molson coors brewing (tap) earnings report: q3 2015 ... · the following molson coors brewing...

CompanyName:MolsonCoorsBrewingCoCompanyTicker:T APSector:ConsumerGoodsIndustry:Food&Beverage

EventDescription:Q32015EarningsCallMarketCapasofEventDate:14.23BPriceasofEventDate:87.57

©2014TheStreet,Inc.Al l R ightsReserved Page1of23

MolsonCoorsBrewing(TAP)EarningsReport:Q32015ConferenceCallTranscriptThefollowingMolsonCoorsBrewingconferencecalltookplaceonNovember5,2015,11:00AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

DaveDunnewald;MolsonCoorsBrewingCompany;GlobalVPofIRMarkHunter;MolsonCoorsBrewingCompanyl;PresidentandCEO,MolsonCoorsBrewingCompanyGavinHattersley;MolsonCoorsBrewingCompany;CFO,MolsonCoors&CEO,MillerCoorsSimonCox;MolsonCoorsBrewingCompany;CEO,MolsonCoorsEuropeStewartGlendinning;MolsonCoorsBrewingCompany;CEO,MolsonCoorsCanadaKandyAnand;MolsonCoorsBrewingCompany;CEO,MolsonCoorsInternational

OtherPart icipants

VivienAzer;Cowen;AnalystIanShackleton;Nomura;AnalystJudyHong;GoldmanSachs;AnalystJohnFaucher;JPMorgan;AnalystPhilippeGruson;MFUG;AnalystBryanSpillane;BofAMerrillLynch;AnalystMarkSwartzberg;StifelNicolaus;AnalystRobOttenstein;EvercoreISI;AnalystBrettCooper;ConsumerEdgeResearch;AnalystPabloZuanic;Susquehanna;AnalystAndrewHolland;SocieteGenerale;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

WelcometotheMolsonCoorsBrewingCompany'sthird-quarterearningsconferencecall.

NowIwillturnthecallovertoDaveDunnewald,GlobalVicePresidentofInvestorRelationsforMolsonCoors.

DaveDunnewald (GlobalVPofIR):

Thankyou.Goodmorningtoeveryoneonourearningsconferencecalltoday.

Beforewebegin,IwanttoparaphrasetheCompany'sSafeHarborlanguage.Someofourdiscussionstodaymayincludeforward-lookingstatements.Actualresultscoulddiffermateriallyfromwhatweprojecttoday,sopleaserefertoourmostrecentKand-Qfilingsforamorecompletedescriptionoffactorsthatcouldaffecttheseprojections.

OurCompanydoesnotundertaketopubliclyupdateforward-lookingstatements,whetherasaresultofnewinformation,futureeventsorotherwise.Youshouldnotplaceunduerelianceonforward-looking




statementswhichspeakonlyasofthedatetheyaremade.

Regardinganynon-USGAAPmeasuresthatmaybediscussedduringthecalltodayandfromtimetotimebytheCompany'sexecutivesindiscussingourperformance,pleasevisittheCompany'swebsitewww.MolsonCoors.comandclickonthefinancialreportingtaboftheInvestorRelationspageforareconciliationofthesemeasurestothenearestUSGAAPresults.Also,unlessotherwiseindicated,allfinancialresultstheCompanydiscussesareversusthecomparableprior-yearperiodandinUSdollars.

Asyouknow,AnheuserBuschInBevannouncedyesterdayafurtherextensionofitspossibleofferforalloftheoutstandingsharecapitalofSABMillerandtherehasbeensomerelatedpressspeculationthatmentionsMolsonCoors.Asamatterofpolicy,MolsonCoorsdoesnotcommentonmarketrumorsandwewillnotbediscussingtheABInBevSABMillersituationonourcallthismorning,includingduringtheQ&Asessionattheend.Wewilldevoteourtimethismorningtoourthirdquarterfinancialresultsandoutlookforthebalanceof.

NowI'dliketoturnthecallovertoMarkHunter,PresidentandCEOofMolsonCoors.

MarkHunter (PresidentandCEO,MolsonCoorsBrewingCompany):

Thanks,Dave.Hello,andwelcomeeverybodytotheMolsonCoorsearningscall.Wereallyappreciateyourjoiningustoday.WithmeonthecallthismorningIhaveGavinHattersley,theCFOofMolsonCoorsandtheCEOofMillerCoors;StewartGlendinning,ourCanadaCEO;SimonCox,ourCEOofEurope;KandyAnand,ourInternationalCEO;SamWalker,ourChiefLegalandPeopleOfficer;BrianTabolt,ourcontroller;and,obviously,DaveDunnewald,whoyoujustheardfrom,ourVPofInvestorRelations.

Inthethirdquarter,ourworldwidevolumeincreased.%drivenbystronggrowthinEuropeandinternational.Underlyingearningswerelowerduetounfavorableforeigncurrency,increasedbrandinvestmentandtheterminationofourMillerbrandsagreementinCanadaandtheModellobrandsandHeinekenBrewingcontractsintheUKearlierthisyear.

WeincreasedgrossmarginsonaconsolidatedbusinessbasisdrivenbytheUSandEurope.WeinvestedmoreinourbrandsinallofourbusinessesexceptinternationalwherelowermarketingwasprimarilyduetothesubstantialrestructuringofourChinabusinessthisyear.Inthequarter,wecontinuedtotransformourportfoliostowardsabovepremium,craftandcider.

Weexpandedthedepthandreachofourinternationalbrandsinfast-growingmarketsandweincreasedourcommercialcapability.Wealsocontinuedtodrivemeaningfulcashgenerationanddisciplinedcashandcapitalallocation.

Morespecifically,intheUSMillerCoorsachieveditsbestquarterlyperformanceinpremiumlightsinthreeyearsasbothCoorsLightandMillerLitebuiltmomentumandgrewshareofthesegment.WecontinuedtorolloutCoorsLight'snewvisualidentityandMillerLitelaunchedits[steiny]bottleandgrewquarterlyvolumeforthesecondtimeinthepastyear.

OutsideoftheUSandCanada,CoorsLightgrewstrongly.Andwe'llsoonlaunchourlargestglobalbrandintothehighlyprofitableColumbianmarket.MillerCoorsannouncedacquisitionofamajorityinterestintheSaintArcherBrewingCompany,aSanDiegobasedbrewerofaward-winningcraftales.Thisacquisitionwillfurtherstrengthenourglobalcraftportfoliowhichgrewnearly%inthethirdquarter.

TheintegrationoftheRekorderligciderbusinessintoourUKandIrelandportfoliohasgonewellandourglobalcyberportfoliogrewalowsingle-digitrateinthequarter.Wecontinuetorestructureourbusinesstoensurewearefitforthefuture,includingtherestructuringofourChinabusiness,theplannedclosureoftheMillerCoorsEdenbrewingnextyear,followingtheclosureofourAlton,UKbreweryinMayofthis




year.Andimportantlywe'vereachedanagreementtosellourVancouverbrewerywhichwillallowustobuildamoreefficientandflexiblebreweryinBritishColumbia.

Otherthirdquarterperformanceheadlinesareasfollows.Worldwidevolumeincreased.%drivenbyEuropeandinternationalanddespitetheimpactoftheterminationoftheMillerbrand'sagreementinCanadaandtheModellobrandscontractintheUK.CoorsLightvolumegrew%globally,drivenbynearly%volumegrowthoutsideoftheUSandCanada.Ournetsalesperhectoliterdecreased.%inconstantcurrency,drivenbymixchangeswithinourEuropeandinternationalbusinesses,includingtheimpactofterminatingtheModellobrandsandHeinekencontractbrewingagreementsintheUK,andwegrewnetpricingintheUS,CanadaandEuropeinlocalcurrency.

Constantcurrencynetsalesincreased.%duetohighervolumeinEuropeandinternational,alongwiththepositivenetpricinginCanadaandEurope.Byaddingintheeffectofforeigncurrency,reportednetsalesdeclined.%.Underlyingpretaxincomeof$.millionwasdown.%,butdecreased.%onaconstant-currencybasis,withthekeydriversbeingincreasedbrandinvestmentandwell-documentedcontractterminations.

Underlyingaftertaxincomedeceased.%drivenbyunfavorableforeigncurrency,higherbrandinvestmentsandterminatedcontracts.Andthesefactorswerepartiallyoffsetbyhighervolume,positivenetpricing,alowertaxrate,andtheresultsofourcostsavinginitiatives.USGAAPnetincomefromcontinuingoperationsincreased$.millionfromayearagoduetolowerbrandimpairmentchargesthisyearinEurope.

Weincurredimpairmentchargesof$millionthisquarterrelatedtosomeofourEuropebrands,includingtheJelenbrandbecauseofcontinuedeconomicandcompetitivechallengesandincreaseddiscountratesacrosstheregion.Wehavealsochangedaccountingtreatmentofthesebrandsfromindefinitelivedtodefinitelived,whichweexpecttoincreaseamortizationexpensebyapproximately$millionperyearbasedoncurrentforeignexchangerates.

UnderlyingEBITDAinthequarterwas$.million,a.%decreasefromayearagodrivenalmostentirelybyunfavorableforeigncurrencymovements.Year-to-dateunderlyingEBITDAwas$.billion,down.%fromayearago.Wealsocontinuedtoimplementourfour-year$billionstockbuybackprogramwith$millionofcashusedinthethirdquartertorepurchasemorethan,ClassBcommonsharesfromJulythroughearlyOctober.

PleasenotethatinAugustwecommittedanother$millionofcashtobeusedforstockrepurchasesduringthefourthquarterunderacceleratedsharerepurchaseprogram.Intermsofregionalhighlights,USunderlyingpretaxincomedecreased.%duetolowervolume,includingareductionindistributorinventoriesversusayearagoandcontinuedsoftnessinoureconomyportfolioalongwithhigherinvestmentsinbrandsandtechnologyasdiscussedinourlastearningscall.

Thesefactorswerepartiallyoffsetbypositivenetpricingandmix,supplychaincostsavings,andlowerbrewing,packaging,materialandfuelcosts.OnesignificantnewsitemfromMillerCoorswastheappointmentofGavinasCEOinSeptember.Gavinhasquicklytakenactionsacrossanumberofareastoenergizeandfocustheentireorganization.

CoorsLightandMillerLitebothgrewshareofsegmentandimprovedvolumetrendsinthethirdquarterversusthefirsthalfofthisyear.Meanwhile,MillerLiteandCoorsBanquetgrewvolumeandoverallmarketshare.TheUSportfoliotransformationtowardsabove-premiumsegmentcontinuedwithleadbrands,BlueMoon,BelgianWhite,Leinenkugel,andtheReddsfamilyeachgrowingvolume.TenthandBlake,theleadingcraftbrewerintheUS,MillerCoorsexpandeditsgrowingcraftportfoliowithacquisitionofSaintArcherBrewing,whichwascompletedinOctober.




We'reexcitedaboutthegrowthopportunityofferedbytheSaintArcherbrands,whichrepresentavarietyofstylesthatarecomplementarytothecurrentTenthandBlakeportfolio,includingsomeoutstandingIndiapaleales.TheUSteamalsoannouncedtheplannedclosureofitsEden,NorthCarolina,brewery.

InCanadaunderlyingpretaxincomedecreased.%inconstantcurrency,primarilyduetothenegativeimpactofterminatingourMillerbrandsagreementattheendofMarchofthisyear.Theeffectoflowervolumeinthequarterwaspartiallyoffsetbypositivepricingandsubstantialcostsavings.Includinganimpactofunfavorableforeigncurrency,underlyingearningsdeclinedby.%.

CanadasalestoretailerSTRsdeclined.%primarilyduetotheterminationoftheMillercontract.ExcludingtheMillerbrands,ourSTRsdeclinedby.of%.InCoorbrands,CoorsLightandMolsonCanadianvolumesdeclinedinthequarter,buttrendsimprovedversusthesecondquarteraswerolledoutnewadvertisingandcommercialexecutionsforCoorsLights.

Abovepremium,CoorsbanquetdeliveredstrongvolumeandsharegrowthinthethirdquarterasdidMadJackAppleLager,MolsonCanadianCiderandStrongbowCideralongwithourGranvilleIslandandCreemorecraftbrands.InEurope,underlyingpretaxincomeincreased.%inconstantcurrency,drivenbyhighersalesvolume,positivepricingandlowercosts,despitethelossoftheModelloandHeinekencontractsintheUKthisyearandthereleaseofourregulatoryreservelastyear.

Europeunderlyingpretaxincomedecreased.%inthequarterduetotheimpactofunfavorableforeigncurrency.Salesvolumeincreasedinnineofcountriesandforeightofourleadbrandsintheregion.ExcludingthelossoftheModellobrands,theUKmarketwouldalsohaveincreasedvolumeinthequarter.

Equallyencouraging,theareasofCroatia,BosniaandSerbiathatwereaffectedbyseverefloodingayearagocontinuedtorecover.InCoorbrands,Carlingtrendsimprovedfromearlierintheyearand(inaudible)BergenbierandBorsodigrewvolumeandsegmentshareintheircoremarkets.Ourcraftandabove-premiumportfoliocontinuedtoperformwellwithCoorsLight,[DenBar]andCobraallachievingstronggrowthinthequarterasdidabove-premiumStaropramenoutsideoftheCzechRepublic.

Ourinternationalbusinessagaindelivereddouble-digitvolumegrowthinthethirdquarterdrivenbytripledigitvolumegrowthinIndiaanddouble-digitgrowthforCoorsLightinLatinAmerica.IndiagrowthwasduetostrongperformanceofourexistingIndiabusinessandouracquisitionofMountShivalikBreweriesearlierthisyear.

DuetohighervolumeinIndiaandLatinAmerica,alongwithlowerMG&A,weendedthequarterwitha$,improvementininternational'sunderlyingpretaxlossversusayearagoora$.millionimprovementexcludingtheimpactofforeigncurrencymovements.

NowI'llturnovertoGavintogiveadditionalthird-quarterfinancialhighlightsandperspectiveontherestof.Gavin.

GavinHattersley(CFO,MolsonCoors&CEO,MillerCoors):

Thanks.Underlyingfreecashflowforthefirstthreequartersoftotaled$.million,whichrepresentsa$.milliondecreaseversusthesameperiodlastyear.Thisdecreasewasprimarilydrivenbylowerunderlyingaftertaxincome,negativeforeigncurrencyandlessbenefitfromworkingcapitalchanges,includinghighercashpaidfortaxes.

Ouryear-to-datefreecashflowincludedthefollowingfactors.$.millionofoperatingcashflow,and$.millionofnetadd-backsforourdiscretionaryUKpensioncontributioninJanuary,settlementofinterestrateswaps,thecashimpactofspecialitemsandMillerCoorsinvestmentsinbusinesses.Investingcash




outflowsincluded$.millionofcapitalspending.

Ourunderlyingfreecashflowincluded$.billionofcashdistributionsfromMillerCoorsand$.billionofcashinvestedinMillerCoors.Adetailedreconciliationofourunderlyingfreecashflowisavailableinourearningsreleasedistributedthismorning.Totaldebtattheendofthethirdquarterwas$.billionandcashandcashequivalentstotaled$.million,resultinginnetdebtof$.billion,whichislowerthanayearagoprimarilydrivenbyforeigncurrencymovementsanddebtpaydown.Youseetheearningsreleasewedistributedearlierthismorningforadetailedreviewofourbusinessunitfinancialresultsinthequarter.

Lookingforwardtothebalanceof,thefollowingfull-yearforwardguidanceisunchangedfromthelastquarter.Althoughwe'renotchangingourunderlyingfreecashflowtargetof$millionplusorminus%,wecurrentlyexpectourresultsfortheyeartobeintheupperhalfofthisrange;thatis,between$millionand$million.AndweexpectourMG&Aexpenseandcorporatetobeapproximately$million.

Wearerevisingthefollowingfull-yearguidance.First,wenowexpectcapitalspendingtobeapproximately$million,downfrom$millionpreviously,largelydrivenbyforeigncurrencymovements.Second,weexpectourconsolidatednetinterestexpensetobeapproximately$millionversus$millionpreviously,drivenbyfavorableforeigncurrencyandinterestrate.Third,wenowexpectcashcontributionstoourdefinedbenefitpensionplanstobeapproximately$millionin,includingour%ofMillerCoorscontributionsattoday'sexchangerates.Thiswasrevisedfromthepreviousrangeof$millionto$million,primarilyduetoforeigncurrencymovements.

Fourth,wenowanticipatepensionexpenseofapproximately$millionincludingourportionofMillerCoors.And,fifth,wenowanticipatethatourfullyearunderlyingeffectivetaxratewillbeintherangeof%to%,downfrom%to%previously,duetothefavorableresolutionofuncertaintaxpositionsandothertaxbenefits.Afterthisyear,westillexpectourunderlyingtaxratetobenearthelowendofourlong-termrangeof%to%forthenextfewyears,assumingnofurtherchangesintaxlaws,settlementoftaxauditsoradjustmentstoouruncertaintaxpositions.

Incostoutlook,wenowexpectourfull-yearcostsavingstobeneartheupperendofthe$millionto$millionrangethatwehavebeentargeting.Byregion,wecontinuetoexpectEuropecostofgoodssoldperhectolitertodecreasetothelowsingle-digitratethisyearinlocalcurrencyandinternationalbusinesscostofgoodssoldtodecreaseinalowdouble-digitrateperhectoliter.

WenowexpectCanadacostofgoodssoldperhectoliterinlow(inaudible)currencytoincreaseatalowsingle-digitrate,downfromannualguidanceofmidsingledigitslastquarter,drivenbylowerbreweryanddistributioncosts.MillerCoorsnowexpectscostofgoodssoldperhectolitertobeapproximatelyinlinewithorslightlybelowtheyearbeforeversuspreviousguidanceofinline.Thischangeisdrivenbylowerpackagingcommodityandfuelcosts.

Finally,regardingtheprofitandcashheadwindfromforeigncurrencythatweexpectthisyear,ifweapplyforeignexchangeratesattheendofOctobertoourresultsforthefourthquarterof,itwouldreduceunderlyingpretaxearningsforthatperiodbyapproximately$millionandtheimpactoncashwouldhavebeenevenlarger.Byaddingtheforeignexchangeimpactonpretaxresultsforthefirstthreequartersofthisyear,wearriveatafull-yearforeigncurrencyimpactofnearly$millionversusourconsolidatedpretaxresult.

AtthispointI'llturnitbackovertoMarkforoutlook,wrapupandtheQ&A.Mark?


Thanks,Gavin.InadditiontotheforeigncurrencyheadwindthatGavinjustmentioned,ourresultsinthefourthquarterofthisyearwillcontinuetobeaffectedbytheterminationofmajorbusinesscontracts




whichweanticipatewillhaveafull-yearprofitimpactof$millionpretax.Additionally,weplantosignificantlystepupourportfolioinvestmentsinthebalanceofthisyear,particularlyintheUSandCanada.

Theseinvestmentswillhaveanegativeimpactonthefourth-quarterbottomlineresults,butweexpectthemtoprovidebenefitslongtermaswefocusondelightingourconsumersandourcustomerstoensurewearethefirstchoicebrewerinthegeographiesandsegmentswherewechoosetoplay.

Regionally,intheUSwearedrivingthreekeypriorities.Jobnumberoneistotransformourportfolioandreignitevolumegrowth.We'retargetinggettingourvolumetrendtoflatinandgrowthinforthefirsttimesinceMillerCoorswasformed.

Todothiswehavethreefocusareas.Firstly,takingshareingrowingourAmericanlightlagers,CoorsLightandMillerLite.AspartoftheCoorsLightoverhaul,wearerollingoutanewcontemporaryvisualidentityacrossallpackaging.Wehaveanewleadadagencyonthebrandandwe'llhavenewnationaltelevisionadvertisinginthemonthsaheademphasizingCoorsLight'sRockyMountaincoldrefreshmentheritage.

Secondly,continuingtopremiumizetheportfolioandfurtherdevelopabove-premiumofferingsthathavethepotentialtobuildscalequicklyandsustainably.ExamplesincludethesuccessfullaunchesofBlueMoonWhiteIPAandLeinenkugel'sgrapefruitshandythisyear,aswellastheacquisitionofSaintArcheranditsexcellentcraftbrands.Thirdly,we'vebeguntheprocessofsimplysimplifyingandclarifyingourbelow-premiumportfoliooffering.

Jobnumbertwoistoimproveourcommercialcapability,includingwinninginon-premiseandincreasingtherelevanceofourbrandsinthiscriticalchannelwherebrandsarebuilt.Andjobnumberthreeistoensurethatourcostbaseiscompetitiveandsetforthefuture,includingclosingourEatonbrewerynextyear.Consistentwithourpriorities,weintendtoinvestsignificantlyinourbrandsandinformationtechnologyinthefourthquarter,includingbeginningaseriesofenterprisesystemramp-upsstartingwiththeShenandoahbrewery.

WecontinuetoexpectourUSunderlyingoperatingmarginsforfull-yeartoberelativelyflatversusprioryear.Wewillbedisciplined,decisiveandaccountableandremainlaserfocusedongrowingourbusinessintheUnitedStatesandtransformingtheMillerCoorsportfolio.

InCanadawecontinuetoinvestinourcorebrandsandabove-premiumincludingcraft,importsandflavoredmaltbeverages.Incorebrands,thenewadvertisingcampaignandincreasedfocusoncommercialexecutiononCoorsLightareshowingearlypositivesigns,particularlyinourhighestshareregions.TheinitialconsumerresponsetoourlatestadvertisingcreatedforMolsonCanadianhasalsobeenpositive.Inthefourthquarterweareagaininvestingaggressivelyintheseprograms.

Inabove-premium,ourportfolioisbenefitingfromthestrongperformanceofCoorsBanquet,MadJackAppleLager,RickardsRadlerandMolsonCanadianCiderbrands,alongwithDosEquis,Tecate,Sol,andStrongbow.BelgianMoonisalsoperformingwellafterthreemonthsintheCanadamarket.

InEurope,theterminatedModelloandHeinekencontractsintheUKwillcontinuetopresentaheadwindinthefourthquarter,aswillthenewamortizationexpenseforthebrandsthatweimpairedthisquarterandmovedtodefinitelived.InsomeEuropemarkets,wecontinuetoseeconsumermigrationtovaluebrandsandincreasedcompetitivepricing.We'llcontinuetoinvestinourcorebrandportfolioacrossEuropetoensurethatthesebrandsremainrelevantandcontemporaryforourconsumers.

Inthethirdquarter,themajorityofourleadbrandsgrewvolumeincludingOzujsko,Staropramen,BergenbierandBorsodi.Inthebalanceofthisyear,ourEuropeteamwillberampingupforthefull




repatriationoftheStaropramenbrandintotheUKstartingonJanuary.AdditionallyweareimplementingsignificantnewinitiativestofurtherimprovetheefficiencyandeffectivenessofourEuropeanoperationsandprovidemoreresourcestoinvestindrivingtop-lineandbottom-linegrowth.

Asamostrecentexample,weannouncedearlierthisweekthatwehavemadeaproposalandenteredintoaconsultationprocessintheUKtocloseourBurtonSouthBreweryandconsolidateproductionwithinourrecentlymodernizedBurtonNorthbrewerybytheendofSeptember.Ourinternationalbusinessisfocusedonattainingprofitabilityinonaconstant-currencybasisandacceleratingouroverallgrowthandexpansioninnewandexistingmarkets.

We'llcontinuetodriverapidgrowthforCoorsLight,developCoorsinLatinAmerica,includingintroducingthesebrandstoconsumersinthehigh-potentialColumbiamarket.We'llalsocontinuetobuildonStaropramen'smomentumingreaterEuropeandaugmentrapidgrowthinourexistingIndiabusinesswithgrowthfromournewlyacquiredMountShivalikBreweriesoperation.

Finally,herearethemostrecentvolumetrendsforeachofourbusinessesearlyinthefourthquarter.IntheUSthroughOctober,STRsdecreasedalowsingle-digitrate.InCanadathroughOctober,STRsweredownlowdoubledigits.ExcludingtheMillerbrands,lastyearourCanadaSTRsdecreasedahighsingle-digitrate.

InEuropeinOctober,salesvolumewasdownmidsingledigits,partiallyduetothelossoftheModellobrandsintheUK.Ourinternationalsalesvolume,includingroyaltyvolume,increasedatdouble-digitratesinOctober.Nowasalways,pleasekeepinmindthatthesenumbersrepresentonlyaportionofthecurrentquarterandtrendscouldchangeintheweeksahead.

Sotosummarizeourdiscussiontoday,inthethirdquarterwegrewourworldwidevolumeandconstantcurrencynetsales,increasedourgrossmarginsandinvestedsignificantlymoreinourbrands.Underlyingearnings,however,werelowerduetounfavorableforeigncurrencyandtheterminationofcontractsthisyear.

There'sbeenagreatdealofnewsflowaroundtheglobalbeercategoryinrecentweeks.Notwithstandingthis,ourorganizationremainsfocusedonourstrategyofdrivingbrand-ledprofitgrowth,meaningfulcashgenerationanddisciplinedcashandcapitalallocation.WeremainresolutewhenutilizingPACCasourkeybusinessdecisionframework,usingourcashtorewardinvestorsandensureahealthybalancesheet,reducingcoststoprovidefront-endfirepowerandmakesomethingsmartinvestmentstodelivervalue-enhancinggrowthopportunities.

Ourstrategyisunderpinnedbyhighlyengaged,passionateandinspiredpeoplewiththeambitiontobefirstchoiceintheeyesofourconsumersandcustomers.NowbeforewestarttheQ&Aportionofthecall,justfirstafewpersonalcommentsaboutGavinashetransitionsfullytotheCEOrolewithinMillerCoors.

ThisisGavin'sthquarterlyearningscallandIthinkeverybody'scometorecognizehistransparentandproductiverelationshipswithbothouranalystsandinvestorcommunities.He'sbeenanintegralpartoftheMolsonCoorsstrategyinprogressoverthelastthreeyears.AndthegoodnewsisthatGavinwillremainamemberofourExecutiveTeamhereatMolsonCoors.

So,Gavin,fromme,justabigpersonalthankyouandbestwishesasyoubecome%focusedonMillerCoorsasCEO.Yougowithourbestwishes,Gavin.


Thankyou.





InordertohelpGavinfocushisfullenergyandattentionontheMillerCoorsbusiness,I'mpleasedtoannounceourEuropeCFO,DavidHeede,willbesteppingintotheGlobalCFOroleonaninterimbasisasweworktofinalizetheselectionprocessforGavin'ssuccessorhereatMolsonCoors.DavidhasmorethanyearsofleadershipexperienceinmanyareasofourCompany,andhasplayedacentralroleintheverysuccessfulintegrationofourCentralEuropeandUKbusinesses.DavidwillhaveastrongGlobalFinanceteamsupportinghimandIhaveeveryconfidencehewillnotmissabeatinthiscriticalareawhilewecompletetheglobalCFOsearchprocess.

Andthenfinally,asusual,ourpreparedremarkswillbeonourwebsiteforyourreferencewithinacoupleofhoursthisafternoon.Also,atPMEasterntimetoday,DaveDunnewaldwillhostafollow-upconferencecallwhichisanopportunityforyoutoaskadditionalquestionsregardingourquarterlyresults.ThiscallwillalsobeavailableforyoutohearviatherecordedWebcastonourwebsite.

Atthispoint,Operator,we'dliketoopenitupforquestions,please.Thankyou.

QUESTIONS&ANSWERS

Operator :

(OperatorInstructions)

VivienAzerfromCowenandCompany.

VivienAzer (Analyst-Cowen):

Hi,goodmorning.


Hi,Vivian.


MyfirstquestionhastodowiththepricemixinEurope.IfullyappreciatethelossofModelloisadragthereandyoucalledoutlowercontractbrewingvolumeandnegativemix.I'mtryingtokindofgetasenseofwhat'shappeningkindofunderneaththat,givenyourcommentaryonsomeintensifiedpromotionalactivityandatoughercompetitivelandscape.IfyoucouldelaborateonpricemixinEurope,thatwouldbehelpful.


Thanks,Vivian.I'llaskSimontopickuponthat.Simon,doyouwanttojusttalktoalittlebitmoreofthedetailwithregardtoourEuropeperformance?

SimonCox(CEO,MolsonCoorsEurope):

Sure.Sothanksforthequestion,Vivian.Whenyoulookatourpricemix,pricingacrossEuropewasactually.%positiveacrosstheregionandsoallthedragonnetsalesper--netsalesrevenueperhectoliterwastodowithmix.Andactuallyyoumoreorlesscorrectlycalledoutthetwomaindriversofthatduringyourcommentary.I

ItisverymuchtodowiththelossofModellobrandsintheUKandthefactthatthecontractmanufacturingrevenueisobviouslyputintoournetsalesrevenueline,butdoesn'tactuallyattractanyofthehectolitersbecauseobviouslyit'snotourownsales.Thathasquiteasignificantimpactonthe




overallNSRperhectoliter.Thereisn'ttoomuchothercolortoadd.

We'reactuallyverypleasedwiththewaythebrandsareperformingacrossboththeUKandtheCentralEuropeanregionsoitisitreallypricingmarginallyupandmixdrivenbyModelloandcontractmanufacturingisthedrag.


Thanks.


Justafollow-upon--sorry.Justafollow-upon--isitfairtosaythatmoremutedpriceincreasesarereasonabletoanticipatekindofjustgiventhebroadermacroenvironmentintheEU?


Asyouknow,wedon'tgiveforwardguidanceonpricing,buthistoricallyifyoulookintoourperformanceoverthelastthreequarterswe'vepursuedasensiblebalance,Ithink,betweenvolumeandpricing.Weareorientatingourportfoliomuchmoretowardsmaintainingstrongpositionsinourcorebrandsandensuringthatinpocketsofvaluegrowth,likecider,craftbeerintheUK,premiumbrands,StaropramengrowthinCzechRepublic,theseareallthingsthatcansupportoverallpricinggrowthandthat'swherewe'reorientatingourportfolio.

That'sbeenworkingwellforus,Ithink,overthepastthreequartersandthat'swhatwe'regoingtocontinuetofocuson.


Terrific.Thankyouverymuch.

Operator :

YournextquestioncomesfromthelineofIanShackletonfromNomura.Yourlineisopen.

IanShackleton (Analyst-Nomura):

Goodmorning,gentlemen.ObviouslyGavinsetoutsometargetsofvolumegrowthforMillerCoorsgoingforward.Ijustwonderwhattheassumptionsaroundthatwereonpricemixandwhetherweassumethelowernumbersthatyou'vebeenreportingtoday,Ijusthave%asthesortofguideline.Whatshouldweexpectinthefutureonthehigh-endnumbersthatwe'vehadinthelastcoupleofyears?


Hi,Ian.Thanksforthequestion.I'llletGavingetintothedetails.Butobviouslytheprincipalresponseiswedon'tgiveanyguidancewithregardtofuturepricing.

Gavin,doyouwanttotalkalittlebitmoreabouttheambitionwe'vesetoutintermsofgettingbacktoflatvolume?


Right.Wedo,Ian,wanttobeflatinandgrowin.We'vegotaveryclearstrategyandveryclearplanstoachievethat.ItrequiressignificantfocusonourpremiumlightbrandsofCoorsLightandMillerLiteandwe'reverypleasedthatwe,inthethirdquarter,hadthebestperformanceinthosetwocombinedbrandsinoverthreeyears.Anditdoesrequireustotransformourportfoliomoreintotheabove-premiumand




getreallyspecificaboutwhatwe'redoingwithoureconomybrands.


Thankyou.


Morebroadly,ourmedium-termguidanceintermsofpricinghasn'tbeenupdatedforourUSbusiness,sothat'sanothercolorIwouldadd.


Verygood,thankyou.Justaquickfollow-up.You'vegonethroughthelastcoupleyears,surprisesquiteafewofthosequartersonthetaxrate,onthepositiveside.Soit'scomingbeneathwherewe'dexpect.We'vegotanotherexampleofthattodayandforthefullyear.Canyoujustgiveusalittlebitmoregranularitywhatishelpingparticularlyinthisquartertobringdownthatrate?


Thanks,Ian.Look,theonethingwecan'tpredictiswhenwe'regoingtoresolveuncertaintaxpositions.Theyareuncertainforareasonandobviouslywecan'tpredictwhenweresolvethemandwe'regoingtoresolvesomeuncertaintaxpositionsinthethirdquarter.

Havingsaid--thelargechunkofthereductionto%to%isrelatedtothat.Andwehaven'tchangedourlonger-termguidanceof%to%andintheshorterterm,forexample,nextyearweexpecttobeclosertowardsthelowerendofthat.Thatremainsunchanged.

Ifyouwanttogetafeelforthelevelofuncertaintaxpositionsthatarestilloutthere,ourformalSECfilingsoftheQswouldgiveyousomeguidanceonthat.


Verygood.Thanks.Thankyou.


Thanks,Ian.

Operator :

YournextquestioncomesfromthelineofJudyHongfromGoldmanSachs.Yourlineisopen.

JudyHong (Analyst-GoldmanSachs):

Goodmorning,everyone.


Hi,Judy.


OnCanada,Mark,IthinkImayhavemissedtheOctoberSTRnumberexcludingtheMillerbrands.





Itwashighsingle-digitdecline.


Anyreasonwhyitwassoworsesequentially?


Stuart,doyouwanttojustgivealittlebitofaflavorastowhatyou'reseeinginCanadacomingthroughthethirdquarterandanycommentaryaroundthestartofthefourthquarter?

StewartGlendinning (CEO,MolsonCoorsCanada):

Judy,overallthemarketwasmuchhealthierinthethirdquarterbenefitingfromsomewarmerweather.Ourportfoliowasinamuchbetterplace.Goingintothefourthquarter,nothinghaschangedandthatportfolioisstillrobust,activitylevelsstrong.

ReallytheonlybigiteminOctobertopointoutisthatthere'sonelesstradingdayinOctober.Butotherthanthat,there'snothingmaterialthat'sgoingoninthemarketplace.


Gotit.Okay.Somaybejustacalendarissueasopposedto--


TheotherthingIwouldaddis,aspermypreparedremarks,ifyoulookatourSTRsforthethirdquarter,whenyouexcludethelossoftheMillerbrands,ourvolumehasbeenabout.of%.Onanunderlyingbasis,Iwoulddescribeourvolumeperformanceasreasonablysolid.


Okay.Andthen,Stuart,justmaybeifwecangetanupdateonyourbreweryoptimizationplaninCanada.We'veheardalittlebitduringthequarterintermsoftheVancouverandIthinkpotentiallymaybeanupdateontheMontrealside.Sowhataresomeoftheupdatesthatyoucanprovideuswithrespecttotherecentannouncementsandhowyouwouldplantokindofoptimizeandthemarginimpactthatwouldhaveinandbeyond?


Okay,Judy.Notalotwecansay,obviously,onmarginsincewedon'tgiveanyforwardguidance.ButgoodnewscomingoutofVancouverforsure.Thatwasanoldbrewerythatwasgoingtoconsumeabunchofcapitalandwehavebeenabletolockincontractforsaleoftheproperty.Broadly,thesaleofthatpropertywillfundtheconstructionofanewbreweryandwhenwemoveintothatnewbrewery,weshouldexpecttoseelowergoingforwardCapExandtheloweroperatingcostsonthatbrewery.

InMontreal,wehaveasimilarstudyunderwaytounderstandwhetherweshouldinvestinthecurrentbrewery,ortoinvestinanewbuild.AndIwon'thavetheanswertothatquestionuntillikelyearlynextyear.Overall,Ithinkwe'vegotaverystrongplanforreshapingthesupplychaininCanadaand,ofcourse,that'soneofthethingsthat'sdrivingtheestimatesofsavingsthatGavin'sprovidedtotheStreet.


IfIcouldjustfollowup.IfIthinkaboutfromacapacitystandpointinCanada,itseemslikebecauseyou'rebuildinganewbreweryinVancouverthecapacitynumbersreallydon'tchangemuchinCanadadespitesomeofthevolumedeclinesthatwe'veseeninthelastfewyears.Canyoujustcommentonwhyyou




wouldn'tnecessarilytakeoutmorecapacityinlookingatthebreweryinCanada?


Ineveractuallyspoketothecapacitytoconcludewhetherwewouldtakeituportakeitdown.WhatIwillsayiswe'regoingtobuildthebrewerytoprovidethebestoperatingefficienciesforourCompany.Andmoreimportantly,whatyougetwithanewbreweryistheabilitytodrivemoreflexiblebrewing.

Ifyoulookatwhat'sgoingoninthemarkettoday,it'simportanttobeabletoprovideawiderangeofbrewsizestoaccommodatethesmallerbrewsandbigbrews.SoIthinkwe'llgainalotfromthat.Butyoucanrestassuredthatright-sizingourcapacityisakeypartofourplan.


Gotit.Okay.Thankyou.

Operator :

YournextquestioncomesfromthelineofJohnFaucherfromJPMorgan.Yourlineisopen.

JohnFaucher (Analyst-JPMorgan):

Thankyou.QuestionforGavin.Gavin,whenyoutalkedaboutsortofthechangesintheUSbusiness,particularlyonCoorsLight,itwasafocus,Ithink,onanewagencybutsortofthesameRockyMountainheritage.

Soisthatasignthatthemessageisn'ttheissue,it'sbeenthedeliveryoftheadvertisingortheamountoftheadvertising?Istheresomelessonlearnedtherethatweshouldgleanfromthefactthatthecampaignideagenerallystaysexactlywhereitis?


Thanks,John.Iwouldsayacoupleofthingsthere.Obviouslychanginganagency'snotgoingtochangethedirectionoftheCoorsLightbrand.It'sthetotalpackageasitrelatestoCoorsLight.Soournewbrandidentitywhichwelaunchedinthesecondquarterandwhichreallygotcompletelyrolledoutinthethirdquarterispartofthat.It'sbeenextraordinarilywell-receivedbybothdistributors,customersandretailersalike.

We'repleasedwiththeperformanceinCoorsLightwhichhasbeendrivenlargelybythatoverthelastcoupleofquarters.AndasDavidsaidonthismorning'scall,CoorsLight'sperformanceinthethirdquarterwasthebestthatwe'vehadforquitesometime.Ournewabove-the-linemarketingcampaignwillbefocusedonRockyMountaincoldrefreshment.Therewillbeadifferentwayofexpressingthat,though,thanyouhaveseeninthepast.

Andthirdlywe'reputtingsignificantlymoremoneybehindCoorsLight.Weputlarge--meaningfullymorebehindCoorsLightinthethirdquarterandwe'reseeingtheimpactofthat.SoIwouldn'tpointtoitjustbeinganyonethingbutatotalpackageofwhatwe'redoingonCoorsLight,John.


John,it'sMarkhere.TheonlythingIwouldaddtothatisifyoulookacrosstheglobalfootprintofCoorsLight,RockyMountaincoldrefreshmentisnotupfordebate.That'swhatthebrandstandsfor.That'sitsabsolutebedrockandweconsistentlydramatizethatacrossallofthemarketsthatweexecutethebrandin.




ClearlytoGavin'spoint,howwedramaadvertiseitintheUSisgoingtobe[evolved],butitwillstillbeverymuchaboutbringingtolightRockyMountaincoldrefreshmentinawaythat'scontemporary,relevantanddistinctive.AndDavid[Kroll]thismorningspoketotheneedforusactuallytodevelopcampaignideasintheUSthathavegotlongevitysothatwecangetbehindsomethinganddriveitoverthemediumtolongtermasopposedtochangingcreativeideasonanannualorbiannualbasis.ButRockyMountaincoldrefreshmentisabsolutelytheheartofwhatCoorsLightstandsfor.

JohnFaucher (Analyst-JPMorgan):

Okay.Great.Thankyou.

Operator :

YournextquestioncomesfromthelineofPhilippeGrusonfromMUFG.Yourlineisnowopen.

PhilippeGruson (Analyst-MFUG):

Yes,goodmorning,gentlemen.Canyouhearme?


Yes.


Goodmorning.Thanksfortakingmyquestions.Actuallyhaveatwo-partquestion,ifImay.Thefirstoneiswithregardtotheacceleratedsharerepurchaseprogram.Doyouhaveanycommitmentsbeyondthe$millionthatyoutalkedaboutforthecurrentquarter?

Andthenthesecondquestion,tryingtobeveryrespectfulofDave'squestion--requestnottotalkaboutanypotentialactivityinthespace,butifImayperhapsaskamoreholisticquestion.Justtalkalittlebitaboutcapitalallocationaswehavetalkedaboutitinthepast.Ifyouweretofaceaonce-in-a-lifetimeopportunity,havetheMolsonandCoorsfamiliesevertalkedaboutthempotentiallycontributingnewequityifthatweretoberequiredinordertomaintainaninvestmentgraderating?Thankyouverymuch.


Okay.Soletmetryanddealwithbothofthosequestions.Onthefirstquestiononthesharerepurchaseprogram,we'vesetouta$billionrepurchaseprogramoverfouryearswiththemajorityofthattowardsthelatterhalfofthatprogram.

We'veconfirmedwhatwe'vedoneinthethirdquarterandwhat'slikelytohappeninthefourthquarter.Onournextearningscall,we'llupdateyouwithregardtoprogressonthatprogram,sothere'snonewnewswithregardtooursharerepurchaseprogram.

Withregardtocapitalallocations,Idon'tthinkthiscall'sthetimeorplacetogetintodiscussionsaboutwhatthepreferenceisofeithertheMolsonortheCoorsfamilywouldbeundercertaincircumstances.Thefamilieshavebeenlong-terminvestorsinthebeerindustry.We'retalkingcenturieshere,notjustquarters.Andthey'vesaidthey'reverycommittedtothelong-termvitalityofourorganization.Soasopportunitiescomeandgo,wewillconsiderthemappropriatelywithourBoard.ButthosewillbeconfidentialBoarddiscussions.


Veryhelpful,Gavin,Ireallyappreciateyourcomments.Thankyou.





Thanks,Philippe.

Operator :

YournextquestioncomesfromthelineofBryanSpillanefromBankofAmerica.Yourlineisopen.

BryanSpillane (Analyst-BofAMerrillLynch):

Hey,goodmorning,everybody.


Hi,Bryan.


Justtwoquestions.OneisinEurope,Ithinkinthepressrelease,there'samentionoftherewasareservethatwasreleasedduringthequarter.Couldyougiveusasenseofjusthowmuchofanimpactthathadonprofits?


Doyourememberthespecifics?Thereservereleasedlastyear.SimonorDavid,doyouhavethat?


Wedidn'tgivethespecificnumberlastyearbutwesaiditwasafactorinourresultsinthirdquarterof,butnospecificnumber'sbeenprovided.


Okay.Allright.Thanks.Andthen,Iguessmorebroadly,justaswe'rethinkingaboutfreecashflow,thisyearwehadafewitemsthatnegativelyaffectedfreecashflow.Iguessaswestartthinkingforwardfromhere,istheVancouverbrewery--IguessIunderstandthat'sgoingtobenetcashneutralonceyousellthepropertyandbuildbutisthereaperiodoftimewherethatwillpotentiallybeadragonfreecashflow?

Andthenalso,intermsofpensions,withinterestratesstillhavingnotmovedyetorjustthewaythemarketshavebehaved,isthereanythingthatweshouldbethinkingaboutintermsofpensionsthatmightcauseyoutohavetocontributemoreagain,Iguess,nextyear?


Gavin,doyouwanttotakethat?


Sure.Brian,wehaven'tgivenanyguidanceforandbeyondoncashflowatthisstage.IguesstheonlypointthatIwouldmakeisthatifwedidbuildabrewery,itwouldbeovermultiyears.Youdon'tnecessarilyjustbuildintheoneyear.Iguessthat'sallIcansayonthatparticularpoint.

Asfaraspensioncontributionsareconcerned,IthinkourrequirementsundertheUKpensionplan,whichforMolsonCoorsremainsourbiggestpensioncashcontributionarea,arequiteclearlylaidoutinourfinancialfilings.Soyoucanhavealookatthosethere,Brian.Asyouknow,we'vemadeaone-off




contributionthisyearwhichimpactsthecontributionsthatwehavetomakeintheouteryears.It'sveryclearlysetoutthere.


Gavin,justoneotheradditionalperspective.Brian,ifyoulookbackatthechangeswe'vemadeinourUKsupplychainoverthecourseofthelastfiveyears,we'vefundamentallytransformedandmodernizedourmanufacturingfacilitiesintheUKandwe'vemanagedtodothatallwithinwhatyoudescribeasaprettynormalcapitalenvelopewithinourbusiness.WeexpecttobeabletodosomethingsimilarinCanadalookingatthecashthatwe'llsecurefrom,forexample,theVancouverBreweryandlandsaleandtherequirementtocontinuetomodernizeourbrewerynetworkinCanada.

SoIthinkourtrackrecordspeakstoourabilitytomodernizeourmanufacturingfacilitiesanddothatinawaywhichiswithinarecognizedcapitalenvelopeinthebusiness.


That'shelpful.


OneotherthingI'dliketojustclarifythere,Bryan,yousaidtheproceedsandtheinvestmentswouldoffseteachother.Butintermsofhowthat'sdisclosedincashflow,theproceedsfromthesaleoftheVancouverpropertywouldnotbeincludedinunderlyingfreecashflowbutcapitalinvestmentswould.


Okay.Thankyou.


Thanks,Bryan.

Operator :

YournextquestioncomesfromthelineofMarkSwartzbergfromStifelNicolaus.Yourlineisopen.

MarkSwartzberg (Analyst-StifelNicolaus):

Yes,thanks.Goodmorning,guys.AfewquestionsonCanada.Onejustatechnicalone.Thedownhighsingle-digitscommentextheMillerimpactforOctober,whatwouldthatnumberbeifwehaveitonanequalsellingdaysbasis?


That'sagreatquestion.I'llbeimpressedifyouknowtheanswertothat,but,Dave,doyouwantto--


It'ssomewherearound%,Bryan,(sic)but--yes,soit'srightaround%isthetechnicalanswer.


Okay.Down%forthemonthofOctober,excludingtheMillerimpactonanapples-to-applesdaysbasis?





Apples-to-apples,onelesstradingdayequatestoabout.%-somethingbutrounditto%ifyouwant.


Great.AndthenthetotalbrewingcapacityinCanada,haveyoudisclosedwhatthatfigureis?Canyoudisclosewhatthetotalbrewingcapacityacrossthecountryis?


Tomyknowledgewehaven'tdisclosedthat.Ithinkthemoreimportantthingisjusttorecognizethataswereshapethesupplychainfootprintforthecountry,ofcourse,we'regoingtobelookingatwhatourneedsare,whatkindofbrewingwe'regoingtobeundertakingandwherebesttobrewitandcapacitywillbewrappedintothat.


Okay.Fairenough.Gotit.AndthenIguessthelastonCanada,Mark,allofyou,youhavethisgoalofimprovingabove-premiumcraftandciderperformance.Ithinkyou'vebeenveryclearabouthowthatlookshereintheUSandthere'ssomerealprogressthere.

Ithinkthere'sprogressthereinCanadaaswell.Butcouldyoutalkalittlebitabout--moreabouthowwell-positionedyouarepresentlyforthatandwhatthetrendsinthatcomponentofCanadalooklike?


Mark,wasthatanMCBCquestionoraCanada-specificquestion?Sorry,youbrokeupalittlebitjust--(multiplespeakers)


SpecifictoCanada.Ithinkwehavegoodvisibilityonhowyou'repositionedhereintheUS.WithCanada,Iwaswonderinghowyou'repositionedandhowtheoutlookagainstthatobjectiveis?


Justinheadlineterms,StewartandtheteamarereallydrivingthreebigchangeinitiativesacrossourCanadianbusiness.Firstly,transformingoursupplychainandmakingsurethatwereallyarefitforfuture.

Secondly,ensuringthatourcoststructureagainiscompetitiveand,thirdly,we'reworkingveryhardontransformingtheportfoliowhichincludesdrivingfurtherintoabove-premiumandcidercraft,etcetera.So,Stewart,doyouwanttogiveabitofcolorontheprogressthatyou'vemadeoverthelastcoupleofyearsandthemomentumthat'sbuildinginthatparticularpartoftheportfolio?


Certainly,Mark.Allofthechangesprimarilythathavetakenplacehavebeenatthetopendoftheportfolio.We'vebeen,asyouknow--wehavetheSixPintsteamherewhichisourequivalentinCanadaofTenthandBlake.Thatgroupwithtwobigcorebrands,GranvilleandCreemore,havebeendrivingthosebrandsacrossthecountry,socraftportfoliogrowingrapidly.

WealsorecentlyintroducedBelgianMoonintoCanada.Thatreception'sbeenverywarm.We'restronglyencouragedbytherateofsalethatwe'veseeninthosewherewebroughtthatbrandintocustomers.Andthen,ofcourse,thebiggestlaunchofallsofarhasbeenCoorsBanquetwhichwebroughtinatapremium-pricepositionandthat'sbetterthanaoneshareofthemarketnow.SoI'dsaythosearethebigones.




Ontheappleside,ofcourse,we'vegottwoveryquick-growingciders,whichistheStrongbowandMolsonCanadianCider.AndthenthisyearwelaunchedMadJack,whichisanapple-flavoredlager.Soallofthoseapplevariantsareperformingstrongly,allofthemplayingattheupperendofthemarket.


Great.Andwhenyouthinkaboutyourviewofwheretheconsumer'sgoingagainstthoseopportunities,isitrighttothinktuck-insandinnovationandjustgoodspendingandplansagainstthebrandsthatalreadyexistthere,that'showyouthinkaboutexecutingfurtheragainstthatgoal?


Ithinkthatmakesalotofsense.Iwillsayit'simportantjusttounderstandthedynamicsacrossthebroadmarket.Thereareconsumerneedsateverysegmentofthemarketandtoexcludeoneattheexpenseoftheotherdoesn'tmakesense.Premium'sahugepartofourbusinessandsothatremainsanimportantfocusininnovationaswell.


Gotit.Gotit.Okay.Great.Thankyou,Stewart.Thanks,everyone.

Operator :

Yournextquestion--


I'msorry,Brian(sic).Imeanttomentiononepartofthemarketalso.Asyouknow,thisyearwehavealsobroughtintheFEMSAbrandsandtheDosEquisandSolhavefilledaniceholeintheportfolioandthey'realsogrowingwell.


Thanks,Stewart.

OperatorYournextquestioncomesfromthelineofRobOttensteinfromEvercore.Yourlineisopen.

RobOttenstein (Analyst-EvercoreISI):

WonderingifyoucanyoutalkalittleaboutyourplansandstrategyforCoorsLightoutsideoftheUSandCanada?AndmaybeperhapsstartbygivingussomesenseofwhatpercentageoftheCoorsLightvolumesareoutsideofUSandCanada?Howmuchtheygrewinthequarterand,onaverage,roughlyhowthey'repositionedpricewiseoutsideofNorthAmerica,whatpercentageofmainstreampricing,please?


Hi,Rob,it'sMarkhere.LetmegiveyoualittlebitofcontextandI'llaskSimontotalkabouttheCoorsLightprogressinUKandIrelandandthenKandytotalkmorebroadlyaboutourotherinternationalmarkets.

Wedon'tofferapercentageofourvolumerelatingtotheproportionofCoorsLightoutsideofNorthAmerica,butit'sintomillionsofhectoliters.I'llgiveyouasenseofscaleandthroughthequarterwegrewat%outsideoftheUSandCanada,soit'sameaningfulpresence.It'sgrowingveryrapidly.SoclearlywithintheUKandIrelandthatbrand'sbeentherenowforapproximatelyadecade.




Simon,doyouwanttogiveabitofflavorforthemomentumyou'reseeingandthenKandycantalkmorebroadlyoutsideofUKandIreland.


Certainly.Thankyouforthequestion.CoorsLighthasbeenperformingasoneofthestrongestperformingbrandsinthemarketnowforoverthreeyears.Andthisquarterisnoexception.We'veseendouble-digitgrowthofCoorsLightintheUKandIrelandthisquarter.

Andbasicallyit'sjustabrandthatcontinuestoworkextremelywellforourconsumersandforourcustomersandforus.Intermsofansweringyourquestionaroundpricingindex,ittendstobepricedabovethemainstream.Intheon-trade,ifyouwalkintoatypicalEnglishpub,you'llseeCarlingonthebar'smainstreampriceandyou'llseeCoorsLightgenerallyata%to%premiumtothat.

That'sasimilartrendintotheUKoff-trade,although,ofcourse,that'salittlebitmorevolatilebasedonwhattendstobequiteadiscount-drivenoff-trademarket.ButgenerallyitcommandsapremiumtomainstreampricingandintheUKandIrelandiscontinuinginreallystronggrowthforus.Soveryimportantbrandinthatportfolioanddoingextremelywell.


Terrific.That'sgreat.AndintermsofIndia,canyougiveusasenseofwhattheorganicvolumegrowthwasthere?


So,Rob,considerdoesn'tKandyjustgiveyouaflavorforwhat'shappeningwithCoorsLightand--


Sorry.


--andtalkspecificallyaboutIndiaperformance.Kandy.

KandyAnand (CEO,MolsonCoorsInternational):

Thanks,Rob.Asyouknow,CoorsLighthasbeenourengineofgrowthforusforseveralquartersinthelastcoupleofyears.ItcontinuestogrowverystrongdoubledigitswithabigfocusinLatinAmerica.ItgrowsonthebackofanearlieranswerthatMarkgaveonRockyMountaincoldrefreshment.We'reverymuchfocusedonthatpositioning.Webringittolifethroughmarketingprograms,placementofcoolersandworkingwithourpartnersonsalesexecution.Andweseethatgrowthcontinuinginthefuture.

WealsospokeaboutanexcitementaboutourlaunchinColumbiawhichactuallyhappensnextweekandwe'redoingthatinpartnershipwithCCC,whichisajointventureofCCUand[Ostaval]inColombia.Sothat'sonCoorsLightoverallintheinternationalbusiness.

We'vealso--youaskedaboutIndia.OnIndia,we'reverypleasedwithourprogressthisyear.Ouroverallvolumeshavegrowntripledigitalongwiththeacquisition,butjustontheorganicbasiswithouttheacquisition,ourvolumesarealsogrowingdouble-digitthere.Soatthispointoftimewe'restillinthethreestepsthatwespokeaboutduringtheJuneconferenceandcontinuetodriveourbusinessthroughthat.





And,Kandy,intermsoftheCoorsLightpricinginLatinAmerica,isitalsoa%to%premiumtomainstreamorisitahigherpremiumthere?

KandyAnand (CEO,MolsonCoorsInternational):

Ishouldhaveaddressedthat.It'stypicallyatahigherpremiuminthosemarkets.Wetendtohaveapricingof,ontheaverage,%abovethemainstream,but,ofcourse,variesbymarket,maybealittlebitlessthanoneandmoreintheother.Ontheaverage,wetargeted%ishpricingpremium.


Terrific.Thankyouverymuch.


Thanks,Rob.

Operator :

(OperatorInstructions)

OurnextquestioncomesfromthelineofBrettCooperforConsumerEdgeResearch.Yourlineisnowopen.

Brett Cooper (Analyst-ConsumerEdgeResearch):

Hi,guys.Afewquestions.Inthepastyou'veconfirmedimpairmentsinEuropewereafunctionofspecificbrands.Andthenifyoulookedattheportfoliointotal,theappreciationinvalueofnonimpactedbrandsoffsetthebrandswhereimpairmentshavebeentaken.Canwegetasimilarconfirmationtodaygiventheimpairmentsinthequarter?


Sorry,Brett,couldyoujust--therewasalotinthatquestion.Couldyoujustrepeatthatagain,please?Apologies.


Noproblem.Ithinkspecific--whenyouguystakeimpairmentsontheEuropeanbrands,it'sbrandspecificandwhatyousaidinthepastisthatifyoulookatthevalueofStaropramen,itoffsetstheimpairmentsyou'vetaken.Andsincewehaveanewimpairmenttoday,Ijustwantedtomakesurethat'sstillthecasethatsortofthetotalportfolio,ifyouwill,isbetteroffintermsofintangiblesthanwhenyouboughtthebusiness?


Thatiscorrect.Sowe'reseeingverystrongperformanceasyoupointedout,forexample,onStaropramen.Sothat'scorrect,yes.


Perfect.Thanks.Shouldhaveaskedthisthismorning,butintheUS,thebusinesstransformationexpensesthatyoutalkedaboutin,thosecontinue--or,I'msorry,intheendofhere,thosecontinueasyougothroughthetransformationthrough.Isthatcorrectorshouldtheyabateforanyreason?





Yes,that'scorrect,Brett.WecontinuetoincurmeaningfulDTexpensesinandalsoin,althoughataslightlylessereffect.


Andfinally,inCanada,thevastmajorityofthecostsavingsthatyouguysaredeliveringatMolsonCoors,excludingyourshareoftheMillerCoorspiecearecomingfromCanada.Andyou'rebeginningtoseesometractiononwhatyou'redoinginCoorsLight.Isthereaneed,adesiretoreinvestmoreofthosesavingstogetthebusinessbacktosharestability?Thanks.


Brett,Ithinkwelaidoutinthelastquarterthatourintentionwastoinvestincrementallythroughthesecondhalfofthisyear.AndImentionedalreadyonthecalltheeconomicengineofourbusinessisthestrengthofourbrands.Soweremaincommittedtoinvesttobuildourbrandequityandourbrandhealth.

WeupweightedourinvestmentinCanadathroughthethirdquarterandcontinuetoplantodothesameinthefourthquarter,soverymuchinlinewiththeguidancethatwegavearoundthesecondhalfofthisyear.BuildingthestrengthofourbrandsinCanadaisanabsolutepriorityforus.


Perfect.Thankyou.


Thanks,Brett.


We'vegottimeformaybeoneortwomorequestions.

Operator :

OurnextquestioncomesfromthelineofPabloZuanicfromSIG.Yourlineisopen.

PabloZuanic (Analyst-Susquehanna):

Inyourpreparedremarksyousaidthatyouwereplanningonworkingonsimplifyingandclarifyingyourvaluebrands.Sothreequestionsonthat.One,canyouelaborateonwhatyoumeanbythat?Ithinksimplifyingthe[SKUcards]wouldclarifyingthemessage.That'sone.

Two,asyoudefinethem,valuebrandswouldbewhatpercentage,roughly,ofyourvolumesorrevenues?Andthree,again,roughly,ifI'mputtingaCoorsLightEBITmarginversussomeofthesevaluebrands,roughlywhat'sthedifferenceeitheratthegrossmarginlevelorEBITmargin?Thatwouldbeveryhelpful.Thankyou.


Hi,Pablo.Alotofdetailinthat.Gavin,didyoumanagetogetthat?


I'llgiveitashot.IfI'mmissinganything,I'msuresomebodywillcorrectme.Fromasimplificationpontofview,itdoesgotoaSKUsimplification.Imean,wehavealotofbrandsinthatsegmentandwehavealotofdifferentpackages.So,yes,simplifyingthatisakeyfocusareaforus.




Intermsofwhatbrandsareinthere,brandssuchasMillerHighLifewhichhasbeenaroundforoveryearsandisveryclearlydifferentiated,wehavebrandslikeKeystoneinthatareaandthenwehaveregionalbrandssuchasHamms.Somakingsurethatwehaveaveryclearpositioningandmessagebehindthosebrandsistheworkwe'redoing.

ThedifferentiationfromapricepointofviewisitcanbevariedbutifCoorsLightandMillerLiteareat,economycanbeanywherefrominourportfoliofrom%to%ofthat.Andthenfromanoverallportfoliopointofview,whichIthinkwasyourotherquestion,itisaroundaquarterofourportfoliowouldbeinthebelow-premiumsegment.IthinkIcoveredallofthem.


TheonlyotherthingPabloaskedwasaboutmargincomparisonswithinCoorsLightandtherestoftheportfolio.That'snotinformationwe'veputinthepublicdomain.


Otherthanthey'relower.


Understood.Butjusttofollow-up.Thankyouforthat.Intermsofthese[targets]ofreachingflatvolumes,Ithinkitwasor,howisthisparticularstrategysupposedtoplayout?Isthisaheadwindoratailwindintermsofvolumegrowth?Becauseifyou'reguidingSKUs,simplifying,thatwouldmeanpotentiallyareduction.Ifyoucanclarifythat,please?Thanks.


Theeconomyportfoliowoulddefinitelybeaheadwindforusintermsofachievingthat,whichmeansweneedtoperformbetteronthepremiumsandabove-premiums.There'snoquestionaboutthat.


Thankyou.


Thanks,Pablo.

Operator :

AndourlastquestioncomesfromthelineofAndrewHollandfromSocieteGenerale.Yourlineisopen.

AndrewHolland (Analyst-SocieteGenerale):

Hi.Wehaven'treallytalkedmuchaboutEurope.IjustwantedtotrytodistinguishbetweenyourperformanceintheUKandyourperformanceinCentralEurope.Sojustfirstlookingatpricemix,whichyousaywasdowninEurope,isthatentirelyattributabletotheUKandthelossofHeinekenandModello?AndcanyoutellmeifpricemixwasactuallyupacrossyourCentralEuropeancountriesisnumberone.

Andsomethingsimilarforvolume,yousayitwasupinnineoutof.IguessoneofthetwowherevolumesweredownwouldhavebeentheUK,again,becauseofthelossoftheHeinekenandModellobrands.CanyouconfirmthatisthecaseandgiveusanideaofvolumeextheUK?





Hi,Andrew.It'sMarkhere.I'llaskSimontotalkinalittlebitmoredetailinasecond.IdidcoverinmypreparedremarksthefactthatifyoustripoutthelossoftheModellovolumeintheUK,thattheUKbusinesswouldhavebeeninvolumegrowth.Sothatwasoneofyourspecifics.

Wedon'ttendtobreakoutpriceorvolumeinformationonamarket-by-marketbasis.So,Simon,isthereanyadditionalcolorthatyouwouldoffertoAndrew'squestion?


Ithinkyouprobablybroadlycovereditthere,Mark.It'sasimilaranswertothefirstquestionIgave,thatthereductionNSRperhectoliterisalldrivenbythetwofactorsoftheModellobrandsintheUKandthelossofcontractmanufacturing.Andjusttoexplainthatagain,obviouslytherevenuefromcontractmanufacturinggoesintoournetsalesrevenuelinebutthevolumedenominatorofhectolitersonlypertainstoourownbrandsales,soit'sactuallyquiteasignificantheadwindintermsoftheoverallwhatwecalloutasmix.Ifyoustripthatout,ifyoustripModelloout,thenyouwouldgetamorepositivepicture.

Sothat'sreallythemainexplanationthere.PricingacrossEuropeandUKwasprettysimilarandprettysolid.Andthen,asMarkjustalludedto,ifyouremovetheimpactoftheModellobrands,thentheUKbusinesswouldhavealsoslightlygrownitsvolumes.Soifyoutriangulatethatagainsta%overallincreaseinvolume,thatgivesyouanideaoftherelativeperformanceofCentralEuropewhichwasverypositivethroughthequarter.

AndrewHolland (Analyst-SocieteGenerale):

Okay.Thankyou.Thatwasveryhelpful.


Thanks,Andrew.SoIthinkthatconcludesthequestions.SojustonbehalfoftheteamhereatMolsonCoors,I'dliketothankyouallforjoiningusonourthird-quarterearningscall.Justasareminder,DaveDunnewaldwill,asusual,behostingamoredetailedcallato'clockthisafternoon,Dave?Yes,o'clockEasterntime.

ManythanksforyourinterestinMolsonCoorsBrewingCompanyandwelookforwardtocatchingupwithallofyouthroughthefourthquarterandbeyond.Thankyou.

Operator :

Thisconcludestoday'sconference.

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