegro, and Croatia is also doing well over the early days. A real success story for us is our premiumization in our APAC business. You can actually see that in the mix benefits which we got in May and back in the second quarter. I think it generated almost 490 basis points of positive mix for us. Nadine, that's kind of a quick high-level run through our European business. Thank you. Our next question comes from Gerald John Pascarelli with Needham & Company. Please go ahead. Great, thank you. I have a question on capital allocation. Just given these volume declines, it's industry v olumes and then your own volumes remain lower for longer. As you think about this business long term, do you believe larger scale M&A or more aggressive bolt-on M&A may be necessary to just expedite your portfolio towards more attractive subsectors and beverages, whether it be more non-alcoholic exposure or exposure to above premium brands, etc.? Just looking for any color or thoughts around how M&A or evolving M&A just fits into your capital allocation strategy. Thank you. Thanks, Gerald. Look, from an M&A point of view, I think we've been very clear about how the string of pearls approach has worked for us. In the early days when we still had somewhat of a challenged balance sheet with a higher leverage ratio, those pearls were relatively small. As we've put ourselves in a really strong position from a balance sheet point of view, I'm very proud of the work that the team has done to get the balance sheet where it is. After the last four or five years, that has allowed us to look at slightly bigger pearls. Certainly the one we did this year with Fever-Tree is very strongly supportive of our overall strategy and is a much bigger pearl than we perhaps would have considered five years ago. When you add everything up from a working capital point of view and a distribution point of view, and our investment in Fever-Tree, that number was well north of $100 million. We remain committed to our string of pearls approach. Obviously beyond that, I'm not going to comment on any M&A, but very pleased with the progress that we've made with Fever-Tree so far. Thank you. Our next question comes from Kevin Michael Grundy with BNP Paribas Exane. Please go ahead, Kevin. Great, thanks. Good morning everyone. I was hoping to get an update on the CEO search process given Gavin plans to retire by year end. Gavin, of course you will be missed, but any update there just in terms of where that process is. Any comments on internal vs. external candidates, attributes that the board's looking for, and perhaps maybe have that evolved a bit given the demands of the current environment. Any comments that you can offer to folks I think would be appreciated. Thank you very much. Thanks, Kevin. Appreciate the kind words. Look, the process is well underway. The board's made significant progress. Obviously, it's navigating a process very thoughtfully given my planned retirement by the end of the year. In terms of capabilities, the board is paying a lot of attention to both relevant business leadership experience along with a cultural fit. Obviously, I'm very proud of the culture we built here at Molson Coors. It's very, it's very special. As we've said previously, it's very common for companies of our size to look at both internal and external candidates for a CEO position. That's what our board is doing at the moment. They remain supportive of our current long term strategy, but obviously I would expect any new CEO to put their own stamp on the company. That's the update, Kevin. Thank you. Those are all the questions we have today, and I'll hand the call back over to Gavin for closing remarks. Thank you, operator. Appreciate that. Appreciate all the questions. I'd like to close by thanking our Molson Coors team and our partners for their continued support behind our business and our brands. I continue to be very proud of the dedication and commitment of our over 16,000 employees, our incredible partners, and our best-in-class distributor network. I'm confident that together we can navigate this challenging environment and certainly emerge stronger with this team behind us. Thanks for your time today. Thank you everyone for joining us today. This concludes our call, and you may now disconnect your line.