Molson Coors Beverage Company Class A 2026 Q2 Earnings Call

Thank you, operator. I'm pleased to introduce myself as Molson Coors' new vice president of investor relations. Our earnings release and presentation materials are available on the investor relations section of our website. Today's discussion includes forward-looking statements within the meaning of U.S. federal securities laws. Please refer to our earnings release and our most recent SEC filings for important information regarding these statements, including risk factors as well as definitions of and reconciliations to any non-GAAP measures. Actual results may differ materially from our expectations, and we undertake no obligation to update forward-looking statements, except as required by applicable law. Today, we'll focus our prepared remarks on our performance and outlook before opening the line for Q&A. To allow as many participants as possible to ask a question, we ask that you limit yourself to one question and then rejoin the queue if needed.

Any technical questions can be addressed with our investor relations team following the call. Unless otherwise indicated, all financial results are comparable prior year period and are in U.S. dollars. With the exception of earnings per share, all financial metrics are in constant currency when referencing % changes from the prior year period. Also, shared data references are sourced from Circana in the U.S., unless otherwise indicated. Our remarks today will also reference underlying pre-tax income, which equates to underlying income before income taxes, and underlying earnings per share, which equates to underlying diluted earnings per share as defined in our earnings release. With that, I will hand it over to Rahul.

Thank you, Bob. Welcome to Molson Coors, and hello to everyone on the call. Today, we're joining you from Golden, Colorado, the home of Coors. Since the launch of our Horizon 2030 strategy in Q1, I've been visiting with employees, distributors, and customers across our footprint to discuss our strategy, our early progress, and any gaps that require quick action. Before I begin, let me take a moment to thank our dedicated employees here in Golden and across the globe for their commitment behind our Horizon 2030 strategy. Let's start with the category. While the U.S. beer industry began the year on relative solid footing, the unanticipated energy and inflation shock associated with the conflict in Iran demonstrated how quickly global consumer sentiment and behavior can shift. In the second quarter, prices at the gas pump peaked in May, hitting certain U.S. regions especially hard.

At the same time, geopolitical uncertainty weighed on consumer confidence and spending behavior in EMEA and APAC. These external factors contributed to our volume performance across our markets in the second quarter. In addition, in EMEA and APAC, heightened promotional activity as well as channel mix further pressured bottom-line results. Of course, in Q2, the industry came together to champion the World Cup as a premier occasion for socialization and celebrating with beer. That said, high industry anticipation increased competitive pressure everywhere. We also saw pockets of intense promotional activity in the U.K. and across Europe. As such, our share of the early World Cup opportunity, which only included the last three weeks of Q2, varied by geography and segment. How we respond to these and other external pressures remain firmly within our control.

I'm confident that our diversified portfolio of well-loved brands, strong cash generation, and disciplined balance sheet provide resilience and flexibility. These advantages enables us to address dynamic external conditions while focusing on the long-term strategic priorities that will grow our business. Based on this, we are reaffirming our fiscal 2026 guidance. Let's discuss our portfolio, starting with our core brands. Horizon 2030 aims to reinforce the relevance of these brands as the first choice for consumer occasions. We're not just sitting back and relying on existing scale and brand awareness to drive volumes. Enhancing our core brand share performance in today's competitive environment requires continued focus and execution. However, we have more work to do here, and we continue to assess how Coors Light and Miller Lite can amplify their authentic identities to drive greater impact with both core beer and new consumers in the U.S.

This work takes time. We are pursuing new campaigns, partnerships, ways to deploy our media investments with an occasion-based approach. In Canada, Coors Light largely performed in line with the industry and held its spot as Canada's number 1 light beer. In the U.K., Carling experienced heightened competition in the quarter, and we've acted quickly with several actions designed to strengthen its position in the market. In the EMEA and APAC, Ožujsko maintained its leading position in Croatia following its sponsorship of the Croatian men's national team in the World Cup. Meanwhile, Coors Banquet grew share and brand volume in Q2. We attribute the brand's ongoing success to its clear identity and consistent marketing. This includes our campaign for America's 250th, called Icons of the American West, which helped contribute to growth across all U.S. regions in Q2.

It includes our latest partnership with the Yellowstone spinoff, Dutton Ranch, which has also become very popular. Turning to our value brands, our share trends improved, driven by the successful launch of Keystone Light Apple. We also saw share trends improve for Miller High Life. We've chosen to support growth in our value brands by deploying modest but targeted levels of investment. Keystone Light Apple, or Capple, is a great example of how we quickly responded to emerging flavor trends. We deployed an AI-generated social media campaign that generated buzz and resonated with the consumer-seeking flavor at an enticing price point. Demand far outpaced our limited run production, so we are bringing it back in the fall. We also decided to bring back fan favorite Keystone Ice, a high ABV beer in the value segment. In above premium beer, we saw mixed performance across our brands and geographies.

In the U.S., we were pleased to see Peroni grow brand volumes by double digits, supported by targeted marketing investments earlier in the year. The broader Blue Moon franchise remains under pressure in Q2. That said, we grew brand volumes for both Blue Moon Non-Alc and Peroni 0.0 in the quarter, underscoring our relevance in the small but growing Non-Alc beer category. While heightened promotional activity impacted Madrí in the second quarter, above premium brand volumes showed segment growth in the EMEA & APAC, driven by Staropramen, Miller, and Blue Moon. In Canada, Miller Lite also continued its momentum as an above premium offering. We continue to gain scale in Beyond Beer, which is an important part of our journey as a beverage company. NSR growth for Monaco, Topo Chico Hard, and Fever-Tree was partially offset by other brands in the segment, like Simply Spiked.

In Canada, Coors slushie continued to show momentum in the RTD seltzer segment, while in EMEA & APAC, Hidra continued to benefit from growing interest in functional beverages. Both Fever-Tree and Monaco are well on track to each contribute 1%-2% to NSR, solid proof points of Horizon 2030's focus on both premiumization and portfolio transformation. We have now lapped the first full year of our partnership with Fever-Tree. We're encouraged to see momentum continue to build. Following a national campaign that celebrated the ease of mixology at home, Fever-Tree delivered its highest quarter of sales in the U.S. since our partnership began. Our first full quarter of ownership of Atomic Brands also produced encouraging results. The integration of Monaco Cocktails has been going well, with its overall top and bottom line contributions tracking slightly ahead of our acquisition expectations.

While still early days, this progress underscores the importance of bringing RTD Spirits into our portfolio. We see Monaco as a clear example of how we can use M&A as a force multiplier in our transformation journey. This acquisition filled wide spaces in our portfolio with a fast-growing beverage segment. It also added an already scaled business, providing both growth and profitability on day one. Currently, the majority of Monaco sales fall within five states, and most of that is in convenience. This is a strong example of our localized portfolio approach in action. We see plenty of runway to expand into new geographies and channels. As discussed in Q1, the launch of Horizon 2030 also incorporated changes to our operating model, including quick actions and resource allocation at the local level.

For example, in preparation for the World Cup, we invested incremental resources into host markets to drive memorable on-premise experiences. Our partnership with venues in key entertainment districts across Dallas, Philadelphia, and Kansas City resulted in strong consumer engagement with our core and above premium brands. In addition, after reports that the Scottish football fans caused beer shortages in Boston, our Restock the Scots campaign swiftly responded by sending a Miller Lite barge to greet them in Miami. These examples show how we're leaning into and learning from targeted efforts that drive incremental results outside of national media spend. In total, while we're encouraged by our ability to make progress from a top-line perspective, we need to stay responsive to the inflationary cost pressures and commodity price volatility that impacted our bottom line.

In the near term, our robust cost savings program and other efficiency initiatives mitigate uncertainty within the global macroeconomic backdrop. We made progress in our previously announced three-year, $450 million cost savings actions by identifying areas where we believe we can drive greater efficiency. For example, we committed to various restructuring actions in EMEA & APAC, including the closure of a small brewery in the U.K., alongside other operational changes designed to modernize, simplify, and unlock efficiencies within the region. We've also allocated a portion of our previously announced $650 million in global CapEx to modernize and expand our supply chain capabilities. Upgrades are already underway at our can plant, Rocky Mountain Metal Container. We're investing in new bulk receiving facilities, as well as new and upgraded canning lines.

Importantly, we believe investments like these that help to strengthen our supply chain will create efficiencies during a time when aluminum sourcing is top of mind. Finally, on capital allocation, we designed our approach to reinvest in our business and reward shareholders as we progress towards Horizon 2030 together. We are a highly cash-generative business, and we intend to deploy that cash on prudent growth initiatives, both organic and inorganic. We continue to believe that Molson Coors shares currently trade at a compelling value with an attractive dividend yield, and we have ample capacity left on our share repurchase authorization. We're halfway into our first year of the Horizon 2030 strategy. One thing I'd emphasize is that no single event will suddenly change our trajectory. This process is about building portfolio strength brick by brick.