MOLSON COORS BEVERAGE CO(TAP.A)Q1 2026 法說會逐字稿

Good morning, and welcome to the Molson Coors Beverage Company First Quarter Fiscal Year 2026 Earnings Conference Call. With that, I'll hand it over to Greg Tierney, Vice President, Commercial Finance, FP&A and Investor Relations.

Thank you, operator. Following prepared remarks today, we look forward to taking your questions. (Operator provided instructions.) If you have technical questions on the quarter, please reach out to our IR team. Also, I encourage you to review our earnings release and earnings slides which are posted to the IR section of our website and provide detailed financial and operational metrics. Today's discussion includes forward-looking statements within the meaning of federal securities laws. Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in our most recent filings with the SEC. We assume no obligation to update forward-looking statements as required by applicable law. The definitions of or reconciliations for any non-U.S. GAAP measures are included in our earnings release. Unless otherwise indicated, all financial results we discuss are versus the 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 percentage changes from the prior year period. Also, share data references are sourced from SIRCANA in the U.S. and from Beer Canada in Canada unless otherwise indicated. Further, in our remarks today, we will reference underlying pretax 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. And with that, over to you, Rahul.

Thank you, Greg. Now before I begin, I want to recognize our team for the focus and commitment they've demonstrated this year. We're operating in challenging times and the work happening across our markets gives me confidence in our people and our direction. In the first quarter, we announced Horizon 2030, our strategy designed to strengthen our business and drive long-term value creation. We took action right away. For example, we said we'd leverage M&A to fill portfolio gaps, and we did just that by establishing a position in RTDs. We also said we'd extend our share buyback program, and we executed on that as well because we believe our shares are a compelling investment. While it's early in the year, we navigated a complex external environment and continue to make progress against our strategy. At the same time, the U.S. beer category started the year on better footing. However, macro uncertainty continues to put pressure on input costs and consumer behavior, especially lower income consumers.

For beer, the number of trips and buyers improved while consumer sentiment declined. In EMEA and APAC macro pressures increased over the quarter, driven by geopolitical events, including the conflict in Iran impacting fuel costs and consumer sentiment. Now that said, we believe Molson Coors is positioned to navigate this moment and strengthen our business, supported by our strong balance sheet, free cash flow generation and our portfolio that spans price points, geographies and consumer occasions. And based on what we are seeing today, we are reaffirming our full year guidance and remain confident in our ability to execute against our priorities. As we move through 2026, we're acting with speed and intent balancing near-term execution with our goal of long-term growth. In Q1, we continued to sharpen our portfolio focus, strengthen our commercial model and move accountability closer to our customers and consumers.

While these efforts will take time to show up in our results, we're encouraged by the early progress. Our strategy begins with building strong and scalable brands that matter across beer and beyond beer. Our momentum in bars and restaurants and venues is a great example. Across the on-premise, our top six brands all delivered share growth in the quarter based on Nielsen CGA. This includes Miller Lite, Miller High Life, Coors Light, Busch, Blue Moon and Peroni demonstrating our strength in the channel across a range of price points. In Q1, we were among the top beverage-alcohol bar advertisers during March Madness and the exclusive sponsor of ESPN's bracket challenge reflecting our commitment to high-impact occasions. Looking ahead to the summer, we are also making a single largest media investment in many years tied to the World Cup, which will include multiple brands across our portfolio.

This investment includes in-match media buys, extensive local activation in key markets, podcasts and influencer partnerships. Now let's get into how our core brands performed in Q1. While U.S. brand volume trends improved, our share wasn't where we wanted it to be. We are executing against the actions we outlined in February, including new creative for all three of our U.S. core brands. Coors Banquet continues to build momentum. And in Q1, it returned to national sports advertising for the first time in five years, an important milestone for a brand with enduring consumer relevance. Miller Lite faced challenges in the quarter, mostly driven by heightened competition in a couple of U.S. regions. So we are working quickly and taking targeted actions, including new ads in English and Spanish for the World Cup and a custom visual identity and activation platform for America's 250th anniversary.

Outside the U.S., we are also taking steps to protect and strengthen our core brands. In Canada, Coors Light remains the #1 premium light beer and is holding industry share. In the U.K., we reintroduced a fan favorite in Carling Black Label. And in Central and Eastern Europe, several of our key brands remain #1 or #2 brands in their home markets despite challenging economic conditions. Now moving to the value segment. We've acted quickly while recognizing this is a long-term journey. While Miller High Life share has been fairly stable and is doing particularly well on-premise, the portfolio needs some attention, and we are taking action. Distributor orders for Keystone Apple are pacing ahead of expectations. And even more recently, our decision to reintroduce Keystone Ice was extremely well received by our network. We're encouraged by the early signals as well as the continued expansion of Miller High Life Light, which is now available in 22 states and performing well.

Turning to above premium beer, we held U.S. industry share in Q1, supported by our priority brands. Peroni continues to gain momentum and saw increased media investment during the Winter Olympics. Blue Moon non-alc also continues to perform well, and we recently launched new creative for the Blue Moon franchise. We're encouraged by the sustained on-premise trend improvements for Belgian-style wit brands, while recognizing that a full turnaround will depend on continued focus and consistent execution. In the U.K., we saw some inventory softness, driven by aggressive competitive pricing. Importantly, we do not believe this is a brand health issue. We're responding with intention, adjusting our commercial actions to remain competitive while protecting Peroni's long-term strength. Our media investment for Peroni is just now turning on for the year, and we continue to build the franchise with innovation like Peroni Libera.

Moving to Beyond Beer. We're scaling up here and we're making great progress. This is the fastest-growing part of our portfolio, supported by brands like Fever-Tree, Topo Chico Hard and, as of this month, Monaco Cocktails in the United States. Fever-Tree delivered strong execution and contributed meaningfully to our top line performance in this quarter. The brand continues to resonate with distributors, retailers and consumers reinforcing our confidence in its long-term potential. We just launched the brand's first national ad campaign in the U.S. a few weeks ago, which we will be supporting with in-person events and sponsorships this summer, including the PGA Tour. Moving to Topo Chico Hard, which returned to growth in Q1 after our regional focus last year. The turnaround of this brand is a prime example of local execution done right. Looking ahead, we believe Topo Chico Hard will benefit from World Cup media support in both English and Spanish language.

We also announced the acquisition of Monaco, maker of Monaco Cocktails during this quarter. This brand is highly incremental to our portfolio and strengthens our position in convenience. Importantly, we believe Monaco fits naturally within our route to market and gives us a platform to compete in RTDs. Integration is now underway, and we are approaching it with rigor. Monaco adds immediate scale to our portfolio and it fits into the M&A criteria that we outlined in February. We expect Monaco to contribute about 1% to global MSR on a trailing 12-month basis, while also delivering incremental profitability in year one with nine months in our portfolio. As part of this deal, we also retained about 80 members of Monaco's sales team, providing continuity and immediately expanding coverage for our Beyond Beer portfolio. Combined with the team members we added for non-alc last year, we are meaningfully expanding our execution muscle at the point of sale.

These feet on the street should allow us to be more present for our customers, more agile in the marketplace and more effective across Beyond Beer. To further support our portfolio ambition, we've also continued to rewire how our teams operate with an emphasis on speed and bold actions. We've implemented changes to our operating model including clear performance measurements and revised incentive structures, ensuring that our people have both the authority and accountability to drive the business. We've established new routines for our commercial teams that encourage responsive investments across the portfolio rather than siloed brand-level budgets. This approach recognizes that our commercial investments should be dynamic with clear trade-offs being made to fund the highest impact initiatives in real time. This practice takes local dynamics into account, in addition to factors like marketing effectiveness.

These changes are designed to drive a strong results-oriented mindset across the organization while also improving the team's speed and execution. We've also taken steps to advance our three-year $450 million cost savings program, announcing further actions in Q1 to strengthen our cost base. These include restructuring actions in EMEA and APAC and closing a brewery in the U.K. alongside other operational changes designed to unlock efficiencies in a region facing cost inflation and increasing macro uncertainty. These actions help us manage two periods of higher inflation, while the initiatives we put in place in the Americas last year should also deliver a benefit in 2026 and help offset cost pressures. Tracey will discuss this further, but to summarize, we are operating amid heightened volatility and are managing through it thoughtfully. Finally, capital discipline remains central to how we run Molson Coors.

We continue to apply a balanced capital allocation approach, investing behind our brands, pursuing M&A to strengthen the portfolio and returning cash to shareholders. We remain committed to our dividend and share repurchase program, and we continue to view Molson Coors as a compelling long-term investment. Now as we move into summer, we are clear-eyed about the work required to strengthen our business. This is complex work. We recognize it will take time. And while the external environment remains dynamic, three things hold true. Our direction is clear, our priorities are defined and our teams are executing with urgency and intent. Just as importantly, where performance has been more pressured, we are now addressing it with far greater precision. For brands like Miller Lite, we have a much clearer view into where and why and how it's performing by region, by channel or by execution lever, and we are taking targeted actions.

This sharper diagnostic approach gives us the confidence that we can stabilize trends and rebuild momentum over time. The progress we're seeing across many brands, the more targeted ways we are addressing challenges and the operating changes we put in place all gives us confidence in our ability to improve portfolio performance and create long-term value. Now with that, I'll turn it over to Tracey to discuss our financial performance and outlook.

Thank you, Rahul. In the first quarter, on a constant currency basis, consolidated net sales revenue was up 0.1% and underlying pretax income was up 16.2%. Underlying earnings per share increased 24%. On an underlying basis, the key quarterly drivers were positively impacted by some phasing considerations, but otherwise, were largely in line with our expectations. The U.S. beer industry was down minus 1.6% based on our internal estimates. Our U.S. volume share was down 60 basis points based on our internal estimates, including relatively better share performance in the on-premise channel compared to the off-premise. U.S. domestic shipments outpaced brand volumes, resulting in a roughly 1 percentage point benefit to Americas financial volume in the quarter. EMEA and APAC brand volume declined 3.4%, primarily driven by ongoing soft market demand and a heightened competitive landscape in the U.K. The Midwest premium remained elevated, adding approximately $13 million of year-on-year cost increase to Q1 cost of goods sold.

And G&A was down 9.1%, largely due to lapping approximately $30 million in prior year transition costs, coupled with lower employee-related costs which more than offset additional investments in technology. Turning to the balance sheet. At quarter end, net debt to underlying EBITDA was 2.5x. This was an expected increase from year-end 2025, as we normally see a sequential uptick in the first quarter given lower cash balances. Earlier this year, we announced that we had increased both the amount and the duration of our stock repurchase program, increasing our total authorization to up to $4 billion through December 31, 2031. And in the first quarter, we continued to make progress against this authorization. We paid $94 million in cash dividends and $164 million to repurchase 3.4 million shares in the quarter. Since the plan was announced in October 2023, we have repurchased 14.8% of our Class B shares outstanding.

And as we previously announced, in the first quarter, we raised our quarterly dividend to $0.48. This is an increase of 2.1% and represented our fifth consecutive year of increases. This clearly demonstrates our intention to sustainably increase our dividend. And given our share repurchases, we were able to raise the dividend while decreasing absolute dividend cash payment. With that, let's discuss our outlook. As Rahul mentioned, we are reaffirming our 2026 guidance. Now before we get into the details, I'll remind you that 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. Starting with the top line, we expect to ship to consumption in the U.S. but now expect some variability by quarter.

After relatively stronger performance in the first quarter, we expect our U.S. shipments to be down 6% to 9% in the second quarter while brand volume trends with shipments outpacing brand volumes in the second half of the year. And with the addition of Monaco Cocktails, we will recognize nine months of NSR and profit contribution as we integrate the Monaco brand portfolio into our network. This impact is included in our guidance assumptions. All other top line drivers remain largely unchanged. We continue to expect the full year 2026 U.S. industry volume trend to improve versus the down 5% we experienced in 2025 and expect our balance of year share performance to improve versus the first quarter as we continue to execute our strategy. We continue to expect an annual net price increase of 1% to 2% in North America in line with the average historical range and expect mix benefits from premiumization in both business units.

Moving down the P&L, we expect COGS to continue to be negatively impacted by rising commodity costs, as premium and base aluminum remain elevated versus the prior year. EMEA and APAC, in particular, experienced additional uncertainty given current geopolitical issues. On Midwest premium, we continue to expect elevated costs relative to 2025. For the balance of 2026, we believe we have meaningful hedge coverage, meaning that the impact of the recent rise in prices since February should be a manageable headwind. And on phasing, we expect Midwest premium to be inflationary over the balance of the year with the largest increase currently anticipated in Q2. Recall that last year, we highlighted that the rising cost of Midwest premium was a $35 million headwind with most of the increase realized in H2. As for MG&A, we continue to expect a significant increase versus 2025 over the balance of the year due to several factors.

First, as previously highlighted, we expect incentive compensation expenses to be higher than 2025, with the largest increase expected in the second quarter. We also expect to make additional capability and technology investments to help drive our strategy and modernize our ERP system. And as with most acquisitions, we will have higher costs in the first year as we integrate the Monaco business. As an example, we are adding over 80 members to our sales team and expect to incur additional costs as we market and integrate the brand into our business. And to mitigate near-term headwinds, we continue to take deliberate actions in driving our three-year $450 million cost savings program. Rahul mentioned the actions we put in place in EMEA during the first quarter. We've also taken additional cost savings actions that are designed to optimize our supply chain within the Americas. These actions are expected to add to the savings driven by the implementation of the Americas structure and operating model at the beginning of the year.

And lastly, we remain focused on driving capital allocation decisions that we believe deliver long-term shareholder value. We've just added Monaco Cocktails to our portfolio and have again made meaningful progress in executing our share repurchase program. We continue to be a very cash-generative business. And looking forward, we continue to have optionality in supporting growth initiatives, returning cash to shareholders and evaluating debt paydown versus refinancing scenarios, while continuing to expect our year-end leverage ratio to remain below 2.5x. In closing, with a solid start to the year, a strong global brand portfolio, a healthy balance sheet and strong cash generation, we are confident in our ability to navigate near-term uncertainty while supporting the long-term health of our business and brands. And with that, we will take your questions.

(Operator provided instructions.) The first question today comes from Filippo Falorni with Citi.

Rahul, I was hoping to get your perspective on the U.S. beer industry. I think you mentioned like a 1.6% decline in Q1. Just what are your expectations as we move forward into the summer, especially with the World Cup and the America's 250? And then, Tracey, I was hoping you can provide a little bit more color on the reason behind different shipment versus depletions in Q2 and the back half? What is driving the undershipment in Q2 and then stronger shipments in the back half?

Thank you for the question. If you think about the industry, and we spoke about this in February, coming into this year, we did expect 2026 to be better than 2025. And if you think about consumer sentiment and obviously, the challenges the category had in '25, the quarter one has turned out to be, I would say, a little bit better than what we expected. And all the science suggests that the balance of the year continues to be stronger versus 2025. Your question about how do we see the summer? I mean, we're pretty excited about going into the summer for a couple of reasons for the category and for our portfolio. We have some big events that are occasion friendly from a beer perspective. So whether that's America's 250th celebration, whether that's the World Cup, so we feel pretty good about the balance of the year in terms of what the category can do compared to 2025. Now we do need to just keep in mind some of the volatility that still exists from a consumer perspective, as you probably saw at the end of March, early April, fuel prices and consumer sentiment in the U.S. was pretty low.

So again, we remain cautious and balanced, but I definitely see the category being healthier than 2025. And the exciting part in this is for our portfolio, right? All the commercial tools that we have in getting behind our brands, whether it's Coors Light tied to the World Cup or it's Miller Lite with America's 250, all of that is coming live right now and getting into the summer. So I would say, broadly speaking, a healthier category this year versus last year, and a lot to get excited about going into the summer. Tracey, do you want to touch on Q2?

Yes. Thanks, Rahul. Listen, so I think overall, we want to say that we do expect to ship to consumption in the U.S. for the year, but we do expect some variability by quarter. So as we said, we expect our shipments to be down between 6% and 9% in the second quarter, trailing the brand volume trends. But we expect shipments outpacing brand volumes for the second half of the year. So specifically, what impacts Q2, just looking at Q1, we did have some challenges with some one-off events related to weather and energy supply, et cetera, to our facilities, and we had some challenges with upgrades that we were making in our breweries and then also some challenges with some of our suppliers, particularly glass supply. But we have been working with our suppliers, and we were able to ship ahead of the brand volume in the quarter. But there still remains a few pinch points in some of our packages and our network is feeling it.

But our team is focused on this, and we're confident that we'll continue to make progress throughout the quarter, and we are communicating consistently with our network. Also recall that we're lapping relatively higher inventory levels from Q2 of last year. And then in addition, for Q2, we do have some planned downtime to make some line upgrades in our Shenandoah brewery. So that's also contributing to lower shipments versus last year. But look, importantly, this is a temporary disruption. And we are expecting to benefit from our efficiencies and improved quality with all of these upgrades that we're making in the long term.

Yes. And if I could add something, Tracey. I mean we have a strong commercial program planned for the summer, and we feel good about making sure we can execute against that. And as Tracey mentioned, there are maybe a couple of packages that we have a few pinch points on that we're working very closely with our network on.

Our next question comes from Peter Grom with UBS.

Great. Thank you, and good morning, everyone. Maybe picking up on that a little bit. So you touched on the optimism around the path forward and related to Filippo's question. But obviously, the world has changed a bit over the last two months. So I'm just curious if you've seen any shift in demand or channel dynamics as you exited the quarter or through April? And then just the guidance for Q2, minus 6% to minus 9%, that's a relatively wide range for one quarter. So can you help us understand what we should think of as the more favorable end of that versus the lower end?

Yes. I think, Peter, I mean I know we don't talk about in-quarter results. But I think to your point of sentiment, I think that's where the, I would say, some caution in the balance of the year thinking comes from. I mean there is still some variability if you think about just what happened in the Middle East and the impact across consumer sentiment at the end of March, and fuel prices play an important role in terms of how consumers think in terms of purchasing at convenience. So again, we're going into the summer with a level of confidence because we do have a lot of high-beer-occasion events planned. But on the other hand, we recognize the macro issues still around the category. So that's why I would still mention that category health this year is probably better than 2025, but how that plays out in the next few quarters we'll obviously keep watching. I think your question on phasing of Q2.

Within the 6% to 9% range, our goal is to always shift to consumption, that's what we're focused on. It's just we wanted to make sure we were being transparent on how second quarter is going to play out. Our supply chain teams are absolutely working with some of our glass suppliers to make sure we can get enough product out to our distributors. But again, these are particular packages in particular geographies. But overall, we feel good about making sure we can meet the moment in the summer.

The next question comes from Chris Carey with Wells Fargo Securities.

So in the presentation, you talked about you would expect market shares to improve over the balance of the year relative to the first quarter. Can you just give us a sense of what an improvement means? Does that mean back to share growth and what are some of the key drivers as you see them? And a logistical clarification: when you say that inflation will be the highest in Q2, are you referring to the increase in COGS per hectoliter should be the highest in Q2 relative to the full year?

Thank you. So I'll take the first two, and Tracey, maybe the inflation one you can. So Chris, you're absolutely right in terms of share and as I said in my prepared remarks, we have work to do there. It is not where we want it to be. So if you break down our portfolio and shares and even Q1 and going into the balance of the year, I would say we've made progress on the flavor side. If you look at Topo Chico and flavored categories as a whole, we've got to growth; flavor is making progress. If you look at our above-premium beer, we're definitely making good progress in terms of share. The value segment is where we have had a leaky bucket for a long time, and that's why we emphasized this as part of our new strategy. Frankly, this is where we have more work to do going forward. So High Life, I would say, is doing okay, and we have more on Keystone. So to your point on market share and balance of year, value is something we need to show progress on.

One of the things we have done is a few things to make sure we can get Keystone stronger. We are launching Keystone Apple and bringing back Keystone Ice. So we have a few things in the pipeline that we've announced with our network to make sure we can slow the leaky bucket in our value part of the portfolio. In our core portfolio, that's where we probably have a little more work to do on Miller Lite. Miller Lite is holding its own in many areas, but in a couple of regions in the U.S. in Q1 we have more work to do there. The good part is that we know where the issues are. We're taking actions, whether through campaigns or other commercial levers. This is where local execution matters, because this is not a national concern but in particular geographies where there's competitive action, and our teams are reacting swiftly and strongly. So I think from your point on share, that's an important measure for us.

STR trends in Q1 were better than Q4. But I believe we have the right plans going into summer. I think the drivers I mentioned are the big ones to break out for different parts of our portfolio. The only other element I'd call out is that commercial activation and the seasonality of our business — summer is critical. The next four to six months are important to win the year, and I think our teams are energized to go after that. Tracey, do you want to talk about the inflation point?

Yes, Chris. So we do expect COGS to continue to be negatively impacted by the rising commodity costs that we're seeing. The Midwest premium and base aluminum and our fuel prices have continued to increase versus last year. Specific to Q2, we are expecting the Midwest premium to be inflationary again, and the largest increase is currently anticipated in Q2. If you recall last year, we highlighted that the rising cost of the Midwest premium was about a $35 million headwind, but most of that increase was realized in H2. We have an extensive hedging program. It's difficult and expensive to hedge the Midwest premium, but we do believe for this year that we have meaningful hedge coverage, meaning that the impact of the recent price increases that we saw in February is a manageable headwind.

Our next question comes from Robert Moskow with TD Cowen.

This is Seamus Cassidy on for Rob. I wanted to ask about capital allocation. You repurchased 3.4 million shares in the quarter, which was a big increase year-over-year, while simultaneously closing Monaco and you ended the quarter just above your 2.5x target leverage range. So question is how do you rank order those priorities from here? Specifically, is buyback pace a lever you pull back on? Do you delever towards the target? Or does the 2.5x ceiling kind of flex upward if the right incremental M&A opportunity were to come along?

Good morning. Thanks for that. Tracey, do you want to take that one?

Yes, sure. We do intend by the end of the year that our leverage ratio is back to below 2.5x. Now remember, Q1 is a cash use quarter for us. And so typically, we do expect the leverage to be a little bit higher. But our intention is to be aligned with a leverage ratio below 2.5x by the end of the year. In terms of how we look at capital allocation, there are three main buckets. We use models to determine how to return capital to our shareholders in a particular year. Of those buckets, we focus on continuing to invest behind our business, whether that be behind our brands or with M&A. We announced on the first of April our acquisition of the Monaco Cocktail brands. So that was a use of our capital. But also, we do intend to continue to return cash to shareholders. Returning cash to shareholders is both dividends and share buybacks. From a dividend point of view, the intention is to sustainably increase our dividend, as we have done for the last five years.

As it relates to share buybacks, we see our shares as a compelling investment. We announced in February the extension of the program to the end of December 2031 and also the increase to $4 billion. Typically, we would look at our capital allocation priorities and make sure that we are getting the best return for our shareholders, and that may differ from quarter-to-quarter. But we are still focused on returning cash to shareholders. One thing this year is we do have a $2.4 billion debt coming due in July. And we have approval to refinance somewhere between $1.1 billion and $1.9 billion of that debt. So that's also one of the capital allocation priorities — to make sure our balance sheet remains strong and we maintain our target debt leverage ratio.

The next question comes from Lauren Lieberman with Barclays.

Great. I wanted to ask you to talk a little bit about the value brand strategy in the U.S. that you talked about at CAGNY, particularly on the more localized approach. You discussed it as being in an analysis phase. But curious where you stand on that. Are you starting to move into implementation mode, any key thoughts as you move forward on that front? Because in the prepared remarks, you spoke more about Miller, of course, and local issues there, but I really want to hone in on the value portfolio.

Thank you, Lauren. If you think about our focus on value historically and our results, it's been a leaky bucket. We need to be very targeted. We are putting plans in place in terms of localizing. Our value portfolio in the U.S. is large but very localized. We have two big brands with Miller High Life and Keystone and a number of other brands that are very local. First, we want to make sure our big value brands are in a healthier place. High Life on-premise share is pretty good; Nielsen CGA showed we grew share with High Life on-premise. You will continue to see us focus on High Life in different ways. High Life Light expansion into additional states is an example. Keystone needs more work, but you see us innovating with Keystone Apple and Keystone Ice, and bringing those into particular geographies. Local execution applies to the entire value portfolio. These brands have loyalty in particular parts of the country. How we invest and execute behind these brands is different than how we think about nationwide brands like Miller Lite. This will take more time given historical trends and the required plans. But it's an important part of our strategy and a positive part of our portfolio for distributors and our teams.

Our next question comes from Drew Levine with JPMorgan.

Tracey, I wanted to ask if we could double-click on the cost phasing on COGS, particularly related to the Midwest premium? You noted it was $30 million in Q1, peaks in Q2. The prior commentary from last quarter was that overall it would be a $125 million headwind to the year. Can you confirm whether that $125 million number is still a reasonable way to think about it or has it moved higher? And second, could you provide more context on the incremental headwind in Q2 relative to Q1? Rahul, on pricing, some peers are projecting lower pricing this year around maybe 1%. Could you talk about industry willingness to take more pricing in light of escalating cost pressures?

Yes. We did say at CAGNY that our guidance does assume an elevated Midwest premium which would impact our pretax income growth by about nine to ten percentage points. That equated to a minimum of $125 million at the low end of the range. As expected, the Midwest premium and base aluminum remain elevated versus last year. In Q1, Midwest premium added about $30 million of year-over-year cost increase to COGS. We have extensive hedging, though it's difficult and expensive to hedge the Midwest premium. We do believe we have meaningful hedge coverage for this year, meaning the impact of the recent price increases we saw in February is a manageable headwind. We do expect the Midwest premium to remain inflationary over the balance of the year, with the largest increase currently anticipated in Q2. Last year most of the $35 million increase was in H2 so phasing differs year-to-year.

I would add that teams are managing through a complex input cost environment — aluminum, fuel and other inputs — and working on both risk mitigation and cost savings initiatives. On pricing, we're staying within our 1% to 2% annual net price increase guidance for North America. It's a competitive context and we'll remain disciplined and granular on pricing by brand and geography. We want to be competitive and considerate of consumer dynamics, and our broad portfolio allows us to meet consumers across price points.

Our next question comes from Christian Junquera with Bank of America.

It's Christian on for Pete. I appreciate the color you gave on how to think about MG&A expense for Q2, but can you walk us through how MG&A should trend during the second half of the year? Any color on phasing of marketing and sales expense versus general and administrative expenses would be helpful?

Thanks, Christian. We do expect MG&A to be a significant increase versus 2025 over the balance of the year. Factors include higher incentive compensation with the largest increase in Q2, capability and technology investments to drive strategy and modernize our ERP, and acquisition-related costs for Monaco integration. We're adding over 80 members to our sales team and expect additional costs to market and integrate the brand. Typically, we spend most of our marketing dollars in the summer selling season. With the World Cup and America's 250, you'll see continued investment behind our brands so that we show up on shelf, show up to our consumers and drive our brands into the summer.

To add, we're making some of our biggest investments in live sports and summer activations over the next couple of quarters. We have strong plans for brands to show up in the right occasions and are approaching investments differently to better connect with consumers and retailers.

The next question comes from Kaumil Gajrawala with Jefferies.

Rahul, when you think about your first year, if you think about taking risks, which us investor analyst types give you a little more freedom to do at the beginning, are there any big risks or big things you're thinking about going for in this first 12 months? And Tracey, on capital allocation, when you say the stock is compelling, what metrics are you using to think about buybacks versus other uses of capital?

That's a good question. We laid out Horizon 2030 and we know our portfolio challenges. We're working in two contexts: making sure our core is healthy and transforming our portfolio. We're going to be more active in using the balance sheet. We want Beyond Beer to be meaningful — approaching 10% as a target for long-term growth — and we're taking big swings on local execution and reallocation of spend. These are big organizational changes intended to return the business to medium-term growth. Capital allocation is central, and we're using the balance sheet to invest in the business and return cash to shareholders.

Kaumil, the important thing is we have a very strong balance sheet that gives us optionality. We take a long-term view when running capital allocation through our models. We invest in the business to drive sustainable long-term growth and believe that's what drives the share price. Because of strong free cash flow, we're able to invest and return cash to shareholders. That's how we look at it.

The next question comes from Nadine Sarwat with Bernstein.

Two for me, please. You called out Q1 doing a bit better at the market level in the U.S. I'm curious to hear what you believe were the underlying factors behind this. There's obviously the number, and you called out consumer confidence deterioration. So what do you think are the drivers of that being a little bit better than you expected? Second, you called out different channel dynamics when it comes to behaviors of consumers relative to consumer confidence. Could you expand on that? Are you seeing different behaviors by pack size, downtrading? Anything that gives flavor on how the U.S. consumer is reacting from the lens of a brewer like yourself?

Thank you. Q1 was lapping a tough quarter last year, which helps. There are a couple of consumer cohorts. One cohort is relatively healthy and drives brands like Peroni and others. There's also lower-income consumers under pressure. Overall, trips to stores and buyers improved in Q1 so there's been an uplift in visits and households purchasing. The West is significantly stronger this year versus last year. Regarding channel dynamics, longer-term trends continue: singles and large packs have performed well. Small and medium packs have been under pressure historically, though small packs did slightly better in Q1. Pack-size dynamics and channel mix — convenience versus off-premise and on-premise — matter. Value brands and higher ABV or value propositions show up differently in these channels. Monaco is predominantly a singles convenience business, and that bolsters our convenience capability. In short, trips are up, but basket size and downtrading nuances remain important to watch.

The next question comes from Gerald Pascarelli with Needham & Company.

Great. Rahul, I'd like to go back to the World Cup. It's a huge on-premise beer drinking occasion and your on-premise share trends currently look better than the off-premise. That would seem like a clear channel advantage. Could you provide color on your level of optimism and the tailwind you think that event could have on your volume trends related to channel?

If you think about occasions, something like the World Cup gives us a platform to engage consumers across multiple games and cities. It plays into our on-premise strength and gives us opportunities to drive new occasions over the summer. There's also travel demand where people come into host cities. It's about showing up to engage with consumers — execution in retail and on-premise matters — and making sure our brands resonate with fans. We've built campaigns to engage consumers in fun ways and we're excited about the opportunities the World Cup provides in the on-premise channel.

The next question comes from Chris Pitcher with Rothschild & Co Redburn.

A quick question on the integration of Monaco. Ten years ago, you were buying craft beer brands and integrating them into the business. Can you give a sense on Monaco about how you're going to retain these people that are coming across? Because it's a move into a new category, how are you going to ensure that you retain these salespeople? Is the founder locked in? And on mechanics, I believe production is still outsourced. Is there scope to integrate that in the near term? Do you see an international opportunity in other markets, particularly the U.K., for these products?

I'll start with Fever-Tree as an example of disciplined integration — job one is not to drop a case when you integrate a brand. Monaco closed in April and our goal is to keep the magic the brand has. Monaco has been around for more than a decade with a clear proposition and channel execution. We want to retain that commercial focus and the team; the founders are involved but we own 100% and will execute within the Molson Coors umbrella. Production is currently outsourced; we will evaluate production and other operational pieces during integration. Our priority is commercial continuity and keeping the momentum while integrating thoughtfully. We will also evaluate international opportunities as part of integration planning.

The next question comes from Bill Kirk with ROTH Capital Partners.

My question is on fuel prices and maybe their impact on consumption. NBWA recently shared some regression analysis work that they had done that showed industry volume trends actually improved when fuel prices went up. I guess the logic would be you leave the on-premise and the two beers there, and you trade it for a six-pack at home. I was a little surprised. Do you see a relationship where higher fuel prices result in a volume benefit?

I'm not familiar with that specific analysis, but fuel prices have multiple correlations: they impact disposable income and can influence channel behavior. Convenience is an important channel where fuel price changes can affect impulse buys and pack size choices. When fuel rises, consumers may change pack size or channel behavior; singles and large packs often perform well in certain conditions. I wouldn't say higher fuel prices directly increase volume, but we watch fuel closely in the context of pack size, channel mix and overall consumer sentiment.

The next question comes from Rob Ottenstein with Evercore.

Rahul, I'd like to double-click on Miller Lite. Iconic brand, great liquid but it continues to bleed. I know you talked about some regional competitive issues and that you have a plan, but what do you think a reasonable outcome for that brand is over the next one to two years? Can it get to stable volumes or hold share? And can you do this with tactical moves or do you need to fundamentally rethink or refresh the brand proposition?

Rob, good question. Our short- and medium-term goal is to get our big brands' share to a healthier, stable place. Miller Lite's challenge is concentrated in regions like the Great Lakes. We have targeted actions for those regions. We feel good about our campaign and the plans for Miller Lite, including activations tied to America's 250th that play into taste and Americana. We believe regional, targeted execution — campaigns, local commercial levers — can stabilize and rebuild momentum. Our goal is to return brands to growth, but first stabilize share and then build from there.

That concludes our question-and-answer period. You may now disconnect.