Gavin Hattersley
Molson Coors Beverage Company at Molson Coors Beverage
Thank you, Traci. Hello, everybody, and thank you for joining the call. In the third quarter consolidated net sales revenue was down 7.8%. Underlying pre-tax income was down 8.7% and underlying earnings per share was down 6.2%. At a high level, EMEA and APAC, and Canada performed strongly, but the U.S. was challenged with the macroeconomic environment contributing to U.S. financial volume down 17.9% and brand volume down 6.2%.
Given the key drivers in the third quarter, we don't see these results as representative of the long-term growth potential for our business. We knew we had a headwind in the quarter from the exit of Pabst contract brewing volume as well as from unfavorable shipment timing due to the unwind of our deliberate first-half inventory build, and these drivers have largely played out as we expected.
Our results were also meaningfully impacted by lower U.S. brand volumes as the U.S. beer industry was softer than we had anticipated over the summer. As we have heard across many consumer products companies, macroeconomic pressures have been impacting the consumer and beer has not been immune. We have seen value-seeking behavior in the form of channel and pack shifting, particularly in the peak summer season.
Given the impact the macroeconomic environment has had on the U.S. beer industry and as a consequence, its impact on our U.S. brand volumes during this year's peak selling season, we are adjusting our 2024 net sales revenue guidance to down approximately 1% from up low-single digits previously. However, it is important to point out that excluding the impact of our contract brewing revenue declines, our annual top line projected growth is expected to be positive.
With an improved cost outlook related to packaging materials, logistics, and G&A, we are reaffirming our underlying pre-tax guidance of mid-single-digit growth for the year, which is in line with our long-term growth algorithm. We are also reaffirming our underlying earnings per share guidance of mid-single digits, but we are narrowing it to the higher end of the range. This is supported by our share repurchase program, which for the first four quarters has been executed at an accelerated pace given our continued conviction in the long-term outlook for our business.
As for more details on the quarterly drivers, as a reminder, our contract brewing agreement with Pabst terminates at the end of this year, although most of the brands have already left our brewery network. This reduced financial volumes by about 570,000 hectoliters in the third quarter and by about 1.5 million hectoliters in the first nine months. As a result, Pabst had a negative 2.6 percentage point impact on the third quarter and a negative 3 percentage point impact on the first nine months of Americas financial volume on a year-over-year basis. But again, while this is a current volume headwind, the reduction of this contract brewing volume is expected to have a positive impact on our brewery network effectiveness as well as mix and margin.
As a reminder, we deliberately built inventory in the U.S. in the first half of the year as a result of the Fort Worth strike. And as expected, most of that unwind in the third quarter. Excluding contract volumes, STWs exceeded STRs by about 1.1 million hectoliters in the first half. And in the third quarter, this flipped the other way with STRs exceeding STWs by about 870,000 hectoliters. From a price/mix perspective, we continue to benefit from global net pricing growth. This combined with mixed benefits from both the Pabst exit in the Americas and premiumization in EMEA and APAC drove an increase in consolidated net sales revenue per hectoliter of 5.2% for the quarter.
Turning to cash flow, we generated $856 million in underlying free cash flow for the first nine months of the year, while investing meaningfully in our business and returning $717 million in cash to shareholders through both dividends and our share repurchase program. In fact, we repurchased more of our shares in the third quarter. We continue to view our valuation as compelling amid our confidence in our business and in our long-term growth algorithm. That confidence stems from our progress against our strategic priorities.
I'll start with our core power brands. Collectively, they remain healthy. In the U.S., Coors Light, Miller Lite and Coors Banquet's third quarter combined volume share was down about a 0.5 share point of industry versus a year ago when we saw strong share gains. Compared to last year, we continued to retain a substantial portion of our share gains on these core power brands. And compared to the third quarter of 2022, these brands were up 1.9 share points. So the step change gains we made last year have largely stuck. Coors Banquet continued to perform very strongly with brand volume up 8% and growing industry share for the 13th consecutive quarter on top of significant prior-year gains.
In fact, year-to-date, Banquet is the fastest-growing top 15 beer brand in the U.S. in terms of volume percentage growth. We see much more opportunity ahead as we invest in building the brand's awareness, its national scale, and loyal consumer base, particularly among new Gen Z and millennial legal drinking age consumers. In Canada, Coors Light continued to perform very well and again gained share of segment in the three months ended August. In fact, it's the number one light beer in the industry. The Molson family of brands also gained volume share for both the three months and year-to-date ended August. This performance has helped us to drive 19 consecutive months of share growth despite the challenging industry backdrop, and we plan to build on that.
In EMEA and APAC, strong results in Central and Eastern Europe were supported by Ozujsko in Croatia, which increased volumes 6% in the quarter, as well as the extremely successful relaunch of a legacy brand in Romania called Caraiman. Caraiman has already reached over 250,000 hectoliters since March and has been incremental to the overall portfolio in the country. And while it's certainly early days, its initial success highlights our ability to identify consumer needs and full white spaces while complementing our existing portfolio. And Carling is of course, a top in the U.K. and we continue to invest to further enhance its brand equity amid a challenged mainstream segment in this market.
Turning to our premiumization priority for both Beer and Beyond Beer, EMEA and APAC is an excellent example of our ability to premiumize. We've shared that more than half of our EMEA and APAC net brand revenue is an above-premium and we have continued to build on that. Much of the success comes from Madri which grew net sales revenue over 15% in the quarter and is now the number two lager in the on-premise in the U.K. in terms of value. And as discussed in our earnings release this morning, we are pleased to have now taken full ownership of Cobra, an over 200,000 hectoliter above-premium brand in the U.K.
Canada also continues to premiumize with its above-premium net brand revenue up nearly 15% in the quarter. This was driven by the success of Miller Lite, which is the fastest-growing beer brand in this market, as well as by our flavor portfolio. We are growing more share of flavor than any other major brewer in Canada. We are committed to building on these successes with premiumization in the U.S. We have taken necessary actions to allow even more focus on scalable above-premium opportunities, including divesting underperforming craft breweries. We do have work to do here, but we have focused plans and see long-term opportunities within our expanding above-premium portfolio of brands in both Beer and Beyond Beer. I'll highlight a few examples.
Last quarter, we shared some of our new plans for Peroni and they are starting to take shape. We have already onshore production of kegs and cans and bottles will follow soon. This will significantly improve consistency of supply, which has previously been a challenge when we have tried to scale the brand. And very importantly, it will also allow us to introduce different pack sizes that consumers are asking for.
In addition, we have strong commercial plans, which we intend to fund through the meaningful savings that will be driven through local production. Ultimately, we see no reason why Peroni can't rival the size of other major European imports in the U.S. Of course, it will take some time, but we plan to hit the ground running in 2025 as we begin to drive meaningful scale and margin for this high-potential brand.
In Beyond Beer, which is a big part of our premiumization plans, non-alc is an important area of focus for us. With our emphasis on addressing consumer needs, particularly those of the younger legal drinking age Gen Z consumer and on capturing more occasions, we are investing behind the growing areas in this space where we feel we have a right to win. This is a long-term plan, but we are making progress. With this in mind, as part of our broader strategy within non-alc, we have increased our investments in ZOA, bringing our ownership interest to 51%. We believe ZOA is well-positioned, particularly as it plays in the better-for-you segment that is outpacing energy category growth. With the support of its co-founder, Dwayne "The Rock" Johnson, we have built a strong foundation for ZOA over the past three years and it's time to pursue the next stage of growth and scale.
Taking this increased stake allows us to lead the entirety of the brand's marketing, retail, and direct-to-consumer sales development as we drive brand awareness and distribution, leveraging the strength of our network. Supporting all these strategic priorities is our robust capabilities. And today, I'd like to share a few examples of how they are creating value across the commercial organization.
Taking a consumer-centric approach, we have developed deep consumer insights that inform how we support our brands and develop winning innovations, whether it's how we show up in new occasions with non-alc or attract Gen Z through flavor or how we make authentic cultural connections with Latinos. Happy Thursday is a great example of how we identified a preference within Gen Z for bubble-free beverages and we were a first-mover in the market to address it. We are also advancing our shopper insights like with our approach in C-stores, creating our first-ever C-store innovation pipeline to win in this critical channel where we have historically under-indexed. This includes three new launches that fit the larger trends in singles and high ABV across both beer and flavor.
Now before I pass up to Traci, I'll conclude by saying that we are confident we have the right strategy to achieve our long-term growth objectives. Collectively, our global core power brands are healthier than they have been in years. We are changing the shape of our global portfolio with premiumization successes in EMEA and APAC and Canada and targeted plans for the U.S. We have strong and growing operations outside of the U.S., which are performing well and contributing meaningfully to our growth. We have built capabilities across our organization that support premiumization and focused innovation, supply-chain efficiencies and commercial effectiveness, all of which help drive sustained long-term profitable growth. And we have substantially improved our financial flexibility, allowing us to continue to advance our strategy by investing in our business as well as returning cash to shareholders. So we are pleased with our progress and our ability to capitalize on the opportunities ahead.
And with that, I will pass it to Tracey. Tracey?
